2014 | Finch Sells

The Scaling Fallacy: Life As An Affiliate Whack-a-Moler

Aug 13 2014

Jack creates 10 campaigns in 10 countries on TrafficJunky:

Here are his morning stats:

Germany: +$45
France: +$10
Switzerland: -$5
Netherlands: +$20
United Kingdom: +$12
Australia: +$25
Canada: -$21
Belgium: +$42
Turkey: +$20
Sweden: -$10

JACK’S TOTAL PROFIT: $138

Bill creates 1 campaign in 1 country on TrafficJunky.

Germany: +$90

BILL’S TOTAL PROFIT: $90

Which affiliate would you rather be?

Come on, it’s a no-brainer.

Bill is in a much better position.

Let’s look at what each affiliate has to do in the morning:

Jack has to:

Check stats for 10 different campaigns.
Optimise creatives in 6 different languages.
Search for the best offers in 10 different countries.
Manage bids against hundreds of competitors.
Put out fires all day before he can work on any new campaigns.

Bill has to:

Check stats for 1 campaign.
Optimise creatives in a single language.
Track the best offer in a single geo.
Manage bids against a handful of strong competitors, and many more weak, distracted competitors (like Jack).
Find new sources to test his campaign.

Now imagine the two affiliates hear about an amazing new traffic source. We’ll call it Exoclick for the lols.

They both want to scale their campaigns to it.

Bill, having much more time on his hands, goes first.

He knows Germany inside out. He knows what works. Scaling is merely a case of busting open Voluum, tapping Duplicate, and changing the tokens:

His stats now look like this:

TrafficJunky

Germany: +$112

Exoclick

Germany: +$42

BILL’S TOTAL PROFIT: $154

Jack, on the other hand, is starting to sweat.

He can no longer make sense of his stats without spending 40 minutes staring at Excel.

He has 20 campaigns in 10 countries on 2 traffic sources.

And his stats look like this:

TrafficJunky

Germany: +$23
France: -$7
Switzerland: -$25
Netherlands: +$27
United Kingdom: +$3
Australia: -$14
Canada: -$28
Belgium: +$12
Turkey: +$25
Sweden: -$5

Exoclick

Germany: +$75
France: +$2
Switzerland: -$17
Netherlands: +$5
United Kingdom: -$88
Australia: +$20
Canada: +$10
Belgium: -$25
Turkey: +$13
Sweden: -$4

JACK’S TOTAL PROFIT: $2

Aw, shit.

Jack can only manage so many campaigns effectively.

Even then, it only takes one rogue offer (in this case, the UK) to wipe out his progress in the other markets.

Jack, like many affiliates, has chosen to stack the deck in somebody else’s favour. He needs everything to go right, or his model is inefficient.

Let me tell you:

In affiliate marketing, fucking rarely does something ever go right — let alone all of it.

Why is that?

Every market requires a complex understanding of conversion rates, clickthrough rates, and the dozens of metrics that wreak havoc on them. Even this may prove irrelevant if you fail to catch hot offers early on their upswing.

So how are you going to manage the above, MULTIPLIED BY TEN, when your attention is DIVIDED BY TEN? (Plus porn.)

There’s a pretty simple solution.

Look at what happens if Jack only runs campaigns in one country — Germany*.

The stats completely change.

His profits would be $98.
(And his ad spend considerably lower.)
*This is an example, not an endorsement for advertising in Germany.

The stats improve, but that is purely superficial. What we should really be interested in is what gives us the best chance of success and true ‘scaling’ going forward.

It’s the revitalising effect of removing so much deadwood that has the real impact.

Perhaps Jack’s morning to-do list would start to look more appealing.

No more staring glumly at the ‘Monday Headbanger’ with rows of campaigns disintegrating in puffs of smoke.

His blood pressure would drop, his sense of direction might return.

More of his working hours would be spent looking for opportunity rather than putting out fires day after day, every day, until there’s nothing left to save.

This is the price an affiliate pays for spreading himself too thin.

* * *

Volume is sacred in this industry.

It goes against instinct to start culling campaigns — especially those that are profitable — and it isn’t made any easier by the pines of your affiliate manager (“Revenue, revenue, revenue!”).

But remember: volume is irrelevant if it’s fractured across 20 offers in 10 countries.

You can’t leverage the sheer number of your campaigns. It’s your dominance in each individual market that counts.

On the flip side, achieving dominance in a single market is easier when you don’t have a desktop scattered with half-finished landing pages for every single nation in the EU.

Attacking a single country with brute force and finding something that works?

Now that is a scalable business plan.

Pussy-slapping 15 nations in to converting at a 10% ROI then screaming like a banshee as you realise Nation 16 lost the entire fucking lot with one dead offer?

Not so scalable, mon ami.

* * *

The lesson?

1. Spreading yourself too thin will cannibalise any profits you might have made.

2. Spreading yourself too thin will prevent you from scaling the campaigns that are actually worth scaling.

There is a balance, of course.

You do want to explore new markets. I can’t emphasise that enough.

Without exploring, you won’t find any profits period.

Newbie American affiliates who refuse to exit their home market are probably familiar with consistent big fat zeros. That’s because domestic arbitrage… is a bitch. There’s a long line of capitalist pigs that got to the table before you.

If you are going to flee in to foreign markets, any experiment should be carried out with a degree of control.

Foreign campaigns should be planned, not ripped with reckless abandon.

Do some calculations on the required CTR/CVR metrics before you even start.

(You’ll know if you’ve planned a campaign — you won’t have French translations in one tab, German in another, and a Turkey flag occupying Photoshop.)

You shouldn’t hesitate to scrap these campaigns if the profit achieved is barely worth a pot to piss in.

So you find a country somewhere close to the Russian border that produces a steady $10/profit per day.

Should you pursue it?

Should you fuck.

Maintaining a $10/day campaign is like pulling down your pants, cracking open your skull, and taking a hearty dump on the sacred membranes.

A complete waste of mental resources.

The only possible reason to focus on these campaigns is if you don’t have the capital to compete elsewhere.

And in that case, your objective should be to raze the marketplace, pillage whatever you can, then move on to richer pastures.

* * *

My advice:

(Yes, there is some here. Eventually. I put it at the end to confuse the undeserving bastards who didn’t make it this far.)

1. Pick a very small number of countries to operate it.

2. Ensure those countries have the same language so you can recycle creatives.

3. Kill any campaign that requires time to manage but can’t satisfy your income objectives — regardless of profitability.

4. Don’t scale at all until your existing campaigns have settled from peak ‘just-been-launched’ performance in to stable, reliable numbers. (Or you’ll be left with an empire of sand castles.)

5. Understand and respect the one metric that Voluum/CPVLab can’t calculate: opportunity cost.

Whatever you work on today, it comes at a price.

Dude, Where’s My Margin?

Jun 23 2014

Feeling the squeeze?

Ever get the impression that your affiliate campaigns are having to work twice as hard for half the profits?

If you work in any of the major verticals — dating, gaming, adult, apps, etc etc — on any of the major traffic sources — Google, Facebook, POF, BuzzCity, Decisive, Exoclick — you have surely seen the effects of an explosion in competition, and the rising costs that it entails.

There is a swelling crowd of hungry affiliate marketers, and most of them are armed with the same weapons:

The same banners
same landing pages
same offers
same payouts
same budgets
same bidding strategies
same traffic sources
and all of the same advice.

Is it any wonder that you can’t get profitable when your entire business can be reverse engineered and replicated in 20 minutes?

Because it can be replicated so easily, it is replicated.

Which leads us to a situation where most of the major traffic platforms are now battlegrounds in a race to the bottom.

Affiliates bid against each other, rapidly driving up click costs, until they can stomach the loss of margin no longer.

He who cries first is forced to take his ball and look for a new traffic source where the battle has yet to reach the savage dying stages.

So what can you do about it?

First, understand the insanity:

There are websites where the exact same banner is shown when you refresh the page. You’d think this is the same advertiser, but it isn’t.

Further investigation shows that the duplicate banners are linked to an identical landing page promoting the same offer. In some cases, the offer is provided by the same affiliate network.

The only way to distinguish between these two campaigns?

They have two unique domains — because they are run by two competing affiliates.

In an industry obsessed with healthy margins, we forget what damage this level playing field does to the cost of traffic.

It rises continually.

Cloning a business model isn’t necessarily a bad strategy, and neither is cloning a campaign. But most business models take months or years to replicate successfully.

An affiliate campaign takes 20 minutes.

Now imagine that you conjure some serious creative juices.

You produce the most stunning banner ever to leave Photoshop. It gets clicked harder and faster than any other creative in Digital History. Imagine you pair it to the freshest and bestselling landing page in your niche.

Now what?

You make money, we hope.

As you start to make money, you can afford to bid more than your competition.

Slowly your winning campaign rises to the top of the stack.

You’re scaling! The world is your oyster!

Until…

One sleep later: every other affiliate in your vertical has noticed that he’s getting less impressions than he received 24 hours ago. He goes to see who’s taking them. He sees your work.

“This looks effective.”

So he copies you, and an entire industry follows suit.

The greatest work of your career is rehashed, ripped, and reuploaded faster than you can say “Hands Off, Wank Biscuit”.

This is a big problem, particularly for those affiliates who misunderstand what constitutes a competitive advantage.

A banner is not an advantage. Banners are copied every minute.

Neither is a landing page.

A business built around the percentage points you are capable of extracting from Photoshop or JQuery is doomed to fail — because there are simply too many marketers ready and waiting to View Source on your innovation.

You can’t hide the creative element of a well scaled campaign.

We’ve got proxies in every corner of the world.

There are a number of spy tools that exist to ‘out’ your work before you’ve had time to celebrate it over breakfast.

Whatever you can get to work, somebody else can too.

(Arbitrage marketers are the most agile in the world.)

And therefore, if you want to regain your margins, the creative process is the wrong place to look.

The solution is to unlock an advantage that is difficult to replicate.

And here are the main areas you should choose to focus on:

1. Wholesale traffic

Imagine trying to run a grocery store if you had to buy your stock from Tesco at retail prices.

It sounds like an uphill struggle, but that is exactly what affiliates try to do.

We buy nicely geo-targeted traffic at the premium rate. We then rely on our creative approach to squeeze profit where a brand advertiser revels in waste.

(If he grew any smarter, we’d be doomed.)

The industry is dominated by self-serve platforms. These charge a premium for their convenience.

They are great if you get there first. But it’s amazing how quickly costs will rise on an auction platform if just a single competitor enters your market.

The good news?

It is possible to buy traffic in bulk.

You can cut out Tesco and go straight to the supplier.

When you find a campaign that is profitable on Placement X, you should be thinking about getting that placement all to yourself. The way to do this is by approaching the site owner and making an offer he can’t refuse.

You need to offer a better deal than he’ll get with a traditional network.

A useful carrot is to offer upfront payment for months in advance.

Better yet, target websites that fit your market perfectly whilst being monetized poorly.

Research which of the major ad networks are known to be stingy with their payments — and target their publisher-base relentlessly with better offers.

If you see Google AdSense on a target’s website, pounce accordingly.

No webmaster who relies on AdSense should be able to refuse the type of deal that a smart affiliate can offer.

2. Exclusive offers

AKA networking, schmoozing and getting a jump on the gravy train before it leaves the station.

The best time to promote an affiliate offer is when nobody else has access to it.

While it’s optimistic to expect a one-to-one relationship with the merchant (unless you’re packing some serious volume), it’s certainly possible to promote offers before they land on your favourite CPA networks.

Often this comes with sacrifice: slower payments, greater risk of getting burnt, the chore of dealing with a real-life, living, breathing, ~~usually fucking sleeping~~ accounting department.

By the time a CPA offer has risen to the top of your network’s ‘hottest offers’ chart, rest assured: some other affiliate has taken the pie.

You may still be able to feed off scraps if you run fast enough, but the train has left the station.

Make it your responsibility to stay connected in your niche. Attend the networking events, store the business cards if you truly absolutely have to.

Use LinkedIn to target companies that might not necessarily have an affiliate program but do have a product that you know how to sell well.

Your competition can’t promote an offer that they don’t have access to.

3. Investing in Technology and Infrastructure

If there’s one thing you shouldn’t skimp on, it’s technology.

Every day I see mobile marketers trying to make a living using double meta refreshes on servers that are barely wired to load a LiveJournal without creaking.

It’s like turning up at St Andrews with a bag full of hockey sticks.

By technology, I mean investments like:

Servers
Tracking solutions
Spying tools
Automation tools
Redirect configurations
Local Content Delivery Networks (CDNs)
Productivity software (keep it simple, avoid productivity porn.)
High quality scripts for geotargeting, countdowns, etc
List building capabilities
Your own choice of hardware

By infrastructure:

Tax-efficient corporation setup (for the love of Satan’s Balls, stop running traffic under your personal name!)
VAT registration (you think your rivals pay 20% on their traffic?)
Access to high quality information
Native translators
Outsourcing teams
Payment terms and credit
Privacy settings to cover your trail
A setup that lets you work on the move

Most affiliates skimp on both technology and infrastructure.

You shouldn’t if you care about your margins.

4. Attritional Bidding

There are several ways to win the war on self-serve traffic sources.

If you have money in the bank, you can grind out the smaller fish by accepting a skinnier margin. This advantage snowballs if you can drive enough volume to demand a higher payout.

Some of the biggest businesses in the world operate on wafer thin margins (1-10%), but they make up for it in volume. They leverage economies of scale against the competition to literally choke them out of the market.

Similarly, you can focus on high quality traffic at the expense of short term profits.

If you deliver good leads, you can outmanoeuvre the competition through pay bumps and familiarity with the vertical’s underlying economy.

Knowledge of what ultimately sells is priceless in a way that knowledge of how to turn a quick 200% ROI usually isn’t.

The third option is to be more efficient.

Affiliates waste ad dollars every day by failing to set rules and redirects for their campaigns.

Just because you’re bidding on prime American traffic doesn’t mean that you’ll actually get it.

Analyse where your traffic is coming from.

Use a filter to deal with mobile traffic, and another to redirect traffic from outside your geo.

You can choose to monetise it with an alternate campaign, or simply sell the impressions back to an ad exchange.

5. Unfashionable Traffic

When a newbie logs in to TrafficJunky and buys a 300×250 banner for the whole of America, I can tell him with sad-eye certainty that he will not be making money in my lifetime.

Because his campaign is simply too fashionable.

It’s too fucking obvious.

You do not get profitable trying to conquer rush hour traffic with a bicycle and a $20 budget.

What is unfashionable traffic?

It’s traffic that you don’t hear publicised on blogs, forums or in network roundup emails. You’ll never hear me talking about it, or anybody who actually relies on it.

It’s traffic that still has healthy margins because the competition either doesn’t know how to monetise it, doesn’t know where to find it, or doesn’t have the technology to deal with it.

All of these burdens create a wall that protects the traffic from inflated costs.

Facebook is a good example of unfashionable traffic.

Yep, Facebook. Unfashionable.

There is still huge money to be made on Facebook, but in order to do so you need advanced technology to cloak your creatives, and you need a healthy bank balance to spend thousands on accounts that might disappear overnight.

To the newbie gazing in from the cold, that’s unfashionable traffic.

It comes with strings attached, headaches to nurse, problems to solve.

The newbie would rather move along to the next platform where the barrier to entry is less severe. The only problem is that he’s not alone.

The platforms with less friction are invariably meeting grounds for an industry full of disillusioned souls all trying to find their margins without having to put in the groundwork.

But shouldn’t that excite you?

You don’t have to follow them.

The upside to monetizing unfashionable traffic is that it gives you a massive advantage in times of industry crippling saturation.

If you run the hottest campaigns on the biggest self-serve platforms with the same creatives as the next guy, you can’t possibly expect to be making money forever.

You’d do well to make money, period.

Newbie affiliates, I’ll be honest with you:

You will not survive unless you build some walls around your business.

Building those walls means embracing the challenges that fill lazy marketers with dread.

It means pushing out of your comfort zone; creating a structural edge in your business that allows you to outbid the competition regardless of whether they copy your banners and landing pages.

That’s not to say that affiliate marketing is dead.

Only that arbitrage for fools might as well be.

My 2 Weeks in Bangkok and Hua Hin

Apr 25 2014

Want to feel energised, more productive and ready to take on the world?

Take a holiday.

My advice: Go to Thailand.

I am freshly returned from a 2 week hiatus spent lolloping on beaches, soaking in the blistering heat of a subtropical summer at the peak of its powers.

Some random observations:

Jesus Christ, it’s hot

Thailand in April is hot with a capital HOT.

I should have remembered this from living there.

Given zero chance to acclimatise by London’s damp fart of a spring, I can tell you that 38 degree heat is a recipe for an extremely sweaty afternoon.

On the hottest day I had to stop my routine of reading by the pool because I couldn’t control the amount of sweat that was dripping in to my eyes.

Hot.

I’m pretty sure you’d find more salt on my sun lounger than in the entire Gulf of Thailand by the time I’d dragged my scorched carcass back to the pool.

Hot, hot, hot.

I miss it already.

Westerners and their Thai brides

I don’t think there’s anything wrong with a guy moving to Thailand, retiring, meeting the cliche ‘Thai bride’, and starting a new chapter in his life.

I can see how and why it happens.

What I find distasteful is that for so many Westerners, this type of romance isn’t built on reality.

It’s a power trip.

Many times I would catch sight of a Brit treating his Thai wife or girlfriend as if she were sub-species. Just because you can exert that control and get away with it, doesn’t mean you should.

Thankfully there’s a younger generation of expats in Thailand who aren’t committed to fantasies of domestic totalitarianism straight from the 1930s.

But for the crustaceans who are… good luck if you ever run out of money.

Mental breaks from work

It’s amazing how the mind slows down when you disconnect physically from your work space.

I don’t mean to take a walk, or go to the pub. But to eject yourself completely from anywhere that resembles work or its associated habits.

By spending entire days away from the computer, you get a fresh perspective.

I often find that it takes this distance to allow myself to drop projects that are going nowhere, or to align my focus on those which actually mean something to me.

Reading fiction instead of non-fiction helps.

Escapism is the best distraction.

Japanese tourists and cameras

I swear to God, what is up with Japanese tourists and their infatuation with taking pictures?

In Hua Hin, one couple would sit in silence for breakfast, occasionally taking bites but mostly interested in snapping each other.

Constantly.

From every angle.

In eerie still silence.

Who needs to talk, or take in the stunning views, when you can just sit there vacantly taking pictures to live through when the experience has already gone?

I really don’t get it.

One of the group even stopped to watch me make a cup of coffee on my balcony, presumably because I was only wearing my boxers.

Normally if I caught this, I’d challenge them, “Why don’t you take a picture? It’ll last longer.”

Pretty fucking irrelevant if they already are.

Shameless!

Songkran public target number one

You’ve got to admire how the Thais celebrate their New Year (Songkran).

Bangkok turns in to a gigantic water fight with water guns, buckets and even fire hoses.

In possibly my favourite moment of the entire holiday, my girlfriend and I were wandering towards Emporium when a nervous, smiling Thai officer approached us with a tin of what looked like Quality Street chocolates.

We were already completely soaked through, so we knew the drill.

I ducked my head and winced.

“Sorry, sorry!” he pleaded, before walking straight past, tottering up to my girlfriend, and slowly pouring a full tin of water straight down her top.

It was one of the politest pre-meditated street assaults I’ve ever seen.

It got me thinking though.

What if you were visiting Thailand for the first time and you didn’t know what Songkran was?

How do you react when a Thai wanders in your direction, blasts you with a SuperSoaker, and carries on walking without taking his eyes off his phone?

I’d probably get back on the plane.

Old people and flying

If you are over 75, with a dodgy bladder, and extremely bad hearing… I’m sorry, but I don’t want to sit behind you on a 14 hour flight.

Old lady: “We’ve been flying for 9 hours.”
Her husband, shouting profusely, clearly deaf as a door mat: “I know. I’ve pissed myself twice.”

There’s something comical about hearing an old couple bicker, oblivious to their incredible decibels, marbles long gone and replaced by wholly British arguments, like:

“Why is my blanket wet? I want a dry one. No, not that one. I want a dry one, dunn’ae.”
“No YOU ask the lady. I don’t bloody know why it’s wet do I? I probably pissed myself over India.”

But after 14 hours sat there, awoken at one point by a strange outburst of applause and hollers — Old Man’s reaction to the end of Phantom of the Opera — I did want to kill myself.

I flew Malaysia Airlines, by the way.

You could sense the palpable hearts in mouths every time the plane changed course on the tracker, especially in turbulence.

Can’t imagine how difficult it must have been for cabin crew in the days immediately following MH370.

‘Cuties’ on the BTS

Ever wondered what Nicky Cakes is up to these days?

Well, here he is, captioned as Justin Timberlake (Timbercakes?), appearing on a Facebook page titled ‘BTS CUTE GUYS’.

Un-be-lievable.

I won’t lie. I did check the page to see if I’d made an appearance.

Not a god damn whisper.

So what happens when you go viral as a ‘BTS cute guy’?

This, apparently:

I expect Cakes will be extending his visa.

Seduced by Thailand again

It’s difficult to leave Thailand.

Every time I visit, I question what ever convinced me to move back to London.

In reality, there were a number of factors. But it doesn’t stop the mind from wandering.

You think of the weather, the people, the food (God, the food), the beaches, the pace of life.

It doesn’t get any better.

Does it?

If you haven’t visited Thailand, I highly recommend it.

Pics from the trip

A collection of pics from Bangkok, Hua Hin and Samphram, April 2014:

[envira-gallery id=”7873″]