Many people currently involved in the CPA industry feel that this industry is rock solid and not likely to change anytime soon. They may be in for a shock. There are developments coming from technological, business and legal areas which are going to have huge ramifications on the industry. One of those just happened.

Specifically I am referring the brokerage fees that CPA networks and brokers charge (around 20%) to push offers to fill the internet demand for remnant inventory, and the inefficiencies and expenses that are put in place by having so many humans involved in making web advertising work. Over time these people will be replaced by technology, just as many industries have been overturned in the past by modernization causing blue collar workers to lose their jobs.

The three biggest sources of traffic for a typical network are:

a. Email marketing

b. Pay per click traffic

c. Web inventory such as banners and text links

We’ll talk about these one by one.

CPA search marketing

Pay per click marketing is changing. Google has just announced it is going to offer a CPA model. At the moment it is possible to make a decent living by being good at PPC arbitrage of CPA offers. This works right now because Google and Yahoo have focused their business model around selling clicks, rather than selling actions. They do this because this is their version of branded CPM advertising – they can generally get more for it.

However, this causes huge inefficiencies in the system, because it is time consuming and complicated to figure out how to drive lots of PPC traffic, enabling therefore arbitrage opportunities.

Since Google has now started offering a CPA system, and Yahoo certainly will, this will change dramatically. Advertisers will be able to add a bunch of creatives into the system, along with a list of keywords and a CPA they are willing to pay. The system will then automatically test the base keywords you inserted, along with an extra list of keywords google generated itself. It will test them all against the various creatives you made; keeping pricing under a certain CPA you have set. The entire system will be fully automated, and the current arbitrage which is possible today will go away. Google and Yahoo can make quite a lot of money by making this change, given the average network commissions and the money made by PPC arbitrage players. Google has already switched and it is just a matter of time before Yahoo does as well.

Notice I don’t mention clickfraud – I don’t believe this impacts Google and Yahoo moving to a CPA model.

Email marketing

Email marketing is an area which is going to change on two fronts. CANSPAM is a law with many loopholes, one that allows people to send as much mail as they want under certain (not very restrictive) limitations. A lot of mail is being sent which does not provide true value to consumers, its simply mass market monetization that is driving volume, a process I really disagree with. At some point a new email law will be passed which requires something like “at the time of sign up, the sending FROM address must be displayed clearly so the consumer knows where they will receive mail from”. And brokering of email data will be exclusive only. You join one list, you unsubscribe from that list, period. It’s only a matter of time until something like this is legislated. Don’t think so? A few years ago the telemarketing industry was doing great – now its been decimated with the FTC’s do not call rules. This kind of thing can happen literally overnight – look at how the online gaming industry has been affected recently.

Secondly, deliverability is going to get much more difficult. Right now, most ESP’s can get mail delivered almost anywhere except major ISP’s such as Yahoo and Hotmail. Reputation management is a new trend in email which will change this dramatically. Reputation management means that every IP address which is sending email is certified by an independent third party as to how that IP address is being used to send mail. It provides a lot of data to email receivers on exactly how that IP address is being used. If you’re certified and your reputation is positive, a lot of your mail will automatically be delivered. If you’re not, you’ll get blocked as spam.

Right now reputation management is being used by the major ISPs to confirm mail delivery – but once this is rolled out more widely across internet mail servers, mail blocking will improve dramatically, and those who are sending bulk co-reg data will find their deliverability falling through the floor.

Behavioural targeting

Thirdly, behavioral targeting is going to get much better. This has been talked about in the past, and never seems to truly work properly but it is starting to get much better now. Networks like Blue Lithium and turn.com are making a lot of progress with targeting and collecting a lot of data on their userbase. Reports I hear about Blue Lithium in particular are that it performs extremely well.

Impressive things are being done on the advertiser side to take advantage of behavioural targeting. For example, Think Partnership has a new product called Second Bite which saves shopping cart abandoners. If you decided not to buy a product and half completed your shopping cart, Second Bite will work to get you to finish your purchase. Think Partnership is just starting to buy banner inventory to save the cart purchase. What this means is that you can be browsing the web and you’ll see a banner saying “hey – come back and finish your purchase on <onlinestore.com> and get a 10% discount”. Once this kind of inventory is brokered out to major behavioural networks, no general interest CPA offer will be able to compete with the CPM’s they will be able to pay to save a purchase. Sure, this is a narrow application, but many more clever targeting applications of behavioural targeting will appear, increasing CPM’s across the board.

In addition, client side behavioral targeting will increase. By this I mean that users will allow more data to be mined from their computers locally, and some of it will be passed back to the network. In an extreme case, imagine if Microsoft made its Windows OS completely free – but in return for being able to mine behvioural data from your machine. This data would be fed back to online targeting networks such as Blue Lithium, to target web advertising more accurately. No popups or any other nasty applications would be included. That could be a huge value add for consumers – with free software AND better advertising. Yes, this has huge privacy implications, but over time these will be worked out – the ECPM increase from accurate targeting will be too valuable, and consumers will not mind their data being mined in aggregate.

That’s not to say that everything is bad. Some areas of the CPA and brokerage industry will continue to work well. These include:

1) Coupon and affiliate sites. Publishers that are actively going out and finding links to promote on their site for consumers will continue to make money and want to use CPA networks. The human interface in this instance provides tremendous value to consumers since the publishers truly understand what their market wants.

2) Newsletters. This will become the standard for email marketing as the more aggressive forms of email marketing will be made illegal. This is similar to coupon and affiliate sites where publishers will actively seek out links to target their audience due to their understanding of their market.

3) Web and chat spam is going to increase. Right now we’re seeing quite a bit of spam on myspace, and given the progress people are making on defeating CAPTCHA mechanisms, this will only increase. If the postings cannot be effectively blocked by computers, then more of it will be done. Unfortunately CPA networks will see more volume from various forms of aggressive webspam as time goes on.

The branding industry will have some impact on these, but it likely won’t change much from the way it is now – some inventory will be sold at higher ECPM’s for major brands, and the rest will be remnant inventory. Of course the big question is how high the ECPM’s can get for behavioural targeting and whether they can beat branded advertising.

Some people will read this article and be thinking to themselves “no, he’s wrong, this has always worked, and it will continue to work”. The reality is that the internet marketing industry has been around for a very short time, and we really don’t have any data points to compare against long term. The right way to think about it is “where is the true value for consumers and advertisers”. If your business model doesn’t provide true value to all stakeholders, then at some point what you are doing will stop working.

If your business model depends entirely on brokering, you may want to consider how you will operate in a few years time once the above become reality.

A good way to think about whether your business will be around in the future is simply by answering two questions:

1) By running my business, am I creating true value for all my stakeholders (customers, employees, consumers, partners)

And

2) Am I keeping up with the very latest trends that might affect my business, including industries that are not directly related to my daily focus?

For number 2, you can say you’re doing the right thing because you’re reading this. J

Does this mean that all CPA advertising and lead generation will go away? Of course not. These are very fundamental models and the backbone of internet commerce.

Just watch out if your business model is entirely focused around brokering remnant advertising. If this is your primary business, make sure you stay on top of your strategy. You don’t want your company to be made irrelevant like has happened with generations of blue collar workers in the past.

While my brother was here, he introduced me to this band from Australia called “Cat Empire”.  Its an awesome combination of australian pub rock, latin (they actually recorded one of their albums in Cuba!) and a bunch of other genres.  They’re just a bunch of 22 year old guys from Melbourne, but have been doing extremely well.  The song below is one of my favourites “Hello”

Ever heard of the children’s author “Enid Blyton”?  Most people in english commonwealth countries have, and growing up in Australia I read tons of her books.  They were all very exciting, and some of you will probably laugh reading me talking about her here.

I recently found that there’s an updated biography published about her life.  It talks about how Enid’s father was pushing her to become a musician.  Everything in her life was being directed towards that goal – by her father.  But over time, Enid was finding that she didn’t enjoy music as much.

Then one day she decided she wanted to teach writing.  Once she started at it, everything changed.  And she wrote about it later that it was like putting a “round peg in a round hole”. 

Too many people in life do things they don’t enjoy.  I think thats a great way to say it – we all need to spend more time ensuring that we’re round pegs in round holes.  Just like my favourite childhood author did.

Ever heard of the DVD called “The Secret”?

Its a self-help/development movie which talks about the “secret” to building wealth.  Oprah is a huge fan, among many others, and its selling very well.  In the end its an updated version of Napoleon Hill’s “Think And Grow Rich”.  The basic idea they express is that you should focus your mind on your goals and visualize achieving them.  They presume that limiting beliefs are the core reason people fail in business.

Its junk.

Actually I’ve been a big fan (in the past) of Think and Grow Rich.  But by the time “The Secret” came along, I knew better.  Some of the biggest scammers I’ve ever met spend their time dreaming up big plans, which have no basis in reality, their skillsets or resources.  And then to achieve their big goals they have to resort to a lot of dishonest marketing and ripping people off.

So what is better?

I’m in the fortunate position to talk with many successful entrepreneurs.  And something I’ve noticed is that the really successful entrepreneurs are Ayn Rand fans.  They’ve all read Atlas Shrugged and have spent a lot of time thinking about her philosophy.  I’ve also noticed that most “The Secret” and “Think and Grow Rich” fans aren’t very successful.

So my advice to you is that if you’ve been spending a bunch of time on The Secret or Think and Grow Rich is to throw them away and read Atlas Shrugged.  Its a little heavier reading, but you’ll notice a big difference afterwards.

I have.

So we’re having an Australia party this Friday, here in the Dominican Republic.  Of course, you’re invited!

Every year I find a couple of things that make a major breakthrough to how I work.  One of those this year was discovering a type of application called an “outliner”.

An outliner is a very simple program for handling lists.  Ever used Microsoft Word in outline mode?  Thats where you can indent a bunch of ideas, below each other.   For example

Point 1
    Point 2
        Point 3
    Point 4
        Point 5

etc.  The key thing in an outliner is that you can keep indenting this as deep as you want, and open and close them so you can gain different levels of visibility.  The other key point is that beside each item you can add “notes”.  So I might want to add a couple of pages of text to point 1, and its very easy to do it, similar to how you might add comments to a cell in excel.

Thats all an outliner does.  And using is has become my most critical application, even more important than my email.  Yes, I’d rather lose all my email data than my outliner data.

Here’s why:  Because it allows indenting, you can file your ideas any way you want.  I’ve got about 6 major categories, including topics like “Quarterly goals”, “personal goals”, “client goals”, “lists”, passwords” and “people followup”.  These are the topics I access most frequently.  Then inside these are a ton of lists all nicely filed away.  I can easily manage projects inside it, capture new ideas, and everything is organized.

What has been really interesting was to learn that in fact a lot of things I work on are actually just lists.  So as I started using this tool, all kinds of lists are now kept in my outliner.. Books to read.. TV shows to watch..  Restaurants to try locally.. Things to do on my next trip to New York/LA/Santo Domingo/Australia..  My packing checklist..  New words I have to look up in the dictionary.. Ideas I’ve had.. Articles to read..  All of it just goes into my outliner and is neatly filed away.. ALONG with my current goals, and an organized project plan of goals to achieve.  So each day I simply pick out a couple of tasks that need to be done and work on them for that day.

Now the breakthrough part of this is when you can sync it with a handheld device.  I have run into quite a few problems with this aspect, and finally found that Bonsai, for the Palm works great.  So all my data is always with me wherever I go.  For those that are experimenting with this, I used to use LifeBalance, but the notes are too short, only 2kb, so you lose a lot of data.  I also tried MyLifeOrganized, and while their desktop version is awesome, I had problems switching to windows mobile.  I actually switched back to Palm just to use Bonsai, and their software both on the desktop and handheld is great.  If you’re not syncing your data, then MyLifeOrganized is the best outliner I have found.

Now, the next thing to know is that the most effective way to use these is to learn about Project Management.. But we’ll talk about that another day. 

The second major breakthrough in productivity I learned is that if you’re stalling or not getting a task done, the reason is that its probably too complex.  If you take a couple of steps back, and break it into a a checklist of pieces, it suddenly becomes easy to make progress.  Again, the key outcome is to be always having some momentum, no matter how small.

This sometimes takes a little while to realise – you may be stuck on a task and its unclear why you’re not getting further along.  You have to wake up at that point, and brainstorm how to break it into a smaller checklist.  Once you do that, its amazing how the most complicated things to get done suddenly become trivially easy!

I had this explained to me many years ago by a friend on my AIESEC International team, Ante Glavas.  But it didn’t really sink in back then.  More recently, Alan Weiss, the expert consultant talks about this in some of his materials.  Alan Weiss is also partially where my previous posting came from, about doing more by doing less.  He turns out a lot of work, yet his goal is to finish each day by 2pm.

BF Skinner, the person who came up with the (controversial) topic of classical operant conditioning was also extremely productive.  He used to write for just 25 minutes or so at a time, and always take forced breaks where he’d reward himself.  He wrote an insane number of books.  I mention BF Skinner, because his methods of classical operant conditioning and providing rewards made him very productive and they can for you too.  Getting good rewards is critical to maintaining motivation.  Don’t shoot the dog is the classic book on this topic, and you can read my review of it here: http://www.adrianbye.com/favourite-books/#dontshootdoog

Yesterday I was talking with one of my developers, who has been a bit erratic in his work lately.  He’s been vanishing for days at a time, not getting things done.  After talking with him, it became clear the issue was one of motivation.. And how he sometimes completely loses motivation to work.

This has happened to me too, and I suspect it happens to everyone who works independently from home.  Here’s what I learned through experience (and what I suggested to my developer):

One of the biggest causes of demotivation is TOO MUCH work, and not getting things done.  You make a big checklist of things to do for the day, and by the time you’re 2/3 of the way through the day you’ve only done 2 items, with 12 more remaining.  You don’t feel like doing the other items because its too much work and you’re already behind anyways.

This pattern can set in place for days at a time, very easily.  For some people I suspect it can last even longer.

The trick is to do less work each day, especially if you’re really demotivated.  All you need to do is make a list of 2-3 things you can get done that day.  And do them.  And finish the day early.

Then, come back the next day and do 4 things.  Slowly increase the load.  But always make sure you’re scheduling far less things than you think you can actually do.  The important thing is to gain positive momentum, and get things moving forward day by day, and finishing the day on a very positive note, since you accomplished your goals for the day.

This is a form of positive reinforcement, which is talked about in “Don’t Shoot the Dog” (see my review here: http://www.adrianbye.com/favourite-books/#dontshootdoog)