The 7 Dangerous Trends Facing Online Affiliates in 2017 | AWasia 2017


Thank you, Eric. You’re a master emcee.
First, I just want to echo something that Paul said. We got to go backstage a little and
got to appreciate just how much work it takes to organise an events like this.
So thank you, Affiliate World. The title of my talk is the Seven Major
Threats Facing Affiliates in 2018: How to Adapt, Survive and Thrive and then to
make it all concrete, I’ll share one of our recent case studies that was
published by Moz. Who am I? As Eric mentioned, I am the founder of
Conversion Wizards, a consultancy that that does CRO. We’ve generated tens
of millions of dollars for our clients and therefore, I believe that what I have
to say will be a value to you. Before I got into CRO, between 2009 to 2011, I was
actually an affiliate promoting health and fitness offers. So I understand your
space a little bit and I hope you learn from – from the case study. First, I will start by pandering to you a
little. Brian Tracy, the famous sales trainer likes to tell salespeople that
nothing happens until something is sold. It’s upon your efforts that the
economy depends, your work pays for employee salaries and government taxes.
As more commerce moves online, affiliates are the new salespeople and so the work
you do is very important. In fact, affiliates built Facebook. In the early days,
Facebook was struggling to attract brand advertisers because they were
worried about their ads appearing against user-generated content but
affiliates didn’t care. They spent the money and as a result Facebook was able
to get to get cash-flow positive and Mark Zuckerberg was in a very strong
negotiating position when he raised subsequent rounds of capital.
Today Mark is worth 73 billion dollars. He controls 51% of the
Facebook voting stock that would not be possible without the affiliates, who
bought ads in those early days. So without further ado the seven threats
facing affiliates in 2018, the very first, which most of you are familiar with is
intense competition and paid channels. This is a graph showing the
revenue growth per user on Facebook, which is a direct result of the fierce
competition between advertisers, which has resulted in significantly higher
CPC’s that’s the first threat. And so as an affiliate it’s much harder to turn a
profit than it was back in 2009, when some of us got into the game. So the
second threat is the law of “shitty click-throughs,” a term coined by Andrew Chen,
the head of growth for Uber. As I, mentioned back in 1994, the very
first banner ad had a 78% click-through rate. Today you’re lucky if
you get 0.1% on most major sites, and then the image below is a heat
map, showing how web visitors don’t even look on the right rail for the
banner ads. You know it’s much harder to reach consumers with banner ads. Second
threat. If you’re buying ads on a CPM basis and you have such shitty click
throughs, your effective CPC is higher until your acquisition cost is higher,
harder to turn a profit. Declining email open rates is the third threat, this has
hit email-based affiliates especially hard because they rely on their email
list to drive sales and so, given the decline it’s much harder to generate
sales from email lists and Google has not helped matters with a tabbed
inbox. Most of the emails that get delivered to the promotions tab, don’t
get seen, much less read, that’s the third threat. The fourth is the proliferation
of ad-blocking software and bot traffic. As most of you know, for most print-based publishers, Revenue has declined quite a bit and so the way most of them are trying to make up for
this. People like the New York Times, the Wall Street Journal, the Washington Post
is to use bigger and more obnoxious ads on their websites. Users in turn, have
reacted by using ad blocking software and so you know, it’s just that much
harder because of ad blockers. The other problem is bot traffic, there’s a lot
of fake clicks out there and so, because of these two factors at
best, your ads don’t get seen, at worse you’re paying for fake clicks. So that
just makes it much harder to succeed as an affiliate, and then the fifth threat
is almost free, equal access to tools and data. Back when I got into the game as an
affiliate, competitive intelligence was very hard to come by, but now with tools
like What Runs Where, AdBeat, with just a few clicks, anyone can find what’s working and replicate your campaign. What I have
there is a campaign I reverse-engineered that belongs to Airbnb. With just a few
clicks for free, fortunately for them, it’s not that easy to replicate
their business model, so they have some defense ability, but most affiliates do not.
If you have a campaign that’s long-lived enough, I guarantee you
someone is going to replicate it. And so that’s the fifth threat. And then the sixth is as you scale,
something one of the other speakers mentioned, by definition when you go
mainstream – you’re going after less qualified traffic, which converts at a
lower rate and so your costs rise up significantly as you scale.
Most startup founders and affiliates are optimists. I don’t think they fully
appreciate this particular challenge when scaling campaigns, and so if you’re
doing projections based on the success of data from an early campaign, of
small data set, it’s easy to forget this fact and so just to to put this in
context, if you’re running a campaign and suddenly your cost of acquisition
rises by 30% and your lifetime value declines by 30% it’s going to take you
twice as long to get profitable. So as an affiliate, if it takes you a while
to get paid or as a founder, if it takes a while to raise your next round of
capital, that could mean the difference between success and failure. And then the final threat is lower
conversions on mobile, we all know that mobile converts less well than desktop,
and Google predicts that in the next two years, 50% of all commerce is going to be
is going to be mobile. This is actually affecting one of our current consulting
clients in the travel space, because their pages are not well optimised, their
revenues declined about 15% and so by the way Ezra Firestone has a really good
course on mobile optimisation techniques, which is available on the iStack Training
that Eric mentioned, so that’s worth checking out. So those are the seven threats, it’s
obviously much harder to succeed today than it was before. How do you adapt
survive and thrive? That’s what I’m gonna share with you. So one solution is to
spend more than anyone else. This is what a lot of venture-funded startups are
doing. Uber and the likes of Blue Apron, they’re just out spending everyone
because they have venture capital. The problem with this strategy is the day of
reckoning eventually comes when you run out of money and you can’t
raise more. And so this isn’t a viable strategy for most affiliates and to
use Blue Apron as an example, when they were a private company, they could hide
behind fancy accounting but now that they’re a public company, it’s clear to
everyone that their unit economics do not make sense and their stock has
tanked. It’s trading I think about 85% discount from their IPO price.
So not really viable for affiliates. The other solution is to create a product
that’s super unique and valuable, so that everyone beats a path for your door, they
buy and you will do well. For example, if today you found a cure for cancer, none
of the seven factors I discussed would affect you. People would be at a path for
your door, they’d buy in droves and you would do well. That was the case for the
very first iPad back in 2010, it was a novel product no one had ever released,
something like that. So they did really well, it was also the case for the very
first weight loss offer back in the late 19th century. It was actually based on
sanitised tape worms that were supposed to eat the fat out of your body and
magically make you slim. And they did well, because it was the first of its
kind. Today that market is saturated and super competitive, so it’s
a viable strategy. The problem is it typically takes a long time to do this
type of thing. Usually takes an element of luck, which you really can’t count on.
There’s a saying that in business hope is not a strategy. Which begs the question, what can you do today to adapt in this new
reality with the seven factors I just – I just discussed. And that’s what I’ll
share with you. And so a far, easier way to adapt, is to become better than
everyone else at conversion rate optimisation. As affiliates you get
conversion more than most people, but do you use a systematic and proven approach?
I’ll share one with you, and so just to reiterate something I said before, when
everyone has access to the same data tools and channels, it’s human skill at
CRO conversion rate optimisation that can be a key differentiator and make you
win. And so I’ll share the methodology we use and cite a case study to show you
the methodology in action. And if you’re thinking that, you know, AB testing, CRO,
we know that. You’ll be surprised to learn that less than 30% of
companies actually do any long-term disciplined AB testing. They might get
Optimizely and test things like button colors and fonts, things that really
don’t move the needle and then give up. And so if you are disciplined and you
take a systematic approach, long term. You will do better than most. And I just want to mention this law of
acumulative advantage that’s so important in CRO. The formal definition is what
begins as a slight edge over the competition, compounds with each
additional contest, each cycle further cements the status of those at the top.
Over time, those that are slightly better end up with the majority of the rewards.
It’s also known as the winner-take-all effect. That’s very
prevalent in online market, it’s marketing, it’s a winner-take-all or
winner take most type of market. And just to give you an example, if you increase your
conversion rate by say 10 or 20% not only do you generate 10 or 20%
more revenue, you also generate 10 to 20% more revenue per user. So
that’s more direct revenue right there and then, but you can also bid more and
bidding more drives more traffic, which begets more revenue, and you end up with
this virtual cycle of conversion rate optimisation. If you’re running campaigns
on all those channels, SEO, SEM, affiliate, the effect is compounded and multiplied.
And say you’re selling a physical product, you quickly attain
economies of scale that make it that much harder for your competitors to beat
you or for new entrants to dislodge you. if they if they decide to get into the market. So a few examples of this law of accumulative advantage, Google versus Bing.
Google search results are only slightly better than Bings, but today
Google has 90 billion dollars in revenue versus Bing that has a billion dollars.
So slight difference huge difference in terms of like the revenue.
Another example, Facebook and MySpace back in 2006. 2005 to 2006 MySpace had a
lead over Facebook but Facebook found a way to become a little better at
acquiring users. Unbeknownst to most people they actually hired a CRO firm
based out of the UK, called Conversion Rate Experts and they were able to acquire users
at a slightly faster rate. Today they’re worth 400 billion.
MySpace is a goner. The third example Airbnb versus HomeAway.
HomeAway was actually founded before Airbnb in 2005. Airbnb was founded
in 2007. Again, they became slightly better at acquiring users. Some say they
cheated by spamming Craigslist but that’s neither here nor there. They got
better acquiring users, they won. Today Airbnb is worth 30 billion dollars,
whereas HomeAway is worth just shy of 3 billion. So slight difference in results, Slight difference in user acquisition huge difference in terms of
like market cap and revenue and long term. So something to keep in mind,
you just need to be slightly better to reap most of the rewards in your market. And so to make all this concrete I’m gonna share the case study.
The anatomy of a 97 million dollar page. The company was Protalus. They make
in-soles, very boring product but they have a really unique value
prop that I’ll discuss at length. And so over the course of six or seven
months, using the methodology that I’ll share with you, we helped them increase
their revenue about 91% percent, which then led to an almost – over 1,200% gain in annual run rate revenue, based on
the virtual – cycle of conversion rate optimisation that I
mentioned, because many more traffic sources became viable because of that
initial 91% gain and so we estimate, we added about 97
million dollars to the company’s valuation, based on the revenue multiple
for their industry I just want to say, that we didn’t invent
much of what we do. We borrow heavily from early direct-response pioneers,
people who perfected many of the techniques we use. People like Claude
Hopkins, Eugene Schwartz, John Caples. There’s the famous Isaac Newton quote
where he says, “If I have seen further than others it’s by standing on the
shoulders of giants” and so I just wanna channel that. Some of the more recent
people that we’ve borrowed heavily from are people like Dr. Karl Blanks of
CRE and Dr. Flint McGlaughlin the founder of MECLABS. You know, sometimes
we think we’re very technologically advanced. We’re in a web and mobile world
and so things that early direct-response pioneers did, don’t apply to our world but
they do. Human psychology has not changed in over a thousand years, so how do
we get results? We use a seven step process, I don’t have time to go through
all the seven steps today, so I’ll just mention two that are very important.
Step number three, we spend a lot of time using various tools, understanding both
the non-converting visitors and the converting visitors. And then step number
six, we apply a heuristic developed by MECLABS that helps you evaluate a
landing page in a very systematic way. So the MECLABS heuristic, it’s based on
research. About 15 years of research, 20 million dollars in spend. Thousands of
case studies, and that’s the heuristic there. It’s actually a lot simpler than
than it looks. All it says is, the probability of a
conversion is based on five factors. The numbers against the factors are the
relative importance of the weights and then plus or minus, means that the factor,
the factor increases conversion or decreases conversion.
So M stands for motivation, which you don’t have control over most
of the time, as a marketer. I mentioned the example of if you found
a cancer cure today, the visitors would be so motivated that
it didn’t matter what your landing page looked like. You would still do well. V
stands for the strength of your value proposition. I stands for incentive. F
stands for friction. So things that affect friction are the length of your
landing page, the difficulty of navigation and so when you’re looking at
designing an a/b test you want to reduce friction as much as possible, so that’s a
heuristic and so again for this case study we focused on answering two key
questions. Why did the visitors who bought convert? Why did those who bounced
not convert? By understanding why the converting visitors bought, you can
accentuate the elements on the page that were persuasive. In this case there
was an animated video that many of the people who bought said, persuaded them to
buy. So we made it more prominent, we put it above the fold that helped to
increase the conversion rate, and then for the bouncing visitors when you
understand why they’re objecting, you can specifically address each objection and
usually that will lead to a significantly higher conversion rate. So
this is the result of the on-page survey we ran. We used a tool called
Qualaroo, there were two groups of people who didn’t buy. Those
who said they found what they were looking for but didn’t buy. And those are the
objections they cited, and then those who did not find what they were looking for.
And when we asked them what were you looking for, those are some of the things
they said, and so in designing the a/b test we just addressed the things
from the survey, we distilled them into themes. I only have time to cover
the three that are highlighted and so that’s price, the price was too high.
Not sure the product will work because other products in the past did not work
and then, not sure it will work for me, I can’t emphasize this enough, never design
an a/b test until you fully understand why your visitors did not convert. I’m
going to quote Abraham Lincoln, who has a famous quote about you know “Give me six
hours to chop a tree and I’ll spend the first four hours sharpening the axe.” The
same applies for CRO. So price objection, a main reason people objected to price
was the in-soles cost $80. Dr. Scholl’s the leading brand, cost $10 and so they could
not see why they should pay that much, and so we explained that Protalus
in-soles are similar to custom orthotics, which cost six hundred to three thousand
dollars and the reason why custom orthotics are so expensive is because
you have to cast a mold for each person, and so that’s why they are expensive, but
after 31 years of practice the founder of the company determined that about 85%
of people have the same defect. So you can cast a mold once and sell the
product and it will work for 85% of the population. So our value proposition
became, avoid paying $600 for custom orthotics, Protalus in-soles are almost
as effective but cost 87 percent less. Now that became a value proposition. The
second thing we did to address price is we used a technique called break price
down to the ridiculous. A pair of insoles lasts six months with heavy use
and so over six months that’s 44 cents a day, which is less than a K-cup of coffee.
Most people consume one or two a day, so explained in those terms, the price is
more palatable then we used the authority of Dr. Romansky. He’s the
resident podiatrist for Protalus, before he was only mentioned in a page that
wasn’t visited a lot. We made him a lot more
prominent. We put him above the fold, we cited his credentials consultant to
the US national soccer team, the Philadelphia Phillies.
We also solicited testimonials from other industry experts people like Dr.
Martin Schultz, he’s designed footwear for Nike and Puma. And then we used celebrity
testimonials. Fortunately for them they had unsolicited testimonials from minor
celebrities like Ms. Senior America, a former NFL player and so we used those.
Their audience skews female and over 55, so Ms. Senior America’s was really
effective in this case. Not sure it will work for me, we listed all the
conditions that the in-soles treat and crucially, we also listed those
that they do not treat. There’s a famous marketing manifesto
called the prospects protest and one of the principles is,
first tell me what your product cannot do and I just might believe you when you
tell me what it does do. And so by doing that you build trust, if you’re all
things to all people you’re nothing to no one, and this is what the final page
looked like it was a really long page much longer than the original that
produced a 58 percent lift. Together with one-click upsells, the
cumulative total is about ninety-one percent, which led to the 1200
plus increase in annual run-rate revenue that’s what the final page looks like
and I’m out of time, so in closing, I’ll leave you with five key takeaways.
Affiliates grease the wheels of ecommerce. It’s harder than ever to succeed online.
When everyone has access to the same tools, channels and data, human skill at
CRO is the key differentiator. You just need to be slightly better than the
competition to do well online, and And if you’d like to learn more about
CRO we have a free mini-course You can go to that link,
TheConversionWizards.com/AWA That is my presentation. It’s been a pleasure speaking to you, thank you.

2 Comments

Add a Comment

Your email address will not be published. Required fields are marked *