The Dangers of Affiliate Marketing (The Pentamillionaire Story).....

[gogiver8figs]

Hi all,

If you've ever thought about getting into affiliate marketing - this story can benefit you.

The thing is this: The TMF book completely "opened my eyes" because it changed my perception
of wealth as a successful affiliate marketer.

And if you are thinking about doing affiliate marketing, know that the Affiliate marketing model
does not gel with TMF Wealth Perception.

Here's what I mean:

Affiliate Marketing Wealth Perception (My Perception Before):
Build business systems for cash flow

TMF Wealth Perception (My New Enlightened Perception After):
Build business systems for cash flow *and* asset valuation.


Want proof.

Here's some excerpt for you from the book that provided a few of my "aha":

"According to research and marketing firm The Harrison Group
(HarrisonGroupInc.com), only
10% of penta-millionaires (net worth $5 million) report that their wealth came from *passive
investments*. Age data was not provided but you can guess that none of the 10% were under 30."
Chapter 12, pg. 96

MILLIONAIRES CREATE AND MANIPULATE ASSETS (ASSET VALUE)
"In a survey of 3,000 pentamillionaires ($5 million net worth) the Harrison Group
(HarrisonGroupInc.com) reported that almost all pentamillionaires made their fortunes in a
big lump sum after a period of years. Worth repeating: a big lump sum, not “by saving 10% of
his paycheck for 40 years.”
“A big lump sum” is just another phrase for *“asset value.”* Furthermore, 80% either started their
own business or worked for a small company that saw explosive growth. Explosive growth is
another phrase representing asset value."
Chapter 18, pg 136


​

ASSET APPRECIATION/GROWTH not PASSIVE INCOME is the path to rapid, massive wealth via a liquidation event.

And you can't sell/liquidate what you don't own (the affiliate marketing business model is based on selling OTHER
PEOPLE's products and building OTHER PEOPLE'S brand assets).

READ THAT PART OVER AND OVER AGAIN...

Think about it...

People in internet marketing/affiliate marketing talk about "passive income" while people in startup circles talk about "growth", i.e. asset appreciation.

Venture capital-backed firms are focused on generating a return for investors - that can only come from a liquidation
event (being bought out, going public, etc).

Even when they are profitable, they often reinvest the money into the company to enhance growth (as an analogy, think of real estate. Instead of spending the money from tenants each month on goodies, you reinvest the profits into
things that increase the value of your property. For instance, you might buy OTHER properties and increase the value of your real estate portfolio as a whole)


So, to sum it up, asset appreciation and liquidation is the key to massive, rapid wealth creation - not passive income.

Furthermore, think about it.

What's safer and more "passive" then cold, hard cash in the bank?

• Furthermore, with lump sum cash as an asset
  (AFTER YOUR LIQUIDATION EVENT)you can save time BUYING
  passive income online assets (websites, domains, products
  other create).
• Not only that you have the safety of DIVERSIFYING, your
  passive income assets.
  
  
  
• Finally you can BUY SYSTEMS.
  

It virtually always takes more timeto BUILD vs. BUY.

This is the secret behind why large corporations buy pre-existing companies.....

So the next time you get an email or see an ad trying to pitch you some affiliate marketing opportunity - think of this short post.

I am not saying that strategic joint venture relationships cannot increase the asset value of your business.

But just building a website and selling other people's products and building other people's brands is not going to lead to the asset growth and liquidation event that is the hallmark of TMF Wealth perception -

TMF Wealth Perception:
Build business systems for cash flow *and* asset valuation. (pg. 122)

Want to make real money in Affiliate Marketing? Focus on building and growing an affiliate program to sell YOUR OWN PRODUCT - don't BE someone else' affiliate...


That's been my new focus going forward - by all means join me...

If anyone cares to chat about running their own affiliate programs, feel free to reach out .

 

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[AndrewNC]

This actually plays into an audiobook I listened to over the past 2 days: Built to Sell: Creating a Business That Can Thrive Without You: John Warrillow: 9781591843979: Amazon.com: Books

In order to build a company that can sell, you have to create a business that can operate without (you) the owner involved in it. This book has nothing to do with affiliate marketing, but gave some decent information mixed in with a (fictional) story. Yes, it was a fictional character, but it portrayed al to of good points through it.

Kind of off topic, but a good read nonetheless.

 

[gogiver8figs]

Actually not at all. John Warrillow is someone I consider a mentor. He sold his company to my former employers (NASDAQ: EXBD).


Good read!

 

[Eskil]

Very good post Shola, and a nice reminder to all affiliates how volatile (or rather, non-existing) their "business model" is.

 

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[frieden70]

I've been saying something similar for quite a while.

As an affiliate, you have no control. The offer that you're promoting can be taken from you in a heart beat and you're left with nothing.

If you're smart enough to build a list, at least you can potentially sell them some other stuff but still, you're selling other people's stuff, with no control of their product and giving away YOUR customers.

I see being an affiliate as a glorified freelance job. You aren't really in the fastlane until you are creating/have created something that is producing cash and building an asset for you. An asset that you can continue to grow and monetize.

Just my .02, as an affiliate marketer :smilielol:

 

[Jeremy]

Funny all the hate for affiliate marketing when that is essentially what limos.com did and made MJ a millionaire.

Unless I'm reading MJ's book incorrectly, Limos.com did not own limousines, employ drivers of limos, nor did it take orders directly for limo rides while MJ owned it.

Instead, MJ sold leads, which is CPA affiliate marketing.

He was at the "mercy" of the people with the product--the limo companies.

Of course, that lack of control didn't hurt him because he controlled the most important part of the equation...the customer.

 

[Eskil]

Funny all the hate for affiliate marketing when that is essentially what limos.com did and made MJ a millionaire.

Unless I'm reading MJ's book incorrectly, Limos.com did not own limousines, employ drivers of limos, nor did it take orders directly for limo rides while MJ owned it.

Instead, MJ sold leads, which is CPA affiliate marketing.

He was at the "mercy" of the people with the product--the limo companies.

Of course, that lack of control didn't hurt him because he controlled the most important part of the equation...the customer.

No you can not compare MJ's business to him being an affiliate. He had full ownership, control, and leverage of a two-sided market business. His service dealt with leads two ways yes - but not like an affiliate. That's like saying the owners of Odesk or Elance are affiliates too...

 

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[The-J]

A friend of mine did some serious blackhat IM back in 2007-2009, got to the point of making $2000/day.

He hated it. It required him to always be working and the work was always so passionless. Despite the fact that he was making good money, he'd rather have a regular job that was meaningful. He always got shut down and it was basically a rat race for him.

The model isn't the only problem with IM.

 

[gogiver8figs]

I've been saying something similar for quite a while.

As an affiliate, you have no control. The offer that you're promoting can be taken from you in a heart beat and you're left with nothing.

If you're smart enough to build a list, at least you can potentially sell them some other stuff but still, you're selling other people's stuff, with no control of their product and giving away YOUR customers.

I see being an affiliate as a glorified freelance job. You aren't really in the fastlane until you are creating/have created something that is producing cash and building an asset for you. An asset that you can continue to grow and monetize.

Just my .02, as an affiliate marketer :smilielol:

Yep. Not just grow and monetize - but SELL. Why spend years building a business you can't sell? Very few affiliate marketing businesses are sellable. Even the ones that have "lists" can't get a proper valuation.

There are has to be more to it than that - a loyal, lifetime customer base and a proper brand and a set up systems the new owners can leverage. John Warillow states in "Built to Sell" that only approx. 1 in 100 businesses are sellable.

 

[Roberteking78]

Marketing is marketing. It's all about how well you do it. If you suck at it, you're not gonna get rich doing it.

 

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[gogiver8figs]

Marketing is one thing - a business model that yields accelerated asset growth is another. That was my main point

 

[sigurdur]

Man .. I wish somebody threw TMF in my face a couple of years ago before I started in IM ..

I wholeheartedly agree with the points made in this thread, affiliate marketing is not something you can build your whole *asset* business on. That said, aff. marketing can offer a good value addition to your existing customer base, but in no way is it a way to create an asset that you can liquidate at a later date.

That said, you can learn most of the skills you need to market anything by running in affiliate circles, SEO and marketing is irrelevant to what is being promoted. ;-)

Anyway, great post, thanks gogiver8figs!!

 

[gogiver8figs]

If you own your own list and market affiliate products (while you develop your own) - I think it's an okay way to start.

Why? Because you'll actually "own" the customer relationship.

That's today. Today I was talking to a friend who owns one of the top Instant Commissions affiliate networks out there (trust me you heard from him).

I told him, if I had it to do all over again, I wish someone would have sat me down and said this:
"Forget all the hype - focus on one thing 'how to acquire a customer (or email subscriber) profitably'

If you have an audience (or list), you can at least turn that into a real business.

There's only one thing you need for a business: a paying customer.

Not a website
Not an aweber account
Not the right sexy wordpress theme
Not The most ninja SEO tactics


JUST A PAYING CUSTOMER!

Affiliate marketing doesn't teach you much about customer economics:

CAC - cost of acquiring a customer
LTV - lifttime value of a customer

Learning to set up a system where LTV > CAC is the essence of a business.

Anybody reading this: ask a friend in affiliate marketing one simple question: How much does it cost you to acquire a customer....What's the lifetime value of your most profitable customer?

If you plan to sell your business, there's no way in hell you are going to do that without knowing these numbers....

 

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[infinitus]

Interesting....I think a golden rule should also be "Dont flog a dead horse" meaning for goodness sake don't promote over-saturated make money online products unless they are really really good lol