Articles

The State of the Performance Marketing Industry | Jason Akatiff, AWeurope 2019

October 3, 2019


There you go, sir. What’s up man?
You’ve got your clicker? You’re good to go! Thanks. Wow, getting blinded here.
How’s everybody doing this morning? Thank you for coming out. I know it’s early. I was quite impressed
by the line out front there. As I was walking in, there was probably 200
people in the line to come into the auditorium or whatever you call
this thing, and I think that’s pretty impressive by the AWE crew and
Stack That Money crew. So first of all, I want to thank everybody for being here.
I’m always honoured to be standing onstage at these events and that
actually, anybody who wants to show up to hear me talk about anything, honestly. It always means a lot to me. So, how many of you,
just by a show of hands, how many of you know who I am?
Jason, as a person, yeah, there’s a few of you. So just a brief background on myself.
I’ve been in the affiliate marketing world since 2003. Yeah, there was an
affiliate marketing world back in 2003. Started in black hat SEO, moved on to
building an affiliate network called A4D, which has been around since 2008,
and I founded it then. You know, back in those days, there was really no
international presence or very limited international presence in the affiliate
world. Talking to people, there was was zanox and a couple of other
affiliate networks that were over here, and there was almost nothing in India,
there was nothing in China, and it’s really amazing to see how the
space has progressed, and that’s a little bit about what I’m gonna talk about
today, is just kind of, where the space was, where it is now, and where I see it
going in the future. Back when I started on Facebook — a lot of you, I’m sure, buy Facebook or use Facebook as a channel. When I started on Facebook, there was
something called Facebook Flyers. There was no actual
Facebook ads or anything like that. It was just some ads on the side.
Everything was one cent clicks. So you could buy as much inventory as you
wanted for one cent, and it was unlimited. So as much money as you had is
what you could spend, but everybody says Facebook was really bad, and the traffic
didn’t perform because they were all coming from Google search. Back even
before that, I started right when Google AdWords got started. So I’m old.
We were around about a $70 million a year company in San Diego, as an affiliate network.
So I’ve gotten a perspective of being in it as an affiliate network,
seeing both sides. So we’re also a merchant. We import in brand
products from China, manufacture them over there, bring them into the US, and
and sell them under our own brand. So we are a merchant as well and we also run
fairly large-scale media buying teams on the Facebook side. So that’s enough about
me. What I wanted to talk about is kind of where affiliate marketing has
been, where we are now, and then where we’re going. So where
it was is, in my opinion, it was a lot easier than it is today. So I don’t
know how many of you have been around for a long period of time in this
space but back when I started, all you had to do was put some
keywords into a page, and it would rank in Google or it would rank in Bing
or Yahoo, and you would get free traffic, and it was super easy, and it’s changing
a lot right. So Facebook kind of took over and was easier before, and then over
the last years, since Cambridge Analytica happened, a lot of that data has changed.
So us as marketers, we have to change and we have to continually get better.
So where I see it going in the future as far as Facebook ads, where it’s going to progress to as the AI continues to get better, which is great for us. It’s gonna become much
less tactical and strategy-based marketing, where it’s, how do I set my budgets,
how do I do that kind of stuff, and it’s going to move to becoming
much more creative heavy, and in addition to that, we are also seeing a lot of
placements that are being taken. A lot of placements that are being sold out as
far as the news feed. So does this mean that we don’t have the opportunity
to grow as marketers? Does this mean that it’s too difficult in order to be
successful in the online marketing world at this point, as affiliates?
Keep in mind, I speak about everything from an affiliate perspective because that’s
where I started from. So if you guys are merchants or you started as network
owners, everything I look at is from the perspective of scale and growth
in this business. So I think if you’re a small affiliate,
a small affiliate makes $200 a day. If you’re looking to make $300 a day, the opportunity as a small affiliate will
always continue to be there, and so if you’re a network or a merchant and
you’re catering to people that want to do $200 or $300 a day in margin or in profit, that opportunity will always be there.
Whereas I see there’s becoming a larger and larger divide is if you want to go from that
few hundred dollars a day to $5,000 or $10,000 a day in margin,
I see that becoming more and more difficult as time marches on, and
where we focus is always on scalability and growth in the space. So,
a lot of what I’m going to talk about today is going to be really about
if you want to build a big, scalable business that’s repeatable and
sustainable, because we all know in the affiliate world, in the affiliate marketing space, there’s large ups and downs, and large
swings all the time, and constantly what we’re trying to do is figure out how do
we build consistent sustainability in a in a place with tons of inconsistency,
large ups and downs, changes all the time, changes in how the merchant processing
works, changes in how the traffic sources work, everything changes as
quickly as six months in this space. So the other thing that I want to hit on
is that I, specifically, am from America. So I have a uniquely USA perspective on things
and it’s always fun to come over here and talk about — Come over here and talk about the international market
and find out what’s going on in the international market. So one one way we know that
this space is still growing and still progressing and, by the way, I
mentioned that stuff about Facebook getting harder, everything getting harder,
A4D will have its biggest year ever this year, and we’ve migrated, we started in —
in the beginning we were a neutraceutical company. We did a lot of weight loss
and skincare and stuff like that, and then eventually, after getting sued
by the Federal Trade Commission, we actually got out of that business in 2012,
and we progressed on to doing lead gen, and we do a lot of
financial newsletter and investment type stuff now, and we’ve really progressed along. When I say the opportunity is still there, there’s
probably you know 50 or 100 micro-markets inside of affiliate marketing,
where all of you can build businesses or probably are in portions of the business,
and I think that’s what’s making it super, super interesting and has
tons of room for growth. So again, a uniquely USA-based perspective, the
first thing I want to talk about, it kind of tells you where this market is, and how far it’s come, there’s
actually a lot of interests on the M&A side or the mergers and acquisition side
in the US market. A lot of companies are getting by bought up, if you go
back 5 years ago, 10 years ago, nobody really wanted to touch the performance
marketing or affiliate marketing space. They wanted nothing to do with it.
Especially from a banking perspective or investment perspective, and we’re really
starting to see quite a bit of interest in anything that has to do with
affiliate marketing in the US. I can’t name a lot of names here because
it’s all proprietary information, but there’s a company I know that they
bought 16 companies in the last probably 18 months or so. They’ve
consolidated over $300 million in revenue. I mean super, super impressive stuff.
We are actually looking at buying affiliate-based companies as well on the A4D side. So the capital markets right now are
actually quite interested in what’s going on in the affiliate and
performance world, which, we never saw that. Nobody wanted
anything to do with affiliate marketing back 5, 10 years ago. It was a kind of
a negative space and lots of people that didn’t believe that anything
that we did was up and up. So it’s really cool to see that. In
addition to that probably another reason that we’re seeing that is right
now, there’s so much capital available from a private equity perspective out
there, and there’s so much capital available, and it’s chasing so
many deals. So again, I speak from an affiliate-centric perspective,
and as an affiliate, how do we take advantage of this? How do
we make money? Or how do we think through the process of taking
advantage or potentially being acquired by somebody? And I’ve talked about this a
lot in some of my other talks, but really, How do you build a business
that somebody would want to buy and somebody would want to acquire?
And I think it’s really important to think about this because if you have a
business that makes, let’s just say it makes $3 million or say it makes $1
million a year right. You’re an affiliate, you’re making $1 million a year.
You’ve got a little business. Maybe you’ve got three or four
people that do this thing. Well that $1 million a year is great,
however, if you don’t build it to sell, you don’t build it for somebody to
acquire it, then all you get is that million dollars right, and I don’t have
any slides today, but if you saw one of my previous talks, all you get is that
million dollars, but if you then go sell that business and it becomes a sellable business, then you potentially could get
$3 to $5 million for that business. Sometimes, depending on how much
technology is involved, you can get as much as $10 million for that
business. So that’s 10 years worth of work. That’s 10 years worth of growth. So
we, as affiliates, really want to be at this show, looking at okay,
as we walk around, and as we look at all these booths, what businesses are being
created in this space, and what business could I, as an affiliate, potentially
build in this space that would be viable, that would be sellable.
Another thing is, I talk a lot about, how Facebook’s getting tougher and these things are getting tougher. Another great thing that
I think, and I’m seeing a great migration towards in this business, is
when I started a single affiliate, my best month was a half a million
dollars in profit, in my pyjamas, out in my house, working from home.
That was a very doable thing and I really don’t see that happening
nearly as much anymore, and I think if you’re gonna be successful in
the years going forward, you really need to build partnerships with people.
Whether it’s creative people, if you’re a great analyst, and you’re a
great data person, you need to partner yourself with a great creative person. So
at this show, there’s a tremendous amount of brilliant,
brilliant talent here. So I would really be focused on, who can I partner with?
Who can I work with? If you run a company, who could I potentially hire and
bring onboard? We went from a media buying team that was really just a
couple of campaign managers. We’d buy anywhere from $50 to
$125,000 a day in media on Facebook typically. We went from just a few people,
being able to do that, to now we’ve had to build out a massive creative team. We
have a video team. We have an image team. We have analysts to literally do the
same numbers. So if you’re at this show, if you work alone or
you want to grow, I highly advise and I highly
suggest you walk around and meet as many people as you can, and you try and
understand what they can do with you, and how you can
partner with them, because I think going forward, things are gonna get tougher,
so we just need to build teams and the people that I see being
really really successful in the affiliate world, are all team-based
now. There’s almost no single affiliates being successful and I have a very
unique view, being an affiliate network owner, I get to see all these people that
are doing all the stuff and the team-based approach seems to be
the most successful. The next thing, I would say is make sure that you’re
building assets as you go through this process. If you find the campaign that works,
and I see this all the time with people, and they’re like well, I
found this campaign that works, and I’m just running to a landing page,
and then running to an offer, and I don’t want to gather push because that lowers
my conversion a little bit. I don’t want to gather email because that lowers my
conversions a little bit. I don’t want to publish content because that takes work.
Well I think we’re still in a very unique time that allows us to
profit on the front end of acquiring users for people. So
I’m really am pushing and hoping that the affiliate community will
build assets as they’re going through the process. So if you’re
building a landing page, you can still run profitably, gather that
email, and build that list. If you can push people onto a push list,
get those people on that list as well. Even if it’s gonna make you a
little less profitable in the long-run, it’s going to stabilise your revenue, and
build an asset that again, becomes acquirable. Another thing that I’m seeing a lot of,
and we really notice on our side of the business, that is
the ecommerce side, and I know it sounds funny here, but again,
being uniquely USA or America-centric is the international opportunity. We’re
seeing CPAs of 50% in international markets that we’re seeing in the US
market, and I know a lot of you are obviously from Europe or from
Asia, and the bulk of people I know are still running US offers or a
lot of people are still running US offers and I want to encourage
everybody to look at international markets, and the
opportunities that are in international markets, and/or other languages. Most
most affiliates are lazy and they don’t want to translate anything, so if you
take the time and you take the energy to translate stuff, that’s going to
present a great opportunity for you as well. We’re seeing quite a bit lower CPAs
on those international markets. So we’re spending a lot of time there.
The people here that are in ecommerce — Can I see a show of hands,
how many people are in ecommerce? Ecommerce? Yeah good number of you.
I’m not sure if you’re following Amazon’s new media channel, but
they’ve basically grown from zero to over billion in revenue in 12 months time. I see them becoming a major player in the
media world. I see them competing against Facebook and Google probably in the next
two to three years. They have so much buyer data on users. So as you
approach the DSP channels, which is what Amazon typically
sells through, if you can access their DSP, and get on onboard with them, then
you’ve got access to everything that anybody’s ever bought,
how much they’ve spent, all that kind of data is pretty interesting. So I think
there’s a lot of opportunity there. I’m not sure if Amazon is here, but I think
they’re gonna become a major, major player in the media world here over
the next couple of years. So you definitely want to keep your eye on that
if you are in the ecommerce world because another thing
that we’re seeing is as Facebook prices continue to rise, and
Facebook’s AI is allowing more non marketer advertisers to engage and
run stuff on the platform every single year, more people that don’t know how to
do actual media buying or marketing are going into that platform, which
ultimately is driving up the CPMs right. So every year we’re seeing the CPMs
increase and it’s getting more and more expensive. So we as a company
are looking at — where Facebook was really cheap before, it’s actually
now these other channels are starting to become interesting. So we’re playing with
Trade Desk, which is a DSP. We’re playing with Snapchat. We’re playing with Google, as part as these other channels, and because the
cost of the media to Facebook is actually becoming lower than what
Facebook was, I mean, before it was like super expensive and the
quality of the traffic was very bad and now, Facebook’s has slowly come
up, and it’s starting to eclipse, that other stuff. So now
we’re really starting to look at native channels and DSPs and stuff like that. So
I’d highly encourage you, if you’ve been primarily focused on Facebook, to really
start to look at some of these other channels. The opportunity is pretty
interesting there. Now from the merchant side. What does all this mean for
a merchant. How many of you are merchants? Or own offers? Can I see a show a hands?
Handful. Merchants, as I see going into
the next couple of years, is as CPMs continue to rise on Facebook,
there’s only really one way to counteract this, and that is to make more
profit per user. So I’ll give you an example. When I started in ecommerce, our
average order values ranged right around the $60 range. We’re up about a $120
an average order value. My target is a $170 average order value
on the front end first purchase from somebody.
So if you want to continually use the affiliate channel,
we’re gonna need to do two things as merchants. We’re gonna need
to understand how to get more lifetime value out anybody that we
bring into our nest or into our group of buyers. That’s number one.
The other one that we’re gonna have to do is start looking at things more on
an omni-channel approach, and I bring this up again, I speak from a ecommerce perspective. When we run traffic, and we buy all our traffic
internally for all of our ecommerce offers, when we run traffic, 20-25%
of our sales come through Amazon and we’re running Facebook traffic to a
Shopify store or a funnel. Think about that for a second, 20-25%
of sales come through Amazon right. So another little story I have
about that is we were the first ones to go to Brazil and do weight loss in
Brazil, back in, I think it was 2010. We ran a product called Caralluma.
Caralluma, we ran online and we picked up. We did pretty well with it. We
were running $1 to $2 million a month and that was decent for
us at the time and what that ended up doing is Caralluma actually became the
largest diet craze in Brazil. So it actually, every single store had
caralluma in it and we didn’t get to take advantage of that. So I think as
merchants, we need to look at the affiliate channel and understand
how is this affiliate traffic contributing to our overall strategy?
Because we do a lot of homepage MSN buys. We do a lot of homepage AOL buys
and maybe those buys break even, but they also drive a
tremendous amount of retargeting sales on Facebook.They also drive a
tremendous amount of sales on Amazon. So a lot of the conversations we’re having
on from a network perspective with our merchants is, “Hey, we’re
breaking even here. Can you pay us a higher CPA because you’re driving sales through these other channels, people are going to Amazon and
searching for the product or what it whatever it might be.” So I think that
as merchants we really need to be focused on, when affiliates are running traffic, what are they driving outside of
just that last click attribution? Because as media costs continually go up, at some
point that’s gonna capitulate and things just aren’t going to be
profitable anymore. So we really need to understand okay, well when they
do an MSN buy, yes, I mean, we only make $50 a sale and we’re paying them $40. Well
maybe we’ll pay them $60 because they’re also driving all these Amazon sales and
all this other stuff that we can’t actually track. So we need to look at a
more holistic view and honestly, that’s kind of the biggest kind
of theme here. As CPMs continue to rise, which they will do. It’s gonna
happen. It happens every year. How do we make more money per user
and then how do we make sure we get as much of that money back as
possible to the affiliate market to make them successful? Because
we use affiliates as a great channel for us and they’re very, very successful.
So I’m just gonna finish up here. I want to welcome you all to the
conference today and it’s really a pleasure to be able to speak with you.
The one person I want to recommend that you definitely see speak is there’s a
lady on later named Molly Pittman, I listened to her Perpetual Traffic podcast,
which is amazing. So definitely see her. I’m super excited
to be here and thank you all for coming.

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