The affiliate marketing industry is growing fast, but are there threats lurking that could put us all out of business? Luckily, you need not fear for the future, as there are four sure-fire ways to stay relevant and steer clear of the threats with an affiliate business.

Speech by Steve Jukes | Co-founder & Chief Innovation Officer, Jumbleberry

Steve Jukes Speech Transcript

Better? There we go. Technical difficulties.

Okay. Like I said, Alex, great looking hat. I wanna give a shout-out first of all to, number 1, to the STM team for putting on a fantastic event. It’s the best show I’ve ever been to in this industry.

And, I also wanna give a special thanks to the staff and the crew from the hotel who have made us all feel so welcome.

A big hand, please.

Ten Years In Affiliate Marketing Industry

So, first, some background on me. As Alex said, I’ve only ever worked in affiliate marketing. My whole career has been in this industry, over 10 years.

And I love this business. There’s nothing else I would rather do.

My education is in Math and Economics. So, I totally geek out on this sh*t. I mean, I feel like this industry was specifically made for me.

Jumbleberry

I co-founded Jumbleberry in 2009 with my partner Danny. And before that, I was an affiliate manager at a small affiliate program.

So, I pretty much done every job there is to do at Jumbleberry. Biz dev, affiliate manager, campaign manager, collections, accountant. I think, I was the janitor at some point.

But that’s what you do when you’re a startup. And I suppose that all of those things prepared me for my role that I’m in today as Chief Innovation Officer.

I hope that today’s talk will give some insight as to why at Jumbleberry, we feel it’s so important to invest in something like innovation.

But to keep it simple, let’s just say that I’m the head problem solver.

If you have a problem or an opportunity that needs a unique solution, I’m your guy.

As Alex said, I also have a beard.

People Trust Man With Beard

Steve Jukes — Trust

Steve Jukes — Trust

Now, as you can see from this study, people trust men with beards twice as much as men without beards. This is an actual scientific study.

So, please, in addition to my passion and experience, factor that in as you listen today.

Besides me and my beard, you might be asking yourself, “Okay, why do I wanna hear what a network has to say? Isn’t a network just a necessary evil whose only purpose is to make sure that I get paid?”

And I get it, networks typically suck. I would agree with you. But let me frame it up this way for you.

Most of you here are affiliates who buy traffic. So, you understand the power in aggregating data. As a network, we’re in a great position to aggregate a lot of data.

Not just about traffic but about the actions and behaviors of thousands of affiliates and advertisers.

In addition, we play the role of universal translator in between. So, we’ve really developed a great understanding of the business from both sides.

Unbiased Opinions Backed Up By Data

So, we see the forest for the trees and we have unbiased opinions that are backed up by data.

Over the past 6 years, Jumbleberry has racked up the following stats.

Steve Jukes — Stats

Steve Jukes — Stats

75 million clicks. 6 million CPA conversion.

We’ve worked with over 2,000 affiliates, 2500 offers. And we’ve had over 40,000 hours of conversation with affiliates and advertisers.

Only to have one too many meetings that end up like this.

Steve Jukes

Steve Jukes

Now, we never set out to become some corporate think tank or industry thought leaders.

Danny and I founded this company to make a lot of money which is I’m sure what everyone in here is trying to do as well.

But over the years, through all the hours of conversation, we’d gathered all this information, thoughts, ideas, behaviors, actions. And we have this great opportunity to share that so we figured, why not.

Now, I’ve gotta tell you, the past 10 years has been pretty exciting. L

Best Year Ever

In fact, last year was Jumbleberry’s best year ever. Over 100% growth.

And, I’m wondering in the crowd, who here had their best year ever last year in affiliate marketing? Don’t be shy. Okay, lots of people.

The rest of you are lying. We all know you’re pushing huge volume.

So, that’s phenomenal, right? It’s been a great year for everyone.

We’ve had a great run. And I hope everyone has enjoyed this great run as much as I have. Because we’re all going out of business.

Business Stories

I’d like to start by sharing a couple of business stories with you.

The first one is about a too-big-to-fail financial institution founded in 1858 that grew into one of Wall Street’s largest players.

Over 19 billion dollars in revenue, 4 billion dollars in annual profits and 700 billion dollars in assets.

 Steve Jukes — Quotes

Steve Jukes — Quotes

I’d like to put up some quotes from the 2007 annual report of this company. And I’m gonna highlight a couple of them.

The first one is, I may paraphrase, but we benefited from our senior level focus on risk management and our culture of risk management.

And the second one, record net revenues, profit and earnings per share.

In 2007, Lehman was coming off its best year ever. They thought they were at the top of their game. Even though cracks started to appear in the subprime mortgage business that they were heavily involved in.

They had on their books over 110 billion dollars in securities related to subprime mortgages. And they will leverage that 31 times.

This means that a movement of less than 4% would cause those securities to become worthless.

We all know that the market moved a lot more than 4%.

Lehman Brothers existed on the edge of a knife with very little margin for error. And, on September 15, 2008, Lehman Brothers filed the largest corporate bankruptcy in history.

It didn’t have to be this way. How could it happen that such a large company could seemingly go out of business overnight?

Blind Spots, Why They Failed

Steve Jukes — Blind Spots, Why They Failed

Steve Jukes — Blind Spots, Why They Failed

I like to highlight some of the blind spots that Lehman had.

You had a country where they were building a whole bunch of houses and not enough people to buy them. And, the people who were buying the houses had no income and no jobs.

Not a great recipe for success.

So, you had ratings agencies giving worthless securities triple-A ratings.

You had an entire industry operating in the shadows, no regulation, no best practices, everyone making it up as they go along. And, because companies played both sides you had interconnected liability, effectively a house of cards that was ready to fall.

So, how could this be? How could a company so large and an industry so large have these blind spots that were so devastating?

And there’s a couple key reasons.

Key Reasons

Number one, the competition for profits meant that the players in the industry had no incentive to share information and work together. There was no incentive to collaborate.

They couldn’t see the toxic assets that were on their balance sheet. They were all mixed together, triple-A with triple-A.

So, they didn’t even realize that they were 4% away from being completely insolvent. They succumb to groupthink. And, they figured, “Hey everyone else is doing it, so it must be totally fine.”

They really believe that.

And in that 2007 annual report, they downplayed and under reacted to the crisis that was already well underway that year. They had investors that they didn’t want to spook.

Now the scary part is they were probably drinking their own Kool-Aid. And they literally believed that everything was totally fine.

Now, we all know what happens as a result of the subprime mortgage crisis. We had the great recession.

And like I said, it didn’t have to be that way. The threats that were in front of this industry, everyone could see them. And yet, the players in the business did nothing about it.

Affiliate Marketing Industry

On to the second story. This story’s about us, about the affiliate marketing industry.

We’re one of the fastest-growing industries in the world.

16% compound annual growth rate over the past five years.

We are outgrowing traditional retail like quite a wide margin. And we’re growing 3 times faster than online retail. So, affiliate marketing is like e-commerce on steroids.

The size of the industry’s about 5 billion dollars in the US and over 15 billion dollars globally. It really is an amazing business story.

Now, a few minutes ago a bunch of us put up our hands and said, “You know, we just had our best year ever in this business.”

And you have to ask yourself, “Are there threats? Are there things facing us that could potentially put us out of business?”

Threats To The Business

Steve Jukes — Threats To The Business

Steve Jukes — Threats To The Business

And the answer is absolutely yes.

First, ad blocking and ad blindness. Now we talked about this a bit yesterday.

It’s not that there’s a lack of banner inventory, it’s that people hate the ads. And they don’t click on them.

Average banner CTR is at 0.06%. It’s the lowest it’s ever been and declining.

We have the rise of these close platforms like Facebook, Pinterest, Snapchat, LinkedIn and Twitter.

And these closed ecosystems make their own rules. The web is dying.

If Facebook or Twitter or Snapchat wants to change the rules on how you advertise, they can do that. So, it’s a serious threat.

We have shifting consumer preferences whether it’s apps versus web, mobile versus desktop. Shifting expectations in terms of value that the consumer is going to receive.

It’s a difficult thing to pin down.

We have regulatory compliance. Regulators move really slow but they carry a big stick.

So, entire sectors of our industry could become regulated, crush profit margins and make all those campaigns you run not profitable anymore for anyone.

Deceptive Marketing

And we also have deceptive marketing. Those ads that your competitors are running that no one is clicking on, is bad for your business.

There’s one thing to be an aggressive and clever marketer. And, there’s another thing to be outright deceptive.

The worst players in the business make it bad for everyone.

Now, I’d like to pause for one second and ask a question. Has anyone ever heard the story of the boiled frog? We got a couple. Okay.

Jumbleberry guys, I know.

It goes like this. So if you toss a frog into boiling water, it will jump out and save itself. No harm, No foul.

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But if you place a frog in cool water and very gradually increase the temperature, that frog will boil to death without even realizing it.

So, the point is, let’s not be boiled frogs in the face of the threats to our industry.

Now, you might be asking yourself, “Is this a fair comparison?”

You might say, “You know, our industry is fine. We’re rolling right along and all the threats you’re mentioning, that’s not affecting me. This doesn’t affect my business. It’s something that’s out there in the future.”

Well guess what, if you ask Lehman brothers in 2007 what they thought, they would say the exact same thing.

Now, I get it. Chicken Little stories in affiliate marketing are nothing new.

Sky Does Fall In Our Business

Every year, since I’ve been in this business, there has been something that is gonna come along and put us out of business.

But the fact is, the sky does fall all the time in this industry whether it’s a Facebook slap or Google slap or some regulatory sweep that comes along.

Or, you know, the shift from desktop to mobile, some consumer preference thing.

All of these things happen all the time and dozens or hundreds or thousands of people are put out of business in an instant.

So, the sky does fall in our business.

But the difference is the rate of innovation and hustle that we have as an industry, outpaces the rate of relevance brought on by these changes.

So, we must not underestimate the threats that are facing our industry.

There are serious long-term implications to the things that we’ve identified here.

In our industry, the rule is to innovate. You either innovate or you die.

4 Big Tips

Having witnessed a bunch of cycles of destruction and creation, of watching affiliates come and go, watching these changes affect the industry and put people out of business, there’s really 4 themes that have consistently popped up that separate the winners from losers.

From the affiliates who are always around at the top of the leaderboard and make it through all of this upheaval and those that simply disappear and go out of business.

Now, we got 4 tips that can help you be just like those great affiliates. To do the things that they do to survive through all of these threats and changes.

So, are you guys ready? This is the big, this is what we’ve all been waiting for, the 4 tips.

You wanna see them? Yeah? All right.

Here we go.

1. Collaborate.

2. Know your instruments.

3. Find your edge.

4. Act as if.

Now, let’s go through these in some detail.

Collaboration

Collaboration. So what does that mean? Collaboration is simply the sharing of skills and ideas to move towards some kind of mutually beneficial outcome.

It’s deeper than just networking, it’s about really working together. And, it’s about sharing. It’s about not being isolated.

When most affiliate start off in this industry, they’re full of more questions than answers. They’re seeking out mentors.

And they’re on, they join forums like STM and they’re looking for someone to take them under their wing and you know, “Teach me a wise one.”

But what happens over time is, you know, maybe they figure something out and they’re starting a little confident. Maybe they even get arrogant. And they stop learning and stop asking those questions.

And, that’s a recipe for failure in this business.

Embrace Your Inner Noob

To succeed over the long term, you need to embrace your inner noob.

Another thing, I can tell you that all of the top affiliates are on a network that are consistently, over the years, the top of the leader board, they always work in a group, always.

I don’t know if you guys have noticed this but affiliates always seem to travel in packs. And, you guys probably have a crew of your own.

I can tell you that it is not just a social thing. It is absolutely a business thing.

Each person in that group is bringing something to the table, particular skill, a way of thinking, you got your idea guy. Each one of those people’s bring something to the table for the mutual benefit of the entire group.

Now, I know that it can sometimes be hard to share ideas.

In fact, how many people here have ever had an idea that didn’t wanna share because someone was gonna steal it?

I think we’ve all been there, you know, “I’m not gonna tell this guy my ideas. He’s gonna steal it.”

Information Is Power

But there’s actually two really good reasons to share ideas.

The first reason is you might get some really good feedback that can make your idea better.

And, the second thing is you may get some feedback that says, “Wow! That idea is really terrible. You should stop wasting your time doing that. That’s awful.”

Both of which are good things.

But the important point is you may inspire someone else to share their idea with you. And that’s the real power.

Because when people share ideas those ideas get mashed up and they all become better.

And that’s why working in a group, that’s the powerful part of it. It’s sharing ideas, making those ideas better. Then, everyone in that group is better off.

So, trade your nickels for dimes. There’s huge, huge power in information. And sharing ideas is a fantastic way to get it.

Now, there is one caution. And think back to the Lehman example, and that’s groupthink.

Potential For Problems

If every idea is a good one and if everyone is thinking the same way, you have potential for some problems.

So, don’t allow yourself to become stale. Sometimes you need to go outside of your main group and talk to some other people.

Apply tip number one.

Go meet someone new and maybe get a second opinion just to check again. To make sure, okay, make sure you’re not under a spell within your little group.

Don’t fall into groupthink.

The bottom line is that winners know the power in collaboration. They benefit from the experience of others.

Know Your Instruments

Number two, know your instruments.

So, data, data, big data, small data, sideways data, data, data, data. It’s all about data.

You know, these days, we get it, right? People need to shut up about data, you need to have data.

The cool thing about affiliate marketing is we’ve been a data-driven business since day one.

So, we’re way ahead of the curve on this. The trick is two-fold.

Number one, in the face of all this data, you need to look at the right data, have the right instruments.

And secondly, you need to be objective. You need to be able to interpret those instruments without bias.

Now, I won’t bore you with specific metrics you should be looking at because you all know it’s about maximizing your daily profit.

But you can’t just look at your campaign data. You need to be looking at outside data sources as well.

That’s data about the industry as a whole. Data about the markets that you’re selling into, data about what your competition is doing to really see the whole picture.

Because when you put things in perspective, you may have a different outlook. And you may make a different business decision.

Being Objective

So, the second part is about being objective about the data that you see. To be objective, you need to be unbiased.

And this is easier said than done. Bias is a natural human instinct and it’s heavily driven by emotion. So, it’s not easy to do.

The suggestion is to learn about the common types of bias that everyone is prone to and no one is immune from. And by learning about these biases, you’re able to be mindful of them.

And then, check yourself against them. Or better yet, apply tip number one and go talk to someone else and get a second opinion.

There’s really 5 major types of bias.

There’s confirmation bias, hindsight bias, over-and-under confidence, over and under reacting, and fallacy in paradox.

Now, I won’t go into detail here. You can go to the website you see on the slides where I go into deeper detail about each of these. So you can check that out.

Preventing Bias Decisions

But the key point is, the first step into preventing bias decisions is understanding the types of bias that you may be prone to.

So, making decisions from bad data or decisions that aren’t objective is a great way to put yourself out of business. I mean, it’s a great way to self-destruct.

And the biggest and best affiliates, they know this.

They look at all their data. They look at their campaign data and their outside data. And they have a disciplined approach to how they interpret that data.

They are aware of the biases and they make objective decisions.

If math isn’t your strong suit, maybe this business isn’t for you. But hey, you can just go and hire some math guru or something.

But either way, don’t fly blind and avoid the common pitfalls that are associated with bias.

Find Your Edge

On to number 3, find your edge.

So, this is the term that’s been thrown a lot over the past couple of days. I’ll give you my thoughts on edge.

So, what is it? Edge of the thing that you win on. It’s what separates you from the competition, it’s your secret sauce.

Now, over the long term, if you don’t add unique value, your business simply won’t survive.

Different Kinds Of Edge

Winners have an edge. And they know what it is and they do it on purpose. Their success is intentional.

Now, there are lots of different kinds of edge that you can have. I’ve attempted to categorize them here.

You could have a technology edge. Maybe you’ve developed and an internal tool that automates a part of your business that gives you an advantage over the competition.

Maybe you have a source edge. You’re consistently the first-mover on new traffic sources, new countries, new geos, and new verticals.

Maybe you have a scale edge, maybe you simply have more cash flow and more spend than the competition and you’re able to exploit that.

You’re able to test more and/or simply outbid and squeeze out your competition.

And finally, you may have a marketing edge. Maybe you have a method of designing ads that always pull more clicks than the competitor’s ads.

Or you’re able to build bridge pages that just always convert like fire.

So, that’s all well and good but what’s the tip?

Go Out And Find What Your Edge Is

The tip is this, if you wanna have an edge, you need to go out and find out what it is. Now, it’s not really that hard to do.

The first thing you wanna do is take inventory of all the things that you do that could potentially be your edge. It’s gonna take some time to think about, “What are the things that I do that I could potentially be winning on.”

Then, what you’re gonna do is go apply tip number one and talk to a whole bunch of people. It’s kind of like playing affiliate’s categories.

You’re gonna talk to a bunch of people and you’re gonna cross those things off your list that someone else is doing it.

If someone else is doing the same thing as you in the same way, that can’t possibly be your edge.

And at the end of it, you’re gonna end up with a list. Hopefully you haven’t crossed everything off. And those are gonna be the candidates for your edge.

Those are gonna be the things that only you do that are candidates for your edge that you’re gonna want to drill into a little bit and learn more.

So now, some of you might be thinking, “Yeah, well, you know what, I’m actually doing the same as everyone else and I’m doing totally fine. I’m making all kinds of money.”

And maybe that’s true.

Be In The Position To Do Something Different

But what happens when something changes tomorrow? Are you in a position to adapt to what the industry is going to throw at you?

This is a very unique business in. Literally, what you’re doing today may not work tomorrow. So, you better be in a position to do something different, if you have to.

When it comes to finding your edge, be humble, be objective and be relentless in exploiting it.

But don’t be complacent. Winning affiliates know that their edge can disappear in an instant.

So, part of their time is gonna be spent refining the edge that they have or out there discovering some new kind of advantage.

Act As If

Last but not least, act as if.

So, everyone in here is an entrepreneur. And being an entrepreneur, it’s very easy to become isolated and we’ve already talked about how becoming isolated can lead to failure.

Affiliate marketing also requires a lot of decisions to be made quickly. So, it really lends itself to emotional decision making.

And without a structured and formal approach, the natural tendency is toward that gut feeling that you have.

We talked about the importance of data and metrics but that’s really just the first step.

If you really want to build in resistance to emotional decision making, you need to build some structure in your business. So that’s the next step.

Build Structure In Your Business

What does it mean to build structure in your business?

Well, it’s not sexy. It’s doing things like hiring employees to take care of the administrative work in your business. And, it’s about hiring a lawyer and being proactive about your legal risk.

So, when you get a C&D or a letter from a regulator, you don’t freak out. You’re prepared for it.

It’s about hiring an accountant and being proactive about your finances and taxation. And it’s about applying tips 1, 2 and 3.

So, when people get scared, they tend to make fight-or-flight decisions. These are typically short-term decisions that are motivated by self-preservation and definitely not around innovation.

So, your business needs to become emotionless. But you wanna be able to harness emotion. To harness an emotion like fear.

And then, use that in your business to drive constant change and innovation.

Fear And Anxiety

Fear and anxiety can be some of the most powerful forces in business when used in this way. And I think back to a Ryan Holiday speech yesterday talking about, “You can only control the things that you control.”

So, you need to take the things that come at you like these threats and then, turn them into an opportunity. And leverage that and make it a catalyst for you to do something new and innovative in your business.

The affiliates that we’ve worked with have done all of these really, really boring stuff.

And it’s really an important point that’s separating these affiliates that are around for a long time and those that don’t make it.

So, all the things we’ve talked about today, this isn’t stuff that I made up. I’m certainly no industry guru, I’m just an observer.

We’ve worked with so many people and we’ve been doing this for so long. It’s not that difficult for us to observe what all the best affiliates do.

And kind of crowd source that wisdom of the crowd and say, “These are the things that the best affiliates consistently do. And it’s what separates the guys who are just no longer around the flash in the pan from the guys who are always there.”

So, what did we learn today?

Summary

Steve Jukes — Summary

Steve Jukes — Summary

In summary, 1. beard equals trust.

2. Jumbleberry equals perspective.

3. Lehman fail.

4. you and me going out of business.

5. embrace your inner noob.

And 6. innovate or die, collaborate, know your instruments, find your edge, act as if.

Thank you very much.