mase.io

Kingpin, Week 1

Dec 5, 2015
7 minute read

So far, off to a slow start. I've been traveling for work, which has totally thrown off my schedule.

My goals stipulate that I need to make my first $50 by the end of January. If I'm going to have time to test things, that means, realistically, I have to have something up by the end of December.

But what am I going to do? Figuring that out has been my back-burner focus this week. Given my goals, I figure there are a handful of options worth considering, each with pros and cons. I've been spending the week learning more about each of these—reading books, listening to podcasts, talking to people, etc. I've narrowed down on three areas of study: affiliate marketing, lead generation, and e-commerce.

Affiliate Marketing

Basically, product promotion. I draw people into a marketing funnel or refer them directly to products, and if they convert (purchase), I get a percentage of the sale.

This is how Logical Increments makes money. People come to the site for useful information on PC parts, performance, and compatibility. The main parts guide includes affiliate links to e-commerce sites, such as Amazon.

If someone clicks on a product link with Logical Increments' affiliate code, any purchase made on Amazon for the next 24 hours (or so) will be credited as a referral from Logical Increments, earning them a base-rate commission of 4% of the sale price. That rate is tiered based on the monthly referral volume scaling to over 8% (varying depending on the product category), and applies retroactively for the month.

Logical Increments thrives on this model because people researching how to build a PC are often already in a buying mode. They're looking for advice on making a purchasing decision. Additionally, the price point for PC parts is attractive, with many components ranging between $50-200+.

Lastly, since Logical Increments earns a commission for any purchase made in the 24 hours following the referral, they'll often get paid for stuff that has nothing to do with PCs—digital products, health products, books, etc.

Pros
  • Few moving parts. Draw people in, push them back out.
  • Many affiliate programs available for all kinds of things, both physical and digital.
  • No inventory to maintain.
Cons
  • Requires a huge amount of inbound traffic before you start to see a reasonable income stream. Inbound traffic can be referred, direct, or purchased. For a long time, the majority of Logical Increments' traffic came from being stickied on Reddit's r/buildapc. Now much of it comes from direct traffic. Getting it to that point has required a lot of community building and content generation.
  • Potentially time-intensive. With the exception of paid traffic, growing traffic numbers requires someone's time, whether it's by writing new content or interacting with a community.
  • Highly reliant on the retailer's affiliate program. For PC parts, there are a number of retailers to choose from, so Logical Increments has a little flexibility if, for instance, Amazon decided to discontinue their affiliate program. However, more niche products may have few or only one site carrying the product, making me heavily reliant on that provider.
  • You don't own the product you're promoting. This gives you limited control over its quality.

Lead Generation

Lead generation is much like affiliate marketing (in fact, many would consider this a specific sub-type of affiliate marketing), but instead of being paid a percentage of the user's purchase, you're paid for referring a qualified lead. A qualified lead is someone who may purchase something in the future.

For example, many colleges will purchase qualified lead information. The lifetime customer value of a student attending a college ranges from the low five figures to the low six figures. A college may pay anywhere from $20-60+ per qualified lead. What makes the lead qualified in this case might (for example) be the expression of intent from the user that he or she is interested in enrolling in school, along with information about a prospective start date and which specific college he or she is interested in.

Pros
  • Most of the pros that apply to affiliate marketing apply here as well.
  • Unlike affiliate marketing, the customer doesn't actually have to purchase something for you to get paid. They simply have to provide their information. Theoretically, this can mean a higher conversion ratio.
  • If you have a product to sell in the same category as the one you're gathering leads for, you can potentially reuse them for your own products as well, enabling you to get paid twice.
Cons
  • Most of the cons that apply to affiliate marketing apply here as well.
  • The price per conversation is often lower, and often fixed.

E-Commerce

Also known as "selling stuff online." Two types of products can be sold:

  1. Digital products: e-books, music, art, information products, maps, logos—you name it
  2. Physical products: anything under the Sun

...or both, such as an e-book/printed book bundle. They can be sold in many different ways:

  1. Product-specific: a site dedicated to selling a particular product. A good example might be the Onewheel website, which promotes and sells one product: the Onewheel (and accessories).
  2. Brand-specific: a site dedicated to selling several products within a product family or under a certain brand. An example might be a Storenvy store specialising in limited-run graphic t-shirts.
  3. Marketplace: a myriad of different products made by different companies, each with their own brands. Amazon has a marketplace format. Though Storenvy store owners manage their own store (and have some flexibility to customize their store page), users navigate the larger site and make purchases across multiple stores in unified shopping cart. In this way, the primary shopping experience on Storenvy (and other sites like Etsy) is that of a marketplace.

So that's three product type decisions, crossed with three store formats, crossed with any number of possible product categories. Lots to choose from.

Pros
  • If you can own it, you can sell it. Limitless product possibilities.
  • You have control over the product itself, and the end-to-end experience the customer takes to make the purchase.
  • There's potentially a much better financial upside.
  • Information products are infinitely duplicable, with zero recurring costs after the initial investment to create the product.
Cons
  • End-to-end control means end-to-end involvement.
  • Inventory. Ugh.
  • Unless you're manufacturing your own product, you're still reliant on someone else to ensure product quality.
  • Potentially much higher ongoing contact with customers (support, questions, refunds, etc) means more time/money.
  • Physical products can tie up money in inventory, and potentially have long manufacturing lead times, large minimum order quanties, and transportation costs. Basically, this is a "takes money to makes money" strategy.

"Leisure Research"

Beyond just researching these product areas, I'm also just trying to get a sense for how other people make money outside the scope of a normal 9-5 job. When you do something a certain way for so long, it's hard to imagine any other way.

So... in my downtime I've been watching some shows I don't normally watch, listening to podcasts I don't normally listen to, and reading books I'd normally cruise right by. With the books in particular, I've noticed that sometimes the interesting bits of information come less from the content of the book than the strategy with which the book is marketed and the means by which the ideas are presented.

Fin

That's all for this week. Please be sure to subscribe to updates, and if you (or someone you know) are interested in learning along with me, please don't hesitate to say hi.