Affiliates – Part 2
In my last post I debated whether or not affiliates are worth it for merchant’s, or in my particular case an ISVs (Independent Software Vendor). I personally believe that they’re worth it, but it takes time and effort to nurture for affiliates to be worthwhile. In any case, I promised I would write a follow-up with more detailed metrics, so here goes.
And for those of you who haven’t read the last post, I concluded with the following tip: If you do decide to go the affiliate route, you’ll find that almost all of your affiliates will fit into two main categories. Those that have 0-1 sales and those that have many sales. To maximize your results from your affiliates I recommend you increase the commissions of your higher performing affiliates, those that prove themselves. This will make them happy and work even harder to get you more customers.
To give you an idea of just how true that is, here’s our sales graph from ShareASale listing our affiliate sales distribution. You’ll find that 86% of our sales went to our Top 10 affiliates as illustrated in the graph below. That’s a whopping majority of the sales!!!
I apologize if the graph isn’t as clear as it can be, but the key thing to note is that the blue signifies the percentage of sales going to the Top 10 affiliates. It obviously dwarfs the rest.
Which made me think, can we get even more detailed metrics? Of course I could look at the raw data, filter it, and then generate my own chart, but luckily ShareASale offers a Bubble Chart of the top affiliates, which you can find below (I have left out the numbers and names of our affiliates for their privacy).
Looking at the above graph, it’s obvious that there are two super affiliates that bring in the majority of affiliate sales! I haven’t looked at the numbers in details, but I suspect they could count for half of all the affiliate sales. Following them there are two medium scale affiliates, and then everyone else. Therefore if we really want to maximize our results from our Affiliate program, we want to work closely with the top 2-4 affiliates. The others almost become noise. Not quite, you can obviously see that there are a number of affiliates getting some sales, but nothing in comparison to the super affiliates.
Which leads me to a bonus and unrelated last chart. I’m mainly posting it because I found it personally very interesting. But before I post it let me give you some context as to why I find it so interesting.
Before you purchase LandlordMax, you can try it for free for 30 days. And then, even after you purchase LandlordMax, you still have 30 days to get a refund if you’re not completely satisfied (for any reason). What does this all mean? Generally our customers have tried it before they decided to buy it, which is great (and I strongly recommend it). In other words they’re already comfortable with the software and know what they’re getting. They’re happy before they bought it. It also means we also rarely need to give out refunds. No company will ever not give out any refunds, but what I’m saying is that our number of refunds is almost non-existent.
That being said, when someone clicks on a link from our affiliates, they have 60 days within which to buy the software for our affiliates to collect their commissions. This gives them time to try the software for 30 days, as well as giving the purchaser time to ask for a refund (to protect us from fraudulent affiliates). Although rare, it balances out everything.
With that in context, below is the graph showing “Return days by gross sale amount”:
Notice anything? The majority of affiliate purchases happen on the same day that they clicked on the affiliate link! But what’s really astounding is that so far we’ve only had one affiliate refund (we actually had two but the second one was because someone accidentally purchased the software twice within 15 minutes). These are people who are buying LandlordMax the same day and not even trying it (sight unseen). This is very different than our internal sales cycle. I wish I could explain this but I just discovered it today when I was looking into the stats for this post. In either case, it’s very interesting and I plan to investigate it some more.
In any case, you now have an idea of what our affiliate sales metrics are like. Hopefully this will give you a better idea of whether it’s worth it or not for your company/website. Just remember that getting those super affiliates does take time, but when you find them they can make it all worth the effort.
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Are Affiliates Worth it for Merchants?
The real answer is it depends. Having an affiliate network to sell your product does require a decent amount of work, so if you’re going to do it the biggest tip I can offer is that you use a service such as ShareASales.com (which is what we use). Don’t try to roll out your own (we initial did), it’s not worth it. Going with a service will alleviate a lot of the technical effort and costs. You’ll still have many issues to deal with, ranging approving affiliates, dealing with people trying to scam you, etc., but at least your cost of running it will be drastically reduced. If we hadn’t moved to a service we would have dropped our initial affiliate program. Actually we were in the process of dropping it when I found ShareaSale.com. It just costs too much to maintain in-house.
In any case, an affiliate program can be worth it if executed properly. To give you an idea of what’s possible, since 2005 (so in two and a half years) we’ve sold $9,408.00 worth of licenses of LandlordMax through our affiliates. Although this might not seem like a lot, based on the amount of effort it took to manage the affiliates, the commissions($1,808.10), the amortized cost over all customers to build the software, technical support, etc. we believe we made some profit. In terms of percentage of total sales it only accounts for a small percentage, but it does add up to more than nothing. In other words it’s an extra $7,599.90 ($9,408.00 – $1,808.10) we wouldn’t otherwise have.
The biggest negative issue we encountered was an affiliate who generated a bit more than a dozen sales (not included in the above totals) that resulted in fraudulent credit card purchases. Luckily we were able to spot him pretty quickly, it was fairly obvious what was going on. Although I don’t know for sure what his intentions were, I would guess that he was trying to get paid the commission before the credit cards were returned to us as chargebacks. In any case we were able to quickly cancel all their transactions as well as avoid the chargebacks by being proactive.
That and some affiliates do use more “aggressive” means of getting people to your product. You should be on the lookout for these types of affiliates and try to limit them to what you find acceptable for your company. Remember that if they go a little crazy and spam your product all over the place (or at least more than what you find acceptable), your company will be associated with the spam, and not the affiliate! You need to be vigilant about these affiliates.
Because of all this we now manually inspect every affiliate that applies, and we double check all their purchases. However other than this negative experience it’s been pretty positive overall for us. The thing to remember is that managing your affiliate program does take time, so you need to add this into your cost. That’s above the commissions you pay out. So your average profit margin will be much lower than a regular sale, if any at all.
Where you’ll really benefit from affiliates is in the total lifetime of your customers, assuming you have a good product or service. In other words it might not even be a bad thing if they’re loss leaders, as long as these customers buy from you again (for example future upgrades as in our case).
So to answer the original question, are affiliates worth it from the merchant’s perspective? It depends. The honest truth is that you need to try it out and see what numbers you come up with. That and you need to look at the total lifetime revenue of your customer, not just that initial purchase, otherwise you’ll probably lose out. And expect to spend a decent amount of time managing and monitoring your affiliates.
Quick Tip: If you do decide to go the affiliate route, you’ll find that almost all of your affiliates will fit into two main categories. Those that have 0-1 sales and those that have many sales. To maximize your results from your affiliates I recommend you increase the commissions of your higher performing affiliates, those that prove themselves. This will make them happy and work even harder to get you more customers.
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LandlordMax Customer Testimonial
Recently I had a very positive exchange of emails with John Newton, a LandlordMax’er. In one of these exchanges he stated:
“All in all, LandlordMax is my favorite property management software package I have reviewed simply because it is a good mix of functionality, ease of use, and price. You get a great software package for under $150 and the company behind it has great service.”
At which point I asked him for his permission to publish his comment. Rather than just respond yes, he added:
“Hey, you guys are the greatest. I love your customer service. I have now bought the software and am loving every minute of it!”
Thank you John for the glowing feedback. It’s great to hear you’re loving LandlordMax and that’s it really helping you out.
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What would it cost to build this site?
Earlier this month there was a thread on Joel Spolsky’s BoS (Business of Software) discussion forum asking What would it cost to build this site. Of course it started innocently enough, with a simple statement:
We recently created a startup on which the website is an integral part. Customers rent our product for a specified time period. When you get right down to it, the required features of the website are no different than what would be required of a car rental web site.
Then came the big question:
My question is, what would a ballpark estimate of the cost be?? Again, the fully functional site would resemble a car rental company such as Hertz.com
This is a completely loaded question!!! There will of course be very large price fluctuations amongst the responses no matter who you ask, these requirements are too broad and open-ended. Sadly however I believe that none of them are near the “real” cost to build this website. I think the highest was around $150k if I remember correctly, with many saying that it could cost as little as a few thousand.
WHAT???
Honestly, to create a car rental service just like Hertz will cost a lot more than $150k. Thinking it will only cost a few thousand is insane. Sure you can say you will outsource it for a few thousand, but I can guarantee you what will come back won’t be what you expect. The price has to be reasonable. If it only cost a few thousand to successfully build this system, than all software, and I mean ALL software, would be outsourced. This isn’t the case. I have no doubt it cost Hertz a lot more.
It’s simple to over simplify how much effort is required to build a software application. So much so that the original poster chimes back in with:
There is just no way this would bet done under $10,000. As I said, the site is about 30 percent of what it needs to do. 5,000 lines of code, couple hundred manhours. The manhours are high as we constantly were changing things. But things are a bit more static now and it would be easier to write a detailed spec for he the remaining requirements.
Some additional “Major” components:
Security/Logins. Certain Admin people will be able to do everything. Lower levels will have limited capabilities.
Audit trails for all changes by personnel. If someone changes a record or changes a reservation it needs to be logged.
RealTime Inventory Management. If inventory is low at certain times then site needs to prevent reservations from taking place. Also ensure inventory was the right stuff when it is returned.
Again, think rental car website. I was thinking more along the lines of $50K to $150K.
Just reading these specs I can very quickly see this site greatly increasing in complexity and scope as the details are filled in. Never mind that the scale of users or data hasn’t even been taken into consideration. In any case, I personally don’t believe that this is possible for $150k, it way too optimistic. The vast majority of the posters are thinking of the simplest solution, but I can already see from this slightly “enhanced” description that it’s not going to be the simplest solution. The requirements are only going to grow, and grow fast they will, otherwise known as scope creep in the software industry.
But alas not everyone agrees. Further down someone comments:
I dunno ’bout 100K. My devs do quite a bit of these sites in the $20K to $50K range … but we don’t have a tight enough spec yet do we? Could (maybe) hit the 6 figures once the full spec is known. The folks suggesting a couple of grand, though, they’re smokin’ crack.
Even though this person agrees that building it for a few thousand is too cheap, he still suggests a price that’s way too low. I have no doubt it cost Hertz much much more. I agree that a simple car rental system could be built for around $100k, but that’s a SIMPLE AND MINIMALISTIC car rental system and NOT a replication of a full blown car system as is suggested. Audit trails, realtime inventory management linked to reservation system, reservation system, scheduling, etc. And these are just listed as “SOME” additional “MAJOR” components. This is not a simplistic system. It will grow in scale very quickly. Just look at some of the questions and issues that came up when we decided to add “simple” email to LandlordMax. And that’s just simple email!
So what’s going to happen. The person will eventually settle on someone who says they can build it for around what they think is reasonable. The delivered system either will not work at all, it will be severely delayed, or it will be severeled scaled back in terms of features and modules. Not only that, but assuming something is delivered, I doubt that it could scale up in terms of traffic load. At least not at that price, scalability takes skill and experience, not to mention effort.
And I haven’t even talked about bug fixing! What do you think happens when a software project can’t possibly be delivered within it’s deadline? Depending on how ethical your company, they might just deliver it in an unstable state where “fixes” will be added to the cost of the project after delivery. For example some software consulting firms are know to do this, deliver a project “on time” only to have the “support” costs be higher than the initial project costs. This way they can be the lowest bidder but yet still charge the real cost of implementing the software. And don’t think it doesn’t happen, it’s much more prevalent than you might think.
Software takes time and effort to build. It’s not that simple yet people continue to grossly underestimate the cost of development and wonder why things it’s late, why it’s buggy, why it just doesn’t work. The answer is simple, extremely simple, many many software projects grossly underestimate the amount of effort required. Although many people want to believe it’s more complex than that, it’s really just as plain and simple as that.
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How to Generate Traffic to Your Website – Mark Gladding Review
Mark Gladding founder of the company Tumbywood Software which sells the software Text2Go, a nice little program that will convert almost any text to audio, reviewed my ebook How to Generate Traffic to Your Website. You can read Mark’s full review of the ebook by clicking here.
Some of the highlights of his review include:
The book is based on Stephane’s experiences over the last few years of marketing and promoting his software company online. This makes the content highly relevant to myself, as I strive to improve the marketing of my own software product Text2Go. I found the examples and statistics quoted in the book fascinating.
The material would also be relevant to anyone starting a small online business, not just a software business. I’m sure the issues are the same. Limited time, little to no marketing budget and 100 tasks all competing for your attention.
Stephane covers an impression range of traffic generation techniques in his book, the highlights being SEO, content generation, freebies, blogging, Google Adwords, press releases and social networking.
I found each topic was covered to just the right level of detail. As you can imagine, separate books could easily be written about each of the above topics. However when running a small business you don’t have the time to become an expert on every possible online marketing strategy. Stephane provides enough information on each topic to get results. Each of the major topics also includes excellent references to more indepth sources of information.
Stephane’s writing style is clear and easy to follow. The writing is illustrated with plenty of interesting graphs and screenshots.
He concludes the review with:
In conclusion, How to Generate Traffic to Your Website contains a wealth of really useful information that’s well organised and clearly presented. I can wholeheartedly recommend it to other small online software and non-software business owners. At $28.95 (or a couple of hundred Google PPCs) the ROI will be very quick.
Something else that’s especially interesting (this is not in his review but was communicated through emails) is that Mark converted the ebook to speech using his software Text2Go and listened to it on his iPod commuting to and from work. How great is that!!!
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Web Design for ROI – Review
I recently got my hands on a copy of the book Web Design for ROI: Turning Browsers into Buyers & Prospects into Leads. Overall I have to say it was a very good book, it really explained a lot of the key concepts in web conversions at a high level (sales conversions, lead conversions, etc.). For example I know our site isn’t perfect, and we already have a lot of work planned towards this end, but what I really liked is that most of the “enhancements” we’re planning for the future are described in this book. At least at a high level. This book is not about the details of the implementation, but it’s a high level description of what needs to be done and why.
Which is the key thing to remember about this book, it’s written at a high level, meaning it’s aimed at people who are newer to the concepts of website conversions (sales, leads, etc.). Therefore if you’re already well seasoned on concepts such as sales conversions it won’t be as exciting for you. It’s not as detailed or thorough as books like Call to Action, but it’s still very good. This book will be especially interesting for you if you’ve been mainly focusing your attention on traffic generation and ignoring any efforts on items such as sales conversions, etc..
I’d highly recommend this book for anyone who has a website where they’d like to increase their conversions, be it sales, leads, etc. It’s a good introduction and will get you going. What I really appreciated was the “Digging Deeper” chapter at the end. The authors really hand picked the best books and websites on the market to recommend as further resources to investigate. Personally I’ve almost read every single book they recommended, as well as follow most of the websites they recommended. Some examples of the books they recommended (which I’ve recommended – even reviewed – before here on my blog) include: Don’t Make Me Think: A Common Sense Approach to Web Usability, Call to Action: Secret Formulas to Improve Online Results, Blink: The Power of Thinking Without Thinking. And some examples of the websites they recommend include: Marketing Sherpa, Guy Kawasaki’s website and blog,
Overall I recommend this book, especially if you’re just starting to get into the market of increasing the performance of your website. It’s not as advanced as some of the other books out there, but that’s not it’s intention. It’s a great book to start with and build up from. Well worth the purchase.
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BitsDuJour Ebook Sale Results
As many of you know from my post yesterday (or from seeing it directly), my ebook How to Generate Traffic to Your Website was showcased on BitsDuJour.com for the day. As part of being on BitsDuJour, I offered a 49% discount, bringing the book down to an even $15.00.
Overall the results were positive. I really enjoyed working with Roger (my contact) at BitsDuJour. He was very professional, helpful, and really made the whole experience a pleasure. Thank you Roger.
In terms of results, there was a noticeable spike in sales of the ebook. It wasn’t quite as high as I wanted, I was hoping to replicate Bob Walsh’s success from some months back. Nonetheless it was pretty decent. I was able to sell a 45 copies of the ebook in one day, which is good. It’s a bit shy of my personal target of 200 sales but acceptable (I always aim high).
I suspect one of the bigger reasons for the differences in sales volume is due to the topic of my ebook (as well as price). What I mean by topic is that there are a lot more traffic generation ebooks out there, and to be honest many are pretty bad or very weak on content. So I can understand people’s trepidation. But my book is about over-delivering and under-promising, or as to quote someone who attended the seminar I gave last summer “if most courses are like drinking from a water fountain, than in comparison this course is like drinking from a water hydrant!” I can’t wait to hear people’s responses once they’ve had a chance to read the book!
In any case it was a good day. Doing the math, the revenues comes out to:
45 * $15 = $675
Of course it doesn’t end there, we now need to remove the commissions and other obvious costs:
PayPal charges = $33.75
BitsDuJour commission = $256.50
Total Profits = Total Revenues – costs
$675.00 – $256.50 – $33.75 = $418.50 Profits
The real profits are slightly less, I had to do a bit of related customer support which eats into my time (I’m not free either). But for simplicity let’s ignore that and say the profits for the day were $418.50 which is pretty good. I’m happy.
What interesting for me is that above the revenues it generated, it also created traffic to my website. My RSS feed count went up a bit. It also gave the ebook a lot more exposure, and hopefully that will result in more reviews. If you’re one of the people who bought the book and you do post a review online, please let me know, I’d love to read it (positive or negative).
Another really positive thing that came out of being on BitsDuJour is that it pushed me to update my sales page for the ebook. I knew it had to be done, I even mentioned it here on my blog as being higher on my to do list. Knowing which day specifically I was going to be on BitsDuJour pretty much committed me to a deadline, which apparently I needed. So that was a really good thing if nothing else.
The big question, would I do it again? Absolutely. The exposure was great and the revenue was good. Most importantly though I really enjoyed working with the people at BitsDuJour, even after the deal had expired they continue to treat me very well!
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49% Discount – Today Only
The ebook I wrote (How to Generate Traffic to Your Website) will be on sale for $15.00, a huge 49% discount from the regular price, on BitsDuJour.com. This discount will be available ONLY TODAY so if you haven’t already purchased it, nows a great time!
The book has gotten many great and raving reviews, of which you can find some of the highlights below. Above the highlights, you can also click on each of the reviewers signatures to read their complete and full reviews.
In addition to this you can read the first 21 pages here for free to see for yourself what the book is like. This sample of the ebook includes the full detailed Table of Contents and a decent portion of the first chapter on SEO (Search Engine Optimization).
Here are some highlights from the many reviews I promised:
It’s remarkably in depth. I’ve only read some of it so far, but what I’m most impressed with is the breadth of the coverage. It pretty much hits on everything someone starting a commercial website needs to think about.
As someone who knows a fair bit about these topics, I found Steph’s down to earth – here’s-what-you-want-to-do-and-why – presentation very complete. His chapters on SEO, AdWords and press releases were some of the best material from a microISV’s point of view I’ve seen to date. Steph pulls from both the experience of his microISV – LandlordMax – and other sources to illustrate and illuminate his points.
The SEO chapter in particular is must reading for any microISV because it focuses on techniques that work today – not 5 years ago – and because it gives you for the time invested a solid set of strategies to start acting on now. MicroISVs seldom have the luxury to dive to the bottom of any of the many subjects we have to deal with.
[…] To my surprise I found that Steph has done an indepth analysis of the traffic generation process and the sheer volume of topics covered in the ebook itself, reveals the amount of research Steph has done to accomplish this book. […]
Honestly, each section and category in itself could’ve easily made into another E-Book and believe me there are lot of e-books out there which deals with only 1/220th of what Steph’s written about in thie ebook, but sells for a higher price.
Steph’s done an amazing job on this ebook, and his hardwork is very evident from the research done, the topics and the sheer depth of information present on each topic.
I can assure you that this is NOT an ebook that will contain information that you’ve already read elsewhere.
Every page is simply worth the money you pay. And it’s cheaper that all those “I’ll teach you everything in two minutes” kind of books. […]
[…] Stephane has actually put a lot of work in the book, making it very easy to read, simple to find what you’re looking for and packed with some serious information about driving traffic to your sites. […]
We consider ourselves pretty savvy, but Stephane’s book has made us look at a few of the methods descibed from a different angle. We’re not saying its all new and revolutionary, we’re saying its got everything you need to know to start increasing your traffic, drastically. […]
Besides tons of written information, Stephane has also made sure that visual examples are placed throughout the book, to make sure you know what he’s trying to teach you. […]
Stephane absolutely knows what he’s talking about, and a lot of this is also coming from his personal experiences as a webmaster. We’ve got nothing bad to say – in fact, looks like we’re going to have to redo our own ebook in the making.
But the selling point for me to get this eBook was the fact that it wasn’t like all those spammy-type eBooks out there. It gives you realistic and proven tips for the long run, rather than the short term deal. Again, the fundamentals that people often overlook. Matter of fact, I have seen quite a few eBooks and all of them tend to only be a few pages long, but not How to Generate Traffic to your Website. This eBook goes into so much depth that it tries to fill as much information within the 138 pages. And so far, every single page has been useful information for me.
So, for all of you guys looking to make money online, you need to build traffic to your site first and foremost and I’m going to go on record and guarantee that this eBook is going to help me in more ways than one.
One of the highlights of the book for me was the sense of balance and perspective that is shown. For example, it’s possible to endlessly tweak your Adwords campaigns or your onsite SEO. However, Stephane repeatly emphases the point that you need to look at the ROI of your time. I also think the fact that he’s not advocating a single traffic generation technique means that he’s not afraid of recommending you weigh up each technique when deciding on how to make your next improvement. One really useful tip he makes is to play to your strengths. For example if you write great content for your blog and you enjoy it, then do more of that rather than trying to become an expert in another technique such as Google Adwords.
[..]In conclusion, How to Generate Traffic to Your Website contains a wealth of really useful information that’s well organised and clearly presented. I can wholeheartedly recommend it to other small online software and non-software business owners. At $28.95 (or a couple of hundred Google PPCs) the ROI will be very quick.
Don’t wait, today’s a great day to bring the traffic to your website to the next level by buying the ebook How to Generate Traffic to Your Website. You won’t get a better price, and it’s only available today at this amazing 49% discount of $15.00. You can buy it right here and now by clicking here.
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Biggest Stock Market Tip – Part 2
Today I had a discussion with someone who didn’t fully appreciate what I wrote about in yesterday’s post (Biggest Stock Market Tip), so I’m going to expand my original explanation with a better example.
Let me ask you this question, would you prefer to own a share of LandlordMax sold for $1000 or one sold for $1? Your answer should be “I don’t know” because you can’t possibly know based on the price alone. Maybe the $1 portfolio is worth a lot more than the $1000 portfolio!
Let’s assume LandlordMax is worth $10 million dollars (we’ll take it for granted that LandlordMax has at least $10 million cash in it’s bank account). If we look at the following two scenarios the values of the portfolios are quite different.
Scenario 1 ($1000/share):
LandlordMax is worth $10 million dollars and has 10 billion outstanding shares sold at $1000/share. That means each share is worth 1/1000th of the real value. In our case this means that our $100 share is worth $1 of real value. A really bad deal.
Scenario 2 ($1/share):
LandlordMax is worth $10 million dollars and has 10 outstanding shares sold at $1/share. That means each share is worth 1/10th of the total price. In this scenario, our $1 share is worth $1,000,000 of real value. A phenomenal investment!
Conclusion:
As you can see from the above examples, the stock price in of itself is pretty much meaningless. It needs a context, at the very least the total value of the company and the number of outstanding shares. If you don’t believe me, please contact me IMMEDIATELY and I’ll sell you some LandlordMax shares at any price and quantity you want, as long as I get to control the total number of outstanding shares.
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