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Category: Opinion

Riding Along The Wave

Forbes is double-dipping in ad-revenue by publishing about Kylie Jenner. First they made the entire world read the headlines that Kylie is the world’s youngest self-made billionaire.

Months later they published that Kylie and her family lied about her billionaire status and that she is not yet a billionaire. Instead, she’s worth only 900 million.

I don’t know about you, but I see no difference in being a billionaire or being worth 900 million. If she’s worth 900 million, she will be a billionaire in 1 or 2 years.

Instead I thought of something else when I read the news. I thought that an instagram influencer is (nearly) worth a billion dollars. She’s built this empire using Instagram, a Shopify store, and by private labeling products.

I also thought that Facebook only paid a billion dollars for Instagram while today an Instagram influencer is worth a billion dollars.

I also thought about TikTok posting 17 billion dollars in revenue in 2019 and over 3 billion dollars in profits. And the fact that they have over 1.5 billion monthly active users, more than Instagram as well as Snapchat.

I thought about gaming influencers/streamers who are making tens of millions of dollars per month using Twitch, YouTube, etc.

I thought about influencer marketing. I thought about riding along the wave of a powerful platform such as TikTok.

And I thought how being early in riding that wave can make you a millionaire or even a billionaire.

I have known, met or spoken to 100s of influencers till date who were early in riding the wave on Digg, StumbleUpon, Reddit, Facebook, Instagram, Snap, TikTok etc. I know a large majority of them are worth at least hundreds of thousands of dollars.

If you saw a platform taking off, figured it early, and cringed instead of taking advantage, it was your loss and it will continue to be.

The Online Courses Industry That Is Filled With Junk

The online courses industry collectively stands at 100s of billions of dollars per year. It is a fact that most of these courses are junk. The ‘fake gurus’ sell you a ‘dream lifestyle’ that can be seen in the backdrops of their videos. Of course, the gurus spent some money to lease that Lamborghini or to fly to the Fiji islands but the lifestyle that they have built is often coming out of your pockets.

My friend Faisal Khan, shared this video that you might find interesting.

Most of my working career, I haven’t touched a course with a 10 foot pole. Because there’s so much junk on the internet, it’s rather difficult to find real value from the junk.

The first course I bought was in 2013. It was a scam. The founder of the course has lost the case against the FTC and is paying $17 million dollars in fines. Hopefully I’ll get some of the funds back.

The second course I bought was in 2020. I found a lot of value in it. I recouped my investment within 10 days of buying it. One of the reasons why I chose that one was because it was for professional marketers, there was a long interview process and they didn’t accept everyone.

While there’s no hard and fast rule on what to buy and what not to buy, I wanted to write a bit about the red-flags you should always watch out for. There can be real value in the courses, but it is a bit like finding needle in the haystack. Read below.

  1. If there are membership level upgrades, it’s a flag. It isn’t necessarily a scam but it could be. Most sellers whether in courses industry or not are trying to raise the average order value. In e-commerce we often do that by offering bundles and tiered discounts. But it’s a flag. So you can think of it as strike # 1 and drop it if you don’t find any other dirt.
  2. If you can’t upgrade membership levels, without skipping a level, it’s a big red flag. E.g if the coaching offered is gold, platinum, diamond and to buy diamond you first have to buy gold and platinum, you’re just setting yourself up for a big disaster.
  3. If the core niche of the trainer is that he makes money by telling people how to make money, get out. Don’t pay him anything. If he makes money by running X and Y businesses that you’ve real evidence of, but also does coaching on the side, then you should be safe.
  4. If you are encouraged to earn revenue by being an affiliate for his course after learning from his course, get out. It’s multi-level-marketing. You buy his course and to recoup your investment you sell his course to someone else and the loop goes on.
  5. If at any point during the sales pitch, he makes the business sound easy, quick or having a too good to be true returns, get out. What seems too good to be true is often too good to be true.
  6. A course with true value will have a trainer that has a proven record of maintaining a certain business, does coaching/course on the side to replace consulting in order to maximize return of his time. A true trainer never over-commits or over-promises. He paints a true picture of how the returns could look like. For example in the Facebook marketing industry, I’d go for trainers that teach 2-4X ROAS instead of the trainers that teach 10-30x ROAS. Real gurus will tell you it’s going to take time, blood and effort and despite that you have 70% chance to fail.

Remember, vultures capitalize on your insecurities. Real coaches don’t do that.

Market Inefficiencies & The Fuel Of The Internet

While you have to pay for most products or services in real life, most products and services that exist on the internet have continued to stay free. Since all internet companies have to make revenue, alternative options are looked into of which a large portion has been advertising.

As advertising became the main fuel of the internet, mega players jumped into the advertising industry to have power and control over the internet’s oil. To power effective advertising, data became even more valuable asset. But the internet advertising had and continue to have many many inefficiencies and over time, all markets try to remove inefficiencies to move towards higher profitability.

A major chunk of the advertising dollar has been going into the pockets of agencies, networks, exchanges, and other layers over layers of middle-men. I look at that as market inefficiency.

With influencer marketing, we saw the markets tried to get more efficient and remove the middle-men altogether. Everyone who explored this area, including us, saw over a 1000% higher ROAS compared to traditional advertising.

A large part of internet continues to stay free because one way or another commerce happens. Advertising is only the means. Facebook and Youtube videos continue to stay free because these companies make money with advertising and data.

However, advertising and data work because commerce happens. Everything else, including the advertising and data are also middle men. They are the inefficiencies that we need today, but hopefully the market will continue to find more efficient ways for higher profitability or cut-throat competition.

All websites and blogs that relied on advertising for years have been increasingly moving towards affiliate commissions to keep their businesses alive. As Amazon cuts affiliate rates, and others might follow, these content websites will need to find smarter ways to make their businesses work. What you could do before by just selling ads can only be done today by selling a product. Today, you can make it work by making a sale happen for someone else and getting an affiliate commission. Tomorrow, that may be seen as a market inefficiency and you may have to generate a sale for yourself either by selling products, or charging for your own product or service.

Youtubers today make up-to 80% of their income not by Youtube ads but by influencer marketing and brand deals. Youtubers and brands are cutting the very platform as the middleman that they host their content on.

We started Socialoholic with content and blogs. We relied on selling advertising in order monetize our network of websites. We drove traffic from the influencers to our content so we can sell ads and pocket the difference. We became content-arbitragers. So many middle-men while the true value was only created because someone somewhere bought something.

Years later, we found ourselves driving the same influencer traffic but instead of driving that to content we drove it to products. We removed the inefficiencies.

Over time, we have pivoted from content to focus on e-commerce as our core area of business because that is the real fuel of the internet. Everything else is only relevant because it assists e-commerce and when something more efficient pops up, it is replaced.

A Lot Of Moving Parts & Perfect Synchronization

Every business has a lot of moving parts. They all need to move together and in synchronization for the business to continue to work.

Businesses have control on many of the moving parts. For example, for an e-commerce business you have control over what creatives you make, how your landing page looks, what should be the selling price, where do you source your products from and what source of traffic would you use etc.

Each business has some moving parts that we don’t have so much control on. For example we don’t have a lot of control on the on going auction prices in the Facebook’s bidding system. That would depend on the over-all advertising competitiveness of the traffic source and is not something one can control.

Some parts of the business are predictable whether you have control on them or not. For example despite having no control over the on-going auction rates, it is predictable that the auction rates will be higher in the last quarter and you can use predictability to your advantage despite having no control on the auction prices.

Some parts of the business are not too predictable. The pandemic is the greatest example of that. We neither have any control over it nor could we predict it.

However, for the business to work, all parts that you can control or not and all parts that are predictable or unpredictable need to be aligned together. If they are aligned, you will have a booming business. If not, you will have a bumpy ride.

It’s kind of like a solar eclipse. You know how the earth, sun and moon are moving. You could even predictably say when the eclipse will happen. But it will only happen when all three are aligned.

The Tall Poppy Syndrome

On the surface it seems that the world want to appreciate the high achievers. Ironically though, as the high achievers start to stand out, they are mocked and down-played for only one reason: for being a high achiever. This is what is referred as the tall poppy syndrome.

All poppies should grow together, and the tall poppies should be cut to size. While this might work okay for poppies, we’re not supposed to be cutting humans like that. Unfortunately, the syndrome runs so deep that many high achievers often feel the same way about other high achievers. This is a toxic culture, and to abolish it we need to acknowledge it.

I have been both victim of and guilty of the tall poppy syndrome but continue to learn to deal with it in both cases.

If you’re guilty of doing it, I encourage you to learn to deal with your emotions of jealousy and envy because it’s neither helping you, nor your victicm.

If you’re victim of it, don’t let other people’s insecurities destroy your own self-esteem and growth.

Humans aren’t poppies, and we should be proud albeit humble of growing tall.

Getting The Biggest Bang For Your Time

Some people prefer doing certain things that are extremely ineffective with regards to time but somewhat cost effective. For example, some may queue to get their cars filled with CNG (a cheaper alternate for petrol). The caveat is queue is often much much longer. People would waste hours of their day to save 20% on the fuel cost. We’ve all seen that happen at some point in our lives.

Some people go to the water filtration plants to get free and filtered water instead of having a water company like Nestle deliver that to their doors for a cost of $1.5 per 5 gallons. We’re all presented with choices like that everyday whether to save 30 minutes of our time or $1.5.

I know my choices well but at the same time I understand not all choices apply to everyone. Although, I’m curious whether many people even weigh these choices at all and regardless of what your situation is I encourage you to weigh those choices at the very minimum.

I’d save time over money every chance I get because time is money and if my time is used effectively I can make a lot more than what I would have saved by doing those manual chores.

A friend of mine asked me whether he should start a YouTube channel, or a social media agency, or a dropshipping business, or build an e-commerce brand. That’s for him to decide of course and I told him that too. He probably needs to work on what he can do better and more passionately? Since he has an internet marketing background he probably can do all of these things progressively and passionately. But it is obvious, that one of these choices would be better than the rest and he needs to take that into consideration.

Which of these options would create the maximum value in the shortest amount of time. That is what he should be doing. Short-sighted people, which I’ve been guilty of many times myself, would gauge in the revenue for each of these businesses. I’m assuming revenue won’t come easily from the YouTube channel but value will still be created outside of revenue. An asset will be created. Similarly there would be pros and cons for each of those options. Dropshipping for example could be extremely lucrative with respect to revenue, but most dropshippers fail to create any value outside of revenue at all.

Yes you can spend $100,000 on Facebook ads and generate $200,000 in revenue in a month. After taking in consideration the cost of goods sold, most likely you’re taking home $50,000 every month. But with delayed shipping times, no quality assurance on the products, you’re most likely not going to have pleased customers resulting in no asset creation. The moment you stop your operations, you realize you’ve very little repeat purchase, that you no longer have any traffic or customers on your store, and basically if you wanted to flip your store today, you’ll fetch exactly $0 for it.

My only advice is whatever you’re going to venture into always look at the value you’re going to create and the time it takes to do so. If you’re good at and passionate about 5 things, which one of these should you work on is a mathematical problem and a spreadsheet could answer that better than a friend.

A Billionaire’s Advice [Part 2]

Yesterday I wrote about a meeting that I had with a billionaire in NYC and some of the advice that he gave me. When we met him, our situation was unique and it made us feel invincible. So I asked him some questions that a lot of other people probably wouldn’t. Because we had a unique relationship with him, he was very kind to us, and wanted to genuinely help us so he welcomed all questions.

The unique situation that we had was that we had successfully setup the US infrastructure including a company, payment gateway and access to other business tools that weren’t available to people in Pakistan. We were at the top of our game with regards to the revenue that was being generated and like other Pakistanis we had extra-ordinary tax benefits available for IT services and IT related services. So when he recommended that we move to US, a natural question came up that we’re able to use most American infra without paying any taxes, why would you ask us to move to US, bear higher costs of doing business and also pay insanely high taxes.

His answer was tax is what you pay for the privilege of doing business in the US. The privilege that you think you have is not nearly enough compared to the privilege that you will have once you’re here. He was vague like that. He didn’t give any specifics of what privilege other than what we already have.

He reminded us once more, “I was going to be a teller at a bank 5 years ago but I’m not. The US has something to do with that”.

I didn’t follow his advice. I’m still here in Pakistan. I know I missed a lot of things. As a digital nomad, that’s okay. But if you’re looking to build the next big thing and want to amass insane amount of wealth, you should give his advice a thought.

A Billionaire’s Advice

I and Saad met a young CEO in his 30s who is a billionaire. The meeting happened in New York City in October of 2013. He encouraged us to move to US and pursue a career there. He said if he hadn’t moved to US, which he had done only a few years before that, he would have been a teller at a bank in his home country.

I obviously didn’t take that advice as I have continued to live in Pakistan for over 7 years since that meeting. For a brief period, I had thought about taking his advice but I was only slightly motivated. And after I was turned down by an accelerator in US, I also lost the little motivation that I had.

As some of you may know, I’m a proponent of digital nomadism. There’s a freedom associated with the ability to be location independent. Moreover, $100K in US last a really short time compared to $100K in a developing country. As for the quality of life, sure quality of life is not great in Pakistan, but in theory you could have great quality of life at a small cost in many countries if you wanted.

Digital nomadism also instilled remote work habits in me. While many of my friends are going bananas now that they have to work from home, it has come naturally to me. In fact, every effort that I’ve made previously to move to an office has failed so far.

In summary, digital nomadism is great but it’s a freedom movement. It’s a hack to live well, spend less, be free and happy. However, in no way it’s the right strategy to be really wealthy. The right strategy to be really wealthy is the one outlined by the CEO we met; relocating to the land of opportunity.

I want to continue to believe that remote work is the future of work. Unfortunately the keyword here is “future”. The present of work is still in the bay area. People like Paul Graham believe US needs to have better immigration policies as 95% of the best programmers live outside of US.

But he doesn’t see hiring the same workforce remotely as a viable solution.

The world has made a lot of progress to equalize the opportunities at a global scale but we’re just getting started and there’s a long way to go. Until then, bay area is your best bet.

Product As A Currency

I have often seen many entrepreneurs offer their product or service as a mode of payment. I read an interesting story in this blog by Waqas, CEO of Markhor and Atoms. He traded 15 pair of shoes to get hold of a Twitter handle for his company.

I think that he certainly stood a better chance of acquiring that twitter handle with an interesting offer of 15 shoes instead of cash. Moreover, by paying with his product, he delivered more value and incurred lesser cost.

In e-commerce, most business owners pay influencers with their products. The influencers in turn review the products and get to keep them for free. The business owners get UGC (user-generated content) that they may use on social media and in their ads. In addition business owners receive content-distribution as the influencers review the products for the followers. The large influencers also receive store credit as a form of payment in addition to free products. The influencers receive higher value (e.g $99 goods if they had to buy), while the businesses incur lesser costs (e.g $30 cost of goods).

Product as a currency works and is a preferred mode of payment for modern businesses.

Platform Strikes Again As Amazon Cuts Commissions

I wrote this blog titled “the incentive to be on a platform” a few weeks ago. Today when Amazon announced rate cuts for their affiliates, I was reminded of my thoughts regarding the platforms.

The rate cuts were announced despite the fact that Amazon is one of the few businesses right now surging through unprecedented growth. They had to hire over 100,000 employees in last few weeks to fulfil the demand of essential shopping and I can’t help but wonder how could Amazon be driven by COVID-19 to take this action. Honestly, I can’t seem to understand it. If this is a COVID-19 related event, please help me understand how.

A rate cut of as much as 70% is devastating for many content websites which generated a substantial amount of revenue from affiliate links as the ad revenues declined due to a large user base behind ad blockers.

It also means a loss of up to 70% valuation for what are known as “affiliate blogs” which are blogs designed to generate 100% of the revenue through Amazon affiliate program.

The sellers were also halted from selling anything but essential items for a few weeks. Sellers were also forced to move out any items from their warehouses that could “melt” such as edibles and make up. While the decision to remove these items was taken by Amazon in order to prioritize essentials, Amazon still charged per unit warehouse removal fee.

When you build businesses on a platform, this is the kind of counter-party risk that is involved. As I wrote in my other blog post, these platforms are the power houses and fuel growth, but no business should ever be built solely with a platform in mind.