The long term cumulative impact of guerilla marketing

In December a panel of internet entrepreneurs shared their stories and their keys to success with my BYU marketing and Provo Labs Academy students.

One young woman told how she had teamed up a few years ago with her brother to start an ecommerce site, selling a very unusual niche product. They did almost $1 million in revenue last year.

One student asked her how long it took for her sales to take off initially. Her answer surprised me: she worked for an entire week before she had her first sale.

How many people would work a full week, generate one sale (probably under $30) and still be willing to stick with it? Yes she worked for a full year before generating enough sales were to pay her a living wage.

Now, after many years of hard work, she and her brother are doing very well.

Her story reminds me how important it is to be patient and persistent with your online business. Online businesses almost always start with a small trickle of visitors, a few sales, and then over time turn into a stream of traffic and a river of repeat customers — but only if the founding team keeps at it.

Even eBay started this way. When the auction site was first launched, a small number of checks started coming in. The stream of checks turned into a torrent, all while Pierre Omidyar was working at General Magic in his cubicle. EBay was profitable from the beginning, because
there was really no overhead and the site was incredibly viral and revenue ramped quickly.

But most of the ecommerce sites listed in the Internet Retailer Top 500 (it takes more than $3 million in annual sales to make that list) probably started much more slowly than eBay. But their teams kept promoting their products, they kept at it, until revenue reached the millions.

The most important book I had when starting all of Ancestry.com and MyFamily.com’s marketing efforts was Guerilla Marketing Online Weapons: 100 Low-cost High Impact Weapons for Online Prosperity.

A lot of the tactics are now obsolete, but it is the mindset that matters the most. It’s a rare mindset but a really valuable one.

As my World Vital Records team watches our small stream of visitors grow, I want to remind them how important it is to market our company’s products at every opportunity, in every possible channel, using every possible tactic.

As our marketing team grows, I want every one of them to understand the power of guerilla marketing compounded over time.

Let’s do the math.

Suppose you hire a marketing employee at $10 per hour, and assign her to do guerilla marketing and PR using dozens of online marketing tactics. There are literally hundreds of legitimate tactics.

Let’s say that her first day she gets a link from another site that will consistently deliver 3 visitors per day from now on. This could be a link on a blog roll, or an entry in a web directory, or a link on any other site.

Not a very successful day, right. In eight hours, she cost $80, and delivered 3 visitors and no sales.

With an average conversion rate of 2% and an average sale price of $50, the marketing employee failed on day one. Result: loss of $80.

But imagine that she works every day using guerilla tactics such as posting answers to questions on Yahoo Answers, appropriately advertising on Craigslist, submitting her site to search engines and directories, commenting on blogs and participating in message boards, putting offers up on freebie sites, publishing press releases, syndicating articles, and asking bloggers to review her site or link to her. Let’s say her efforts bring an additional 3 visitors per day from links that are semi-permanent and will consistently generate 3 visitors per day from now on. (Many links have a long life span and therefore individually have a long tail.)

So after 30 days her links are now bringing in 90 visitors per day and generating 2 sales a day, or $100 in daily revenue.

Now all of a sudden the economics start looking really good. She’s generating $100 in sales with labor costs of $80. Depending on the cost of goods, she will soon be a profit center for the company, if she can continue focusing on these online marketing tactics and overcome boredom, and the lack of management understanding about what she is up to.

If she is creative enough to keep finding new ways to get permanent links from other sites that will consistently deliver 3 new visitors per day, then within a year, her efforts will be bringing about 1000 visitors per day or 20 sales per day, which would be $1000 per day, or
$30,000 per month. The second year, her results would be double.

This is how internet companies actually succeed. Ask the founders of Backcountry.com to tell you how they spent the first few years basically getting as many links from other sites as they could (even before it mattered for SEO purposes) and how over the years the cumulative impact of all these links (including from their paid affiliates) yielded tens of millions in annual revenues.

This is how it works. There are employees in every successful internet company (usually underappreciated) who are in the trenches every day, gutting it out, getting a link here and a mention here, and an affiliate here, finding webmasters or bloggers or journalists anywhere who might take an interest in their products, writing new content, finding new keywords to market around, generating some sales and some positive word of mouth, until the cumulative impact of all their efforts is generating a consistent daily stream of sales.

Since most corporate executives (unless they were there from the start) have no idea how this stuff actually happens, they don’t give much credit to the trench workers (such as when Ancestry.com laid off its only affiliate manager back in 2000 when she was merely responsible for personally recruiting 9 of the top 10 affiliates, and generating, at one point, a very significant percentage of the companies new daily sales), and they stop investing in the daily guerilla and online marketing tactics that have this cumulative impact.

When their businesses seem to plateau or peak, they panic and spend more and more dollars on paid marketing, and the guerilla stuff goes by the way side.

You can still be profitable when you are spending money to get every visitor to your web site, but not nearly as profitable as when you use a nice combination of paid marketing, guerilla and viral.

For me and my team at World Vital Records (and genealogy is extremely diverse and viral, so we have a lot of opportunities to spread the word in creative ways) the question is this: how many employees like the one I described above can we find, train, and support, before they are duplicating efforts and stepping on each other’s toes.

If our market can handle one such employee, and she can generate links every day that will bring us 3 clicks per day from now on, then in a year, we’ll have one employee generating the $1,000 per day that I described above.

But if there are enough tactics involving enough web sites from enough countries and we can have 10 employees doing this guerilla marketing stuff, then at the end of a year, this team will be generating $10,000 per day in revenue. That would be better: a $3.65 million annual revenue stream from our guerilla marketing/affiliate marketing team. But what if we could support 20 such employees, or eventually 50. The numbers start looking very good.

And it all starts with just 3 visitors a day.

PS. I just thought of a new metric for guerilla marketing. We all use unique visitors, unique visits, page views, and sales. But what about this: unique daily referring domains. I wonder if anyone has ever used that.

A guerilla marketer or a team of them could keep track (this would be an easy report in Omniture) of the number of unique domains or unique URLs that brought at least one visitor each day. If the team is doing their job and getting enough attention and links from other sites, this number would grow every day. This would indicate how horizontal their efforts.

Of course a good online or guerilla marketer will try to get prominent links on high traffic web sites that will generate hundreds or thousands of visitors per day; but my point is that you don’t have to have huge wins like this to succeed–you can do it with small wins every day over a long period of time.

CyberMonday.com from Shop.org

Check out the Alexa ranking of CyberMonday.com which lists special holiday discount offers from more than 400 ecommerce retailers.

Shop.org is a important association of ecommerce companies. I have always appreciated their press releases and market research. But that they are promoting online sales for all their member companies is another good reason to consider joining this association.

Internet companies and merchant account limits

If you run an internet business with the potential for rapid growth, and you use a merchant account for processing credit card transactions, please check your merchant account monthly limit before you encounter the problem that we experienced over the weekend.

Wikipedia has a decent article on Merchant Accounts, but until I edited it today it said nothing about monthly transaction limits.

The merchant account limit bit one of our Provo Labs companies this weekend. Here’s what happened:

WorldVitalRecords.com started selling subscriptions to its web site on October 4th. We had some initial subscribers from blogs and news releases, but we didn’t turn on our online marketing efforts until last Friday. Our first email campaign went out to 80,000 genealogists. We invited them to get 2 years access to our databases and online courses for the price of 1 year. Our expiration date on this offer is today, October 31st. (MarketingExperiments.com has demonstrated how important it is to have special offers that include urgency.)

The email campaign brought us a large number of new subscribers. Our team had a contest to see who could guess how many subscribers we would get in the first 24 hours. I won the contest–my guess was within 4 of the actual number.

The large numbers of signups continued into Saturday, but then came to an almost complete stop. On Sunday, our numbers were tiny.

Upon investigation yesterday, our team discovered, much to our dismay, that we had reached our monthly transaction limit on our merchant account. Between Saturday and Sunday 113 credit cards were declined, costing us more than $5,000 in revenue.

Yesterday, when our bank helped us get the limit increased temporarily, we saw the subscription numbers soar once again. Hopefully, we can recover the lost revenue from the denied cards. But more importantly, we hope to get an increase to our limit so we won’t have this problem again.

I remember many internet companies had problems with merchant account limits years ago. A 2002 story about profitable internet companies in Southern California describes the trouble that one internet startup had with their merchant account:

The toughest part, they agree, was establishing credit as a totally Internet business. The first weekend they received $10,000 in orders. “Our merchant account (for payments by credit card) would take 12 days to clear our money,” Livdahl says. “Suppliers wouldn’t ship because we hadn’t paid. We just had to wait. It was terrible.”

InternetRetailer.com sells a report that lists 500 retail ecommerce companies that had 2005 revenues of more than $3 million. Many of these companies are fast growing. I wonder how many of them have run into the merchant account limit problem at some point in their history? I bet this is a pretty common thing.

Does anyone have insights into this problem or first-hand experiences with it? What can be done to avoid it? (It’s actually a nice problem to have, in comparison with other problems that many startups have, like not having enough customers.)

P.S.

Interesting thing from Google Trends when you look at the cities where people are searching for “merchant account” or “credit card processing.” Apex, NC has far more queries than any other US city. Does anyone know why?

And Pakistan has far more searches on “merchant account” than any other country. Pakistan is listed by MSNBC as one of the top 5 countries involved in credit card fraud.

Next 3 days: free online conference on internet marketing

If you can afford to stop working for part or all of the next three days, you can hear from dozens of the most successful online marketers in the industry–for free and from the convenience of your own home or office.

(Or you can sign up for $99.95 and get access to more than 175 online presentations–that’s one a day for the next 6 months.)

ecomXpo starts today (Oct. 24th), with free sessions over the next 3 days from key employees at Google, Yahoo, eBay, Microsoft AdCenter, LinkShare, Searchfeed, iHispanic, Performics, and MarketingSherpa, and many others.

Utah affiliate guru Jeremy Palmer (Quityourdayjob.com) will also be presenting, as will one of my favorite authors, John Battelle, who wrote “The Search” (how Google changed the search industry.) His SearchBlog is the best coverage of the search engine industry.

I highly recommend that you budget time every day to stay sharp in internet marketing. My own personal knowledge plan has included reading MarketingSherpa every week and all the daily newsletters that come from MarketingVOX. After learning about eComXpo from Brad Pace, internet marketing specialist at Provo Labs, I’m now planning to subscribe to ecomXpo University so that I can hear these presentations over the next several months.

Online Retail Grows by 20% This Year to $211 Billion

Shop.org just released its ninth annual ecommerce study. It projects $211 billion in ecommerce revenue this year, up from $176 last year.

The forecast $211.4 billion includes travel, a category valued with revenues of $73.4 billion in 2006. The top non-travel categories include computer hardware and software ($16.8 billion); autos and auto parts ($15.9 billion); and apparel, accessories and footwear ($13.8 billion). Cosmetics and fragrances ($800 million) and pet supplies ($500 million) are expected to experience over 30 percent growth in 2006, more than any other categories. Pet supplies is a new category tracked in this year’s report.

Integration between online and offline activity is key for retailers who report 22 percent of offline sales are influenced by the Web. Retail Web sites are also a viable channel to reach new customers; 38 percent of online customers are first-time buyers.

Amazing.

Speaking of online retail, I just saw an Inc. Magazine profile of the largest internet shoe retailer. It turns out the entrepreneur running Zappos.com, is Tony Hseih, who sold LinkExchange to Microsoft in 1998 for $265 million (I was a huge user of LinkExchange–it was one of our best sources of traffic in the early days of Ancestry.com). Zappos.com had $252 million in online shoe sales last year, and they are obsessive about great customer service.

I love this quote:

We have to untrain employees’ bad habits from previous call centers, where they’re trying to be more efficient by minimizing the time they talk to the customer. If someone is looking for a specific shoe and we happen to be out of stock, we have employees direct those people to competitors’ sites.

Another Inc. Magazine profile describes how Utah entrepreneur Morgan Lynch built Logoworks into a successful online business. Revenue last year was $7.3 million.

Infopia raises $8 million

Congratulations to Infopia for closing on an $8 million funding round from Hummer Winblad and Trident Capital. Infopia is an ecommerce platform that helps customers get their products onto sites such as eBay, Amazon, Google, Overstock, Shopzilla and others. Bjorn Espenes and his partners have made some very powerful breakthroughs in e-commerce automation. This funding round is great to see.

Google Base starts taking cash – vnunet.com

Google Base starts taking cash – vnunet.com

If you try using Google Base to take payments from customers, let me (and my readers) know how well it works.

It seems improbably that Google Base will take any users away from PayPal which is so standard now. At least, it will take a long time to make a dent, unless somehow the user experience is better with Google Base.

(I personally have had tons of usability problems with PayPal. I only use it rarely, and I always seem to have problems with passwords and with the data entry screens. If Google Base uses the same login as most of my other features, then that might endear me to them.)

So let me know if you try it out.

Zoovy: Rapid Response to New Opportunities

I have a friend who uses Zoovy for her e-commerce system. That is the only way — until today — that I had heard of the company.

But today I was very impressed to discover that they have already integrated their e-commerce services with Google Analytics, Google Base and Google Site Map.

My friend really likes Zoovy. Now I can see why.

Most companies I know dedicate all or most of their developers to longer term projects–projects that take weeks or months to implement. They don’t have resources available to rapidly respond to outside opportunities.

Zoovy seems different. I am impressed at how quickly they have responded to Google’s new services.

Has anyone seen any other e-commerce service provider already announce an integration with both Google Analytics and Google Base?

Shop.org Takeaways

Last week Shop.org held their annual
conference in Las Vegas. This week it’s the Electronic Retailing
Association, same place. If you haven’t been to an internet conference
recently, it’s amazing how big things are getting and how fast things
are moving.

I visited every exhibitor at the Shop.org event last and met at least a
dozen companies that I hadn’t heard of before that are doing
interesting things in online marketing, comparison shopping, search,
and web analytics.

Here are a few impressions:

  • Omniture Site Catalyst version 12 is awesome. You can
    import cost of sales and call center data so you can get more complete
    ROI reporting. The new client software features an OLAP engine which
    enables unprecedented data mining.
  • I asked Yahoo’s search people if they allowed XML data feeds to
    be uploaded to Yahoo like Google’s Froogle. They told me about their
    Product Listings feature that allows you to upload your product catalog
    to Yahoo Shopping and pay per click when visitors search for your
    products and click on your ads. This isn’t as good as Froogle’s free
    upload, but Yahoo Shopping gets far more traffic than Froogle, so any
    good merchant will include this in their online marketing strategy.
  • RSS can be a great way to get your information to consumers
    (since most online merchants say their biggest concern is whether their
    emails are getting delivered) but only 2% of adults use RSS today,
    while 5% of consumers age 12-21 use it.
  • According
    to eMarketer, 56.3% of US households will have broadband by 2008
  • Broadband
    users spend 40-50% more money online than dial-up users
  • 3/4ths
    of consumers browse online, then shop offline
  • Pay-per-call
    will grow from $162 million in 2004 to $3.38 billion in 2009. Even local
    businesses without web sites can use pay-per-call.
  • 70% of consumers use the internet to
    search for local stores and merchants, while 62% of consumers use the yellow
    pages. (BIG WOW)

Gotta run. I’ll update this post later with at least a dozen more thoughts/impressions.