The 7 Dangerous Trends Facing Online Affiliates

As we’ve been online affiliates for some time, you know that in many cases, it’s getting harder than ever to get sales, leads and app downloads. Gone are the go-go days of 2003 to 2012 when it was a no-man’s land and anyone with a pulse and a Google Adwords account could make money hand over fist!

Join Jasper for a well-researched and riveting talk on the 7 Dangerous Trends Facing Online Affiliates In 2017. He’s the Managing Partner of The Conversion Wizards who recently published a case study on Moz’s “The Anatomy of a $97 Million Page” that went viral.

The discussion will include a brief overview of trends that are affecting your business, the secret of staying ahead of the curve as well as dive into a few case studies that will provide solid takeaways for you to implement during or after the conference.

Speech by Jasper Kuria | Managing Partner, Conversion Wizards

Jasper Kuria Speech Transcript

Thank you, Eric. You’re a master MC.

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 Online 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 were 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.

7 threats Facing Online Affiliates In 2018

AnTd I hope you learn 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.

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As more commerce moves online, affiliates are the new salespeople. And so the work you do is very important.

In fact, online 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 online 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 online affiliates, who bought ads in those early days.

#1 Intense Competition In Paid Channels

So without further ado, the 7 threats facing online 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.

#2 Law Of “Shitty Click Throughs”: 3x Harder To Reach Customers

So the 2nd 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 at the right rail for the banner ads.

You know it’s much harder to reach consumers with banner ads.

2nd 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.

#3 Declining Email Open Rates

Declining email open rates is the third threat.

This has hit email-based online 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.

#4 Proliferation Of Ad-Blocking Software And Bot Traffic

The 4th 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.

#5 Almost Free, Equal Access To Tools and Data

And then the 5th 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 defensive ability, but most online affiliates do not.

#6 Scaling Means Less Qualified Traffic and Higher Costs

If you have a campaign that’s long-lived enough, I guarantee you someone is going to replicate it. And so that’s the 5th threat.

And then the 6th 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 online 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 a small dataset, it’s easy to forget this fact.

So just 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.

#7 Lower Conversion Rates On Mobile, yet More Traffic Is Mobile

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.

Those are the 7 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.

Adapt, Survive And Thrive

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 online affiliates.

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 online 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 release something like that. 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 tapeworms 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.

Saturated And Super Competitive Market

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 7  factors 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 online affiliates, you get conversion more than most people. But do you use a systematic and proven approach?

I’ll share one with you.

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 accumulative advantage that’s so important in CRO.

Winner-Take-All Effect

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.

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That’s very prevalent in the online market. It’s marketing, it’s a winner-take-all or winner take the most type of market.

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.

Facebook Versus MySpace

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.

Slight difference in user acquisition huge difference in terms of 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.

Case Study: Anatomy of a $97 Million Page

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 6 or 7 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.

How We Get Results

So how do we get results? We use a 7-step process.

I don’t have time to go through all the 7 steps today, so I’ll just mention two that are very important.

Step number 3. We spend a lot of time using various tools, understanding both the non-converting visitors and the converting visitors.

And then step number 6, 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 it looks.

All it says is, the probability of a conversion is based on 5 factors.

The numbers against the factors are the relative importance of the weights. 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. When you’re looking at designing an a/b test you want to reduce friction as much as possible, so that’s a heuristic.

Focusing On The Key Questions

Again for this case study, we focused on answering 2 key questions.

Why did the visitors who bought convert? Why did those who bounced not convert?

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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.

Understand Why Your Visitor Did Not Convert

I can’t emphasize this enough

Never design an a/b test until you fully understand why your visitors did not convert.

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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 to CRO.

So price objection, the main reason people objected to price was the Insoles cost $80. Dr. Scholls, the leading brand, cost $10.

So they could not see why they should pay that much.

We explained that Protalus Insoles are similar to custom orthotics, which cost $600 to $3,000. The reason why custom orthotics are so expensive is that 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 Insoles are almost as effective but cost 87% percent less.

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Now that became a value proposition.

Address The Price

The 2nd thing we did to address price is we used a technique called break price down to the ridiculous.

A pair of Insoles lasts 6 months with heavy use. And so over 6 months, that’s 44 cents a day, which is less than a K-cup of coffee.  Most people consume 1 or 2 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 Insoles 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.

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And so by doing that you build trust. If you’re all things to all people you’re nothing to no one.

The Final Page

And this is what the final page looked like.

Jasper Kuria – Final Page

It was a really long page much longer than the original that produced a 58% lift.

Together with one-click upsells, the cumulative total is about  91% 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 5 key takeaways.

Online affiliates grease the wheels of e-commerce.

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 if you’d like to learn more about CRO, we have a Free Mini-Course. You can go to that link,  www.TheConversionWizards.com/AWA.

That is my presentation. It’s been a pleasure speaking to you, thank you.