Are You Creating Value or Just Advertising Space?

Shane Melaugh:             Hello and welcome to the Active Growth Podcast, episode 35. Today we're talking about opportunities trends and problems. More specifically, we're talking about advertising space, and a clear trend that is happening in a lot of online marketing, and especially in creative areas where there are a lot of sponsorships are influencers. It's kind of become a thing to be a social influencer, which really means that you get paid by sponsors to post about their stuff. And that really means that you're a brand and what you do becomes advertising space, that becomes the purpose is to create advertising space to get pinned by sponsors.

                                        This is the most obvious example, but a similar trend of basically shifting businesses towards providing advertising space has been happening in many areas for online business, and especially if you're new to this game. This might look like a good opportunity, right. Might look like a great thing to do, and it might look like a desirable thing to have. To have sponsorships, to have enough traffic, and a large enough audience to make money this way. It looks great, but there are some problems with this. There are problems with this that I want to talk about because I think this is the kind of thing that generally nobody talks about, even though it's very important. There are some problems with this for you directly immediately, as a creator and entrepreneur.

                                        There are also problems with this in the bigger picture for the long term and what this means for online business in general. So keep listening to find out why as a content creator and entrepreneur you may have been lured into a trap into something that at first glance looks like it's great and looks like it's good for you, but that actually turns out to be a trap.

                                        So this is what we'll cover in today's episode. We really boil it down to the question, how are you creating value or just advertising space? And the answer is not as simple as you might think. As usual, we have put together shows and links to everything related to this episode. You can go find them at activegrowth.com/35. So go to activegrowth.com/35, get all the links and resources, and also to join the conversation about today's topic.

                                        I will get started by answering some of the questions that have been sent in, and then we'll get into our main topic on advertising space.

Hanne Vervaeck:             I'm Shane Melaugh and I'm Hanne Vervaeck.

Shane Melaugh:             And let's start by answering some of the questions that have been sent in. We'll start with some voice messages, so let's listen to the first one.

Dwight Norris:                I'm currently using your drive themes, and I'm looking to build an audience. I know one quick way to do this is through a contest, but I hadn't seen any [inaudible 00:03:06] that actually does this, but I did run across your other site, Active Growth, which is where I'm at now, and you don't do it either. Is there plans in the future for you to make a contest or a giveaway kind of theme or a platform or something you can integrate with something that would make a good compliant, US compliant, or everywhere in the world, giveaway or a contest?

Shane Melaugh:             All right. This question was sent in by Dwight Norris, thank you for your question. Well, that's interesting. We have considered this, we've talked about this in terms of what are useful marketing tools, what are things for marketers that we can do with software, and contests have come up. The thing is, we have also experimented with contests ourselves and they have not worked well for us, so we've done this a couple of times. And I think it's like in theory you imagine that yeah, okay, I'm going to do a contest. People are going to spread the word. It's kind of something I can do deliberately to get the word out using some kind of contest app or something. And sometimes that's how it works.

                                        But we have found that in practice it's actually quite difficult to make this work. It's actually quite difficult to put together a contest that will combine being an actual traffic generator, where you actually get more traffic, you actually get something like a viral effect and it's not just kind of a thing that mostly your existing audience benefits from. And also a contest that is somehow useful, that brings in qualified traffic and gets engagement and so on. We have not figured out how to do that. And that's one of the reasons why we aren't planning to do a contest app or anything at the moment, because unless we can find a way to reliably do this it's not something that we can tell our customers go ahead do this generate traffic, either.

                                        The next message was sent in by Hubert, and this is in response to, first of all, our episodes talking about why you should record yourself on video, and also our episode on deliberate practice, and links to both those will be in the show notes. So here's Hubert's message.

Hubert:                           So I just wanted to report to you that after watching the last episode on the recording yourself on a video I started doing this again after a pretty long break. I haven't been recording videos of myself for about a year. Thanks for [inaudible 00:05:40] to doing this. And more than that, I decided to record at least one video every day. So, some of the videos I publish, some of the videos I just use for feedback. And now, today, I just finished listening your podcast on deliberate practice, and that's really great. That's a brilliant idea.

                                        And then when I went to the bottom of your post where you placed a call to action, and you say, "Okay I did not choose a skill and go and do it." I was thinking that would be really great if you could guys maybe create some kind of either a Facebook group or some place where me and other people who actually do apply the stuff you teach could hang out, could give each other feedback, and could group together to actually apply this stuff.

                                        And I think that would be quite easy, maybe it wouldn't required much work on your part. I'm sure there are other people like me that, for example, would love to improve the video skills and do not know if there would be like a platform or something place where we could all hang out, and I don't know, maybe I could find 2, 3, 4, 5 other people, create just a small group, and then we could post videos every day and then give each other feedback. We could do this within this group discuss which sub skills we could improve. Each of us could brainstorm ideas, like which skills would be the most important, body language, eye contact with a camera, using the tonality of the voice. I mean just the top of my head.

                                        But anyway, would be great if you could either point to the place where I could hangout with the people who wants to apply the same thing. Or maybe you could create some kind of the group or a sub group where we could all hang out and give each other feedback and basically grow together.

Shane Melaugh:             Okay so, Hanne, what are your thoughts on this? Because I do have thoughts on this, but I kind of suspect that may be your reply to this can be more constructive than mine.

Hanne Vervaeck:             My first reply on this is I think it's a very innate human feeling to want a group and to do like see other people go through the same thing, and using it as like a motivational tool and yeah, this hopes that people will give feedback and help other people out. Unfortunately, from my experience, what I've seen with anything from like masterminds, Facebook groups, any community based type of thing, it's actually really hard to have people engaged, so just giving that type of space as is most of the time not enough.

                                        So if we would open a Facebook group, like an Active Growth Facebook group, it would probably not be very helpful for people. Even if we do it like, oh, a video of feedback type of group, it's like, chances that people will actually interact with other people and take the time to watch other people's videos and give constructive feedback is rather small, so I do very much like the idea and I know that often for myself I'm also looking for that type of groups, but I've found that it's not in a very tight type of environment, where people actually often pay to get this type of community, so that this type of engagement also, to actually doing it, it often doesn't work out. That would be like my thoughts on this.

Shane Melaugh:             Yeah, unfortunately I agree. That's my experience as well to give you an example of this, Paul, who is a co-founder of [inaudible 00:09:45], he actually started such a group not too long ago, where he was like, "Okay, let's do one video a week and give each other feedback and stuff." And I think the group quickly grew to ... this was a small thing, right, but it grew to, let's say about 10 people doing it, but then a few weeks later it was like 4 people left, and another few weeks later was no one else left, right.

                                        And I have seen this dynamic happen a lot, so I agree that this would be super cool, but my expectation is that if I would start a group and say, "Hey here's the deliberate practice [inaudible 00:10:19] group. And let's say if I drummed up some advertising for it. Maybe we get like 1000 people joining, and then two weeks later does only like 10 people active, and two months later there's just no one there. Right.

                                        And so, I don't know how to hack this. I don't know how to make communities happen. If you been around long enough, you know that at one point we launched Impact Insider, which was the whole idea was we wanted to create a thing, we wanted to create a platform that is specifically about this kind of interaction, specifically about not just hanging out in a forum and talking but actually actively using the kind of the benefits you can get from interacting with entrepreneurs who are also trying to build their skills and so on. We really tried to put everything in place to motivate a real exchange there, that people wouldn't just sign up and be like well we want to receive content but that it would be a community, and it totally failed.

                                        And maybe we can dissect out some more detail. But yeah, my reply here is as well that I just don't know how to make that happen. I agree, it would be cool, but I can't do that.

Hanne Vervaeck:             Yeah, the thing that I've seen especially, I think Facebook groups now are all the rage, right. And the only Facebook groups that are actually valuable are Facebook groups that are very, very closely monitored. So it's like somebody is actually it's their full-time job to be in there to engage with people, to make sure that questions get answered, to tag the right people for the questions, to actually be the coach in that group, right. Because, yeah, most of the time a lot of people ask questions but not a lot of people answer them or take the time to answer them.

                                        And I feel like especially with video feedback, imagine having this group with, whatever, 100, 150 entrepreneurs, and all of them like post videos, and you have to spend five minutes and actually think, like looking at the video and then thinking about constructive feedback and something that the other one could do, that that's a lot of engagement. So what I would say to Hubert is I still think it's it's a cool idea, but maybe he can find one friend with whom to do it, so that they basically like team up, they couple up, and they keep each other accountable. Because for me that's the only thing that has actually worked. Where it's like you're two people, you really want to go for it. It doesn't cost you too much time investment to listen to four other people speaking before you can actually like asking a question and that type of stuff. And so, I would team up. I would get a video body, and either just gives you video feedback and then you do it on his or her video, or maybe it's even another skill that the other one wants to improve. And both are just like working on the skill and getting feedback for each other.

Shane Melaugh:             This is really interesting, because I think if you're partner up like that you can't hide in the anonymity of the group. I think this is like the difference between signing up for a fitness class with dozens of people or having a gym buddy where I'm like okay we go work out together every Monday, Wednesday, and Friday or whatever, because at the gym class it's much easier to be like well, if I don't show up the class is gonna happen anyway. No problem for anyone. But if you have your friend who's waiting for you in the lobby of the gym, that's something you can't as easily escape. So it's easier to keep yourself accountable in a smaller group like that.

                                        All right. And then, one more question that was sent on Twitter by Eminence, @GetEminence asks: Hi, big fan of podcasts. Do you think you guys will ever do an episode about idea validation? I'd love to hear the process you followed when sorting through themes, how you decided it was viable to pursue Thrive architect.

                                        And so, we have already done episodes on idea validation. You can check out episodes 1 and 2. So the first two episodes in the first series of the Active Growth Podcast. Go check those out. Those include our approach to idea validation. Now, the way this is framed in those episodes is that it is for starting from scratch, how to basically find your business idea and validate your business idea and get your first customers all at once. And that's just kind of how we frame that and that's what we teach there. But fundamentally, this basically stays the same at scale.

                                        So we talk, for example, about the importance of talking to people one on one, interviewing people to validate your idea, and it is something that we have continued to do. So every once in a while we will send out surveys and one of the questions will be, "Can we get in touch with you?" And we will get on Skype calls with people to ask them about how they use, for Thrive themes for example, to ask about how they use our product or what they need and what they want and so on.

                                        So even though yes, in some ways maybe there some other processes that are used at scale or on a later stage of a business. But the fundamentals of what you learn in Episodes 1 and 2 of the Active Growth Podcast are how we still do idea validation, and how we still do a lot of this kind of thing.

                                        And at this point, I also want to mention that if you've joined listening the Active Growth Podcast recently, I recommend that you go back and listen to the first two series. This content is pretty much evergreen, we're not a news podcast, that doesn't go out of date. And so, if you're looking for like a strategy, a clear approach to how do I get started, how do I get the business off the ground, definitely listen to those early episodes.

                                        You can get in touch with us and send us your messages and questions by either going to the show notes of any given episode and at the bottom of the show notes is always a little button that you can tap or click to simply record your voice and send us voice messages like the ones you heard, or you can tweet us question @ActiGrow on Twitter. That's A-C-T-I-G-R-O-W, @ActiGrow. So send us your questions and your comments and we might feature them on a future episode.

                                        With that, let's get into the main topic of today's episode, which is about advertising space and how, as I see it, it has become normal. It has become like an almost standard business model to basically create an audience and then sell advertising space. It's like this is the influencer model, right. I'm an influencer. I've got an audience, and now I get sponsorships. And I've seen this evolve over time to a degree where now I feel compelled to comment, and that's why we're doing this episode. This is one of those episodes, by the way, like we did on the Patreon era. This is kind of a ActiGrow philosophy hour or something. We're kind of looking at a trend and commenting on what's going on more than giving you specific strategies here's what to do next. Right. But I do think it's important to have this perspective.

                                        So regarding advertising space, let's take a step back and can look at how advertising evolves. Let me just give you a very brief kind of breakdown of the history of advertising, because at one point early on, as online commerce started taking off, there was a real advertising boom. And Google AdWords and Google AdSense had a lot to do with that, because one of the things that worked really well for a while was to create a website, create some content, and put ads on your website.

                                        [00:18:08] This became especially powerful with the introduction of AdSense, where you could just add these snippets of code your website and your website would automatically serve ads and optimize ads and so on to be as relevant as possible for your audience, and you didn't have to do any of the management. So you didn't have to go and talk to potential advertisers and get their banner codes and put them on your side and figure out how many clicks you're getting and so on. You just put this one piece of code on the website, and it would automatically basically all advertising and optimizing and so on for you, and you just get a revenue share.

                                        AdSense acted a bit like a marketplace between advertisers and people with advertising space. So it's basically just a middleman. You have people advertising, and you have all kinds of people advertising on your website. You can assume that it is usually going to be relevant advertising. And yet, it's kind of just this intermediary where the interaction between you and potential advertising space is just automated and made very simple.

                                        Now one of the things that we have to keep in mind here is that this is already a phase of extreme dominance by Google, because first of all, in the search results themselves, of course, you have AdWords, but there is not the marketplace aspect there. So with AdWords, and what I mean is that with AdWords Google is the only one benefiting, the only one getting paid, right. But then you also have blogs and news websites and magazines websites and authority sites and so on that are monetized with AdSense. And there, there are two beneficiaries in terms of who gets money. Google gets some money, and the person providing the advertising space gets some money.

                                        But most of these websites are relying on organic traffic from Google search results to get their traffic. So it's basically people search for something on Google, they see a bunch of ads by Google, and they don't click on the ads, they click on a result instead. And there, they see a bunch of ads by Google. So this was already a crazy situation in terms of how dominant Google has become. Right.

                                        A similar thing also happened in some other platforms. For example, revenue sharing was added to YouTube, so that as a YouTube creator, you could show ads on your videos and around your videos and get a share and revenue generated from them. Again, money going to Google, of course. We also had a blogging platform, some free blogging platforms that used a revenue sharing model, so the idea was start a blog for free, if it gains a bit of traction we'll start putting ads on it and you get a revenue share and so on.

                                        And in a way, this was very promising for creatives and content creators, because the ideal outcome here would be that as a content creator, you can just be a content creator. You can just do your creative work. You create good stuff that people like, you build an audience, and all the ad stuff is done for you. So like I mentioned before, you don't have to go and reach out to sponsors and say, "Here are my stats." And make deals with them and sign contracts and stuff. It's just no, you just put some ads on your site, you just put the ad code on your site. If you don't get any traffic, then you just don't get paid. But it's not a problem, right. You're not contractually bound to anything. And presumably, if you do good stuff people come, and you make some money.

                                        And there was also kind of a golden era of things like web comics, where that was the idea. Right? You make a web comic, and if you're a comic is funny or good or whatever, then a lot of people will come and read it every day, and you make some money with ads. And that's how you can be creative right. That's how you can be a cartoon artist without having to find employment as a cartoon artist, without having to find a publisher as a cartoon artist. It's like this kind of blossoming of the opportunity of being a creative and getting paid for it.

Hanne Vervaeck:             What's important here I feel is that it's one of those things where you don't have to sell. So it feels really safe, right. It feels like oh you can just create, focus on your craft, and then the money thing is taken care of by something else, somebody else. And you don't have to put yourself out there. So I feel like for a lot of people this is just, like your saying, it's super simple but it's also super safe to do. They don't actually have to worry about the whole money aspect then and coming off as salesy.

                                        From a psychological point of view I think this is one of the biggest advantages of advertising, is that it feels as if you're not doing anything "wrong", right. You're not being a salesy cars man or whatever. Just like oh yeah, people click on something that they find interesting and I get paid, that's fair. That doesn't seem like something that's against my ethics.

Shane Melaugh:             Yeah, totally. And also just in terms of what you focus on. Even though I'm the first person to tell you that you'd whatever your business is, you need to get a grip on marketing and need to understand basics of what makes people buy things and so on. Even though I'm the first person to tell you this, I totally understand the idea that, like I said, maybe, I don't know, you're a musician or you're a cartoon artist or whatever, and you're just like listen I just want to do my thing and I want to become a marketer. I totally understand that. And this is a very attractive idea for most people.

                                        Unfortunately, this did not last very long. I think some people did very well during this time but it didn't last very long, because there were some counter trends that started rising. First of all banner blindness, which has basically, since the first banner was ever displayed anywhere the banner blindness has been in effect, meaning that over time fewer and fewer people click on advertisement of any kind. And then of course, advertisers try to counteract that by making advertisement look less like advertising for example, or by just changing the way advertising is displayed and so on.

                                        AdSense again was one of those things, right, where this is kind of novel. All advertising before that, or almost all of it, had been images and people started recognizing Oh yeah. An image of this size is an ad, I'm not going to click on that. And so, introducing like these text links that look more like part of the website was an important step there to counteract that a bit, but then of course, people get used to that too. And then of course also ad blockers, because many websites became just unusable. You go to a website and it's just flashing banners and text links and overlays everywhere, just you can't even find the content anymore.

Hanne Vervaeck:             Like auto-play videos, and ...

Shane Melaugh:             Oh, God, yes.

Hanne Vervaeck:             Oh my God, you open a website and all of a sudden hear noise comes out and you don't even know where and you can't stop it. And then you have like a, "Watch out, you might have a virus on your computer." Overlay. And then of course your mom clicks on it and then you get a virus.

Shane Melaugh:             Ironically, yes, that's how you get the virus. And also how about the flash games, right, where in a little box it would load a game where you suddenly you're controlling the goalkeeper and you have to prevent the guy kicking the ball from scoring goals or something, they like try to force you to interact with the thing.

Hanne Vervaeck:             Fells like you lost a lot of time there, trying to save goals, Shane.

Shane Melaugh:             No, I actually I think successfully avoided the mini get. It's just crazy how, right, you trying to read an article about ... I don't know, whatever, so some tech review in my case often, and there's all this crap going on. So, yeah. So that led to the rise of ad blockers which is now has gone so far that there's some kind of informal regulation about what you can and can't do with ads and those to some degree built in ad blocking and browsers. And an important thing that we also saw was that news media, even large news media with huge audiences was in big trouble.

                                        So we saw that the transition of the old school media where people would buy newspapers to the Internet. It didn't work out, because originally the idea would have been oh this is great. All you do, you continue doing the same work, right, if you're the New York Times or whatever, some newspaper, you continue doing the same work. You do your journalistic work. Create your content, but instead of selling newspapers you just put it online and you make it accessible for free. And from that, you will just monetize the traffic with advertising. But as we started seeing very, very clearly this did not work out. This was simply not a viable model because there was not enough money, there's not enough revenue to be gotten out of this amount of audience.

                                        And so this was true even for basically what we saw is that there's a certain imbalance, where first of all, you needed a really large audience to make a decent amount of money but also the way this used to work for news media was that the balance was that if you had a million readers you could employ a certain number of people in offices and spend a certain amount of time creating content and so on and it would work out, whereas on the internet if you have a million people, you have to fire half your staff and make the other half work twice as fast in order to still break even.

                                        And one of the consequences of this is that it turns out that you can't just be a content creator after all, unless you're one of the very, very few lucky ones that are at the very top of the pile, right. If you just happened to have an insanely popular blog or if you're one of the top YouTubers or something like that, if you have an absolutely massive, top of the pile audience, then this worked out for you and I think for some creators in some businesses this still works out now. But for the vast majority, we're talking about far more than 99% of creators, turns out that this just wasn't viable. So even if you made amazing web comics every single day and people loved them and you have a huge audience this was not enough to make a living, so in the end you still have a job and do your creative work and you're still broke.

                                        All right. So what happens next is, first of all, technology changed, and also the way people monetize it the way creators might has changed over time. This brings us closer to where we are now. First of all, one of the things that changes retargeting came up. And retargeting is interesting. So in case you're not familiar, just a quick summary retargeting is that you chase people around with your ads, so when someone comes to your website you tag that person, and then you can show them your ads on Facebook and on YouTube and on other websites wherever they go. So if you've ever wondered why you keep seeing the same ads over and over again of the same company that you were you may visited their website two weeks ago, that's why.

                                        Now this is retargeting is very interesting from an advertiser perspective, can be very effective. But it changes the nature of advertising again, because instead of people going to various websites and depending on the keywords and depending on the topic and so on, being shown different ads, it's more like the advertising space is being capitalized by people. Basically it's like your existing audience, you're capitalizing advertising space for your already existing audience. So it removes more of this marketplace effect. It removes more of this kind of spreading around of different people in different contexts being different ads, and it's more just a venue for dominating, right. If I dominate my niche, I dominate all advertising channels and you see my ads everywhere no matter where you go.

                                        On the other hand, we have had the rise of things like Patreon and other similar kind of crowdfunding platforms. And we have done a whole episode about this, you can go to ActiveGrowth.com/Patreon. That is not our Patreon page, we don't have one. But it's an episode about Patreon on and kind of how that has changed the way money is being made online and where that might go in the future. But the idea is that people just pay you directly. So again, if we think about our cartoon artist instead of using ads, he basically says, "Hey listen, if you want to keep seeing my cartoons I need to get paid somehow. So if you love what I do you know give me a dollar a month or five dollars a month or whatever this is worth to you. And if enough people do that I can keep doing this." And so this has happened much more.

                                        But also, like I mentioned the top, but I've seen a lot is that sponsorships and the way it's called nowadays, influencer marketing, right, influence market. It's all about influence or marketing. So nowadays people are called influencers if they have an audience, and everything is sponsored. It's become a norm, and often these are even combined. So you might listen to a podcast where the podcast has a Patreon and they also run sponsored ads, and maybe if you go visit their website or some ads on the website it's like a combination of everything to try and get money in from all these channels to try and make it work out.

                                        Now an interesting thing about sponsorships, and this is something that if you're not aware of this yet I think it's very important to know about this as a marketer, is the term native advertising. And I think this is a very important dimension to be aware of. If you can think of it like a scale that goes from foreign advertising to native advertising. Foreign advertising is I'm reading a blog post about I don't know. It's a new phone, right. I'm reading a review of new phone and then the text is interrupted by a large image and it advertises something totally different. It advertised, I don't know, a car, as just obviously a banner ad and I have to scroll past it to get back to my content. That is foreign advertising. In fact the advertising is like a foreign invader on my attention. It's not about what I'm interested in it doesn't fit the context. It's just an interruption.

                                        On the other end of the spectrum we have native advertising, a much derided example of native advertising is you go to a news website and you click on an article and it looks and feels like an article. But there's a little line somewhere that says no. This is sponsored content. So actually, this is not a journalistic news article. This is an ad that I'm reading that has been made to look like a news article. And of course this has been much derided because it's very deceptive just like her. I thought I was reading news but actually I just spent ten minutes reading an ad. You feel a bit cheated when that happens.

                                        Now why this is important is well native advertising works much, much better. In fact, I would say that the more native an ad is the better it works, the more effective it is, the more attention it gets. The more revenue it can potentially generate. And sponsorships the way they are often done are an attempt to make advertising more native. And are also an attempt to get around ad blockers, so if you're watching a YouTube video and you've got an ad blocker running you will not see the pre roll and mid roll ads because the ad blocker takes care of that. But if that video creator has a sponsorship going, then they make the message, they make the ad part of the video, and the ad blocker cannot recognize and skip that. So that makes that's a workaround for the ad blocking problem.

                                        But also in most cases sponsorships are somehow tied into, creators try to tie them into what they're talking about. So it's not just okay, I'm interrupting my message here's an ad and then we continue our message. You try to make it more relevant to what you're doing and this is an important part of you know you have basically trying to counteract these problems of ad blocking banner blinders and so on in making advertising more native.

                                        But I'm seeing now when I look around is that sponsorships have become a norm and influencer marketing has become a norm. If you listen to podcasts it seems that everything is sponsored by Squarespace and Castrum mattresses right.

Hanne Vervaeck:             And the undies.

Shane Melaugh:             And the undies, how could we forget. So, we're still waiting. We're still waiting for that day.

Hanne Vervaeck:             We still haven't been contacted by the undies, [crosstalk 00:35:07]

Shane Melaugh:             It's strange, but I feel like a perfect person to advertise undies.

Hanne Vervaeck:             I'm not going to comment on that one.

Shane Melaugh:             Anyway so, but yeah, you've probably noticed that, right? There's some sponsors, some companies that are really like dominating various spaces. And it's become such a norm, it's just become such a norm to listen to a podcast and hear about Kasparov mattresses first or in between or whatever.

                                        And there's a whole generation of so-called influencers who are sometimes actually creating advertising instead of content, like it this used to be called selling out. It used to be that an artist, it'd be a reputation problem if an artist became famous and then sold out. Now, it's more like you made it. And it's kind of celebrated in the culture, and there are creators who essentially go, "Hey you know I'm making a video today that is sponsored by whatever. And this whole video is basically an ad, like they asked me to make an ad for them. How cool is that? I get paid to do this." It's like celebrated that you get to do an ad, right.

                                        And I think that there's a whole generation of people who for whom this is like the norm, and people who strive for this. It's like that's the goal. If I have enough Instagram followers I will get to the point, where every time I post something I have a protein shake in my hand while I take my selfie. And I get paid. Amazing, right. I think that there are a few problems with this.

Hanne Vervaeck:             Just a few.

Shane Melaugh:             Yeah, just a few, just a few. One problem is that somehow this is not sustainable and is not scalable. Everything cannot be advertising space. And I think a lot of entrepreneurs, a lot of creatives are pursuing this goal, of growing a large enough audience to basically turn themselves or turn their platform into advertising space, not realizing that there are alternatives. One problem is that there's a lack of value creation here. If everyone's just trying to build an audience in order to then advertise and get paid and have sponsors, there's a lack of real world value creation.

                                        So we can't all just advertise whatever the top 10 richest companies in the world are, because that's all that's going to be left eventually, right. And we can't all just be advertising space. There has to be and I'm talking about let's say the larger economic picture here. If too many people and too many companies are pursuing the goal of building a large enough audience to be able to sell advertising space this just doesn't work out like someone has to create actual value. Someone has to create value and pay people so that there is an economy of people who can click on ads and buy things. Otherwise this whole thing breaks down. 

                                        And also personally I'm troubled by the monopolization of the economy, I am troubled by this trend of basically by the fact that it's Casper mattresses everywhere. I would rather live in a world where there are several mattress producers who are competitive, but it seems like we live in a world where the only mattress manufacturer who can afford to run ads everywhere is the one at the top. That's something that I'm a bit troubled by.

                                        I've talked previously about the idea of of a value based business, and this kind of thing sponsorships, advertising space, is not a value based business. You are not giving something of value directly in return for people's money. You're doing it through intermediary steps, and you're basically your goal essentially becomes that people go away from what you do and spend money somewhere else so that you can get some kickback from that money. And I don't think that that's the basis for a very healthy economy.

                                        Another thing that I think is important here is that I think most people don't realize how many people get stuck in that audience building phase. We only see the people at the top, we only see the creators for whom this works out, the people who have huge audiences and get paid like crazy. And of course you know it's very attractive, the idea that oh, all you did was you know you bought this shirt by some manufacturer who sponsored you and you posted on Instagram and you got paid like tens of thousands of dollars. That's awesome. I want some of that right. We don't see the thousands upon thousands of creators who are stuck in the lower rungs of trying to build an audience not getting anywhere and who are never going to get paid.

                                        And then finally, there's a huge problem with creative control, and this has always been the case with advertising. There's always a conflict, if you have sponsorships in advertising, there's always this clamp down effect of the advertiser wants to have control of your message. Wants to make sure that you don't say anything that's too out there, don't say anything that's too edgy, wants to make sure that you're safe, middle of the road, appeal to everyone, don't do anything offensive, because the advertiser doesn't want to be associated with something horrible you did basically and that it there's always a conflict. There's always, always a conflict, no matter how much you say I'm unbiased or whatever. No. There's a conflict if you have especially if you have one huge sponsor who basically pays all of your bills. Right. You have the one sponsor. Are you ever gonna say something bad about them. I mean probably not right. There's a huge conflict of interest.

                                        And again, if that becomes the norm, if most of the voices we hear, that the people we follow, the media we follow and so on, if they all have these strings attached to them and those strings at the other end are attached to the same few gigantic corporations who can you know you can afford to dominate all the ad space, that creates a real problem. And that's one of the reasons why you know that's one of the things where I'm like I hope this trend reverses in some way, because the path this is headed does not look like a good direction to me.

Hanne Vervaeck:             Actually I think it will. And the reason I'm saying that is because exactly all the problems that you pointed out. So first of all, there are a lot of people who try this but will never actually get to a level where it's sustainable, where they will be able to pay the bills. So what do they do? They accept to just get free stuff. So for example, you have like this that's a mini influencers or whatever, and they are okay we're just getting the T-shirt for free. Not even being paid but just getting the T-shirt for free and advertising with that T-shirt. And they are happy because they feel as if they're becoming an influencer and if they are they start to make it. So then, as a brand what happens is like oh I can just send out a thousand dated to a thousand people and not even pay one dollar to anybody. And I get this return on investment right, because I have like a thousand people are actually posting Instagram pictures with my stuff whereas rather than having having to pay them. So if people start to accept free stuff as a way for their actually be paid for their creative work whether it's videos or whether it's photos or anything else you create it diminishes this whole viability and my opinion about the influence of marketing.

                                        So that's definitely something that I've seen, or even just brands like offering ridiculously low things, low money for a lot of effort from the creative side, because they know that if that one doesn't want to do it they can get just go onto the next one, and that if somebody makes $100 from their website today and you offer them $500, like that's a lot of money for them. And even though they actually have to work for, I don't know, three weeks on creating that new video or whatever, they will do it because they are in this idea of getting that money.

                                        So in my opinion, and I've seen this, like I've seen this before. For example, like my little brother, he's a BMXer, but the only thing that he gets is free stuff. He's sponsored. But the only thing that he gets is free stuff and it's like well at the end of the of of the road he starts to pay his rent. So he still needs a day job even though he is like sponsored by this BMX brands. And I think that's where influence of marketing will go down and actually become like less and less a viable option for content creators as making it their main gig, I'd say.

Shane Melaugh:             That's a very interesting point. So there might be an erosion there, right, where the market kind of eats itself, because of course as an advertiser I always try to get away with spending less. And the other thing that's really interesting and I wonder how this prediction is going to work out, I think overall it will probably be better or it wouldn't be better for creators. But yeah be better if it doesn't just run into this huge, basically advertising monopoly.

                                        That's a good point, and this is also like you mentioned, right, we have to realize that basically for every influencer we see who gets paid like crazy there's probably thousands of them who would be lucky to even get free stuff. Now what to do about all this? My suggestion, of course, as a solution is that as a creator you should sell your own stuff. You should create something of value. You should create solutions to problems and sell them directly to the customer in some form or another, and that can be in the form of software, that can be in the form of information products, that can be informed of coaching or services or whatever. But this direct exchange, this is a way to break free from these problems, is the direct exchange of, "Hey, I have something that you'd need, you've got some money. You pay me. I give you the thing you need." It's really, really simple but it's a way to break out from many of these problems.

                                        Now, you might be thinking, hold on. Isn't there something wrong about this? Because if I think about creating and selling my own stuff, in the end, if I look at something like content marketing, isn't that just doing the same thing but creating advertising space for my own stuff? I mean, I create malleable content to get people to my website. I try to get them to sign up to my mailing list, I send valuable stuff on my mailing list to get them to come back. And what do I do? Well I advertise my own products, right. Isn't that the same thing? Just advertising my own stuff.

Hanne Vervaeck:             Yes. That's why it's called marketing.

Shane Melaugh:             Yeah. Yeah. So, how is this different? Why am I presenting this as like a better solution? Isn't it just a question of advertising a different thing? Well, I think the X factor here is this native advertising idea, if we go back to this idea for an advertising the more foreign it is, the more wasteful it is. In fact, foreign advertising is hugely wasteful. This is one of the problems why you can have a new site that half of the country reads every day and not make enough money to keep it going, because foreign advertising, people come to your news site to read the news, and all this ad stuff they ignore as hard as they possibly can. And so you have to get like millions and millions of people to get some of them to click on an ad to get a little bit of money from that. It's immensely wasteful.

                                        Anyone who's ever tried this anyone who's ever done advertising on a website, sponsored deals, or affiliate marketing, and then selling their own products knows the vast difference in performance. I remember for me the first time I did this, I was doing email marketing at the time quite a lot and some content marketing, and I had started building an audience and I was recommending affiliate product. So as an affiliate I was having people he has a great product, you should buy this, making tutorials and so on so forth.

                                        And from that I had some expectation of how many people in my audience would buy something. The first time I made my own product and sold that I was absolutely shocked at how much more money that made, because essentially it's the same thing. I am contacting my audience saying hey here's a thing that you can buy that I believe will help you with the thing you're trying to accomplish. Except that this time the thing that you can buy is something I created. I thought the performance would be about the same, but it was easily ten times more. It was easily ten times more effective to sell my own stuff, even if it was the same kind of product. If it simply was here's someone else's product that I recommend you to buy, massive, massive difference.

                                        And this is where the 1,000 true fans comes in, the idea of 1,000 thousand true fans. See, a thousand people looking at ads on your website aren't worth much. In fact, they're worth pretty much nothing but 1,000 true fans who are your customers and your clients, or maybe about 10,000 true fans who are your patrons. That is a living. That is something you can make a living off.

Hanne Vervaeck:             If we take it very simple, if you listen to some of our episodes we're really like napkin [inaudible 00:49:14] whereas just like we don't go super deep into the numbers, but we just take a few numbers and very quickly calculate what this would mean. And if we have a look at those 1,000 people who come to your website and you have an advertisement there, and maybe you get let's say 3 cents for a click, and you get a 1% click-through rate. So a thousand people 1% Lestrade 3 cents for a click. That will give you 30 cents.

                                        Now if you replace that advertising space with an advertisement for your own product, and let's imagine this is like a $9 e-book or something, so something really low dollar. We're not saying to replace it with your flagship product. Let's start simple with this simple product. So a $9 e-book. And let's take the same numbers, so even though Shane just explained that it's a real difference, your own product with advertising, but let's just keep it simple, right. Napkin math. $9 for an e-book. You would get the 1% collector rate. You would get 10 customers to a sales page, and that would probably mean one or two sales, which is just even one sale, is like 3000% better than what you would get from advertising.

Shane Melaugh:             Yeah. It's amazing how that works out, right? Dude you don't even. It's not very generous napkin math, right. We're really looking at kind of a worst case scenario here for selling your own thing, but you can see how much of a difference that makes. By the way, there's also a post on Active Growth which is 15 or maybe some other number, let's say 15 reasons why you should sell your own stuff. Where I go into details, into more details about how selling your own stuff gives you this extra leverage. It can do so much more.

                                        Just to name one example, not only do you make more money from the sales you generate of your own product, but if someone clicks on an ad, and they go buy something somewhere else and then you get your 30 cents, that's the end of the story for you. There's not much you can do there and other than trying to shove more clicks into the top of that funnel. But if you get a couple of people buying your $9 e-book, not only have you already made more money but you can do more stuff there. For example, you can show an upsell. You could say, "Hey you bought my $9 e-book, buy my $50 video course." And that's something you can do. You have the power to add value to your own funnel. And then you can run some maybe tests or improve the performance and so on and so forth, and pretty soon you're just making absolutely bucket loads more money than you could ever make from just providing advertising space.

Hanne Vervaeck:             And by now if you listen to these numbers and what we're saying you might be wondering like why doesn't everybody do this? And it's one of those things it's I think we can call it the principal, Shane, where it's like do the hard stuff, because of course it's so much harder to create your own product rather than just to copy paste a little bit of code on your website and to have ads running. But that's a huge advantage, because this actually means that if you are willing to do the hard stuff, if you are willing to figure out what your audience wants, to give them what they need, then you will be able to be the one that makes that 3000% more than the other one who just decided to put that little bit of code on their website.

Shane Melaugh:             Absolutely, this is absolutely a principle that we preach a lot and that I absolutely believe in. And I also think that often the stuff that is hard is, it seems harder than it is. Especially compared to how hard the easy stuff actually is, because you end up trying to pursue the easy solution [inaudible 00:53:10] here's the new simple thing go whatever, let's say podcasts. Oh, podcasts are super trending. All you do is set up a microphone, record yourself thinking out loud for an hour a week. And before you know it, you'll you'll be rich or something like that. Right. That there's always these trends arising where someone tries to sell you on. Here's the easy way to do it.

                                        And the angle is often like Hanne just said, right. It's like oh you don't have don't worry about the hard stuff. You don't have to create your own product, you don't have to learn marketing, you don't have to deal with all this complicated stuff. Just do the simple thing. But the reality of that simple thing is usually that's very complicated once you get into it. With the podcasting example, like oh crap. How do I built my audience? How do I get paid? How do I find sponsors? How do I make this work? Right. And then suddenly you realize, oh, my audio sounds terrible. And now you have to get into audio equipment. All of a sudden this thing is super complicated and you've done the same amount of work as you would have done just building your own thing, except you're not getting paid.

                                        All right, so those are some more thoughts on what is happening with the online space in terms of how money is being made, and how I think you can differentiate yourself. And one of the reasons I like to talk about things like this is that, for me personally, it's important to have this kind of perspective, because what I see a lot is that entrepreneurs are basically just swept up in whatever is happening right now. You know, five, six years ago, people were just unquestioningly doing, "Oh we're doing [inaudible 00:54:46]" don't even ask, right. Not seeing the bigger picture at all. And then everybody gets whacked by Google and a lot of people just totally lose everything.

                                        But then the next trend comes along, right. Facebook pages, everybody is betting Facebook page building huge fan groups and so on trying to monetize that with the links and before you know it, reach goes close to zero. And again, like, you've got people kind of in the wreckage of what they built, not knowing what the hell's going on and so on. This cycle repeats again and again and again. And for me personally, I think it's very important to have this kind of perspective to not only see what's right in front of you and not only see the current trend that's happening, but to see it in context, be like, "Hold on, what's going on here?"

                                        And this is an example of that, right. Instead of just seeing everything that's going on, just say, "Hold on, there's an underlying principle here. Underlying principle of people, audiences, advertising space. What's going on here? And an underlying principle of foreign advertising versus native advertising, and understanding what's going on here. This is the kind of thing that can help you make better strategic long term decisions.

                                        In fact, I would go so far to say as that if you are simply swept up in what's happening at the moment and don't have this perspective, you're almost guaranteed to crash and burn and not be able to predict that in advance. So this is why I like talking about this kind of stuff. Also the Patreon era podcast is an example of that, it's pretty popular episode as well, so you should go listen to that if you haven't yet. That is at ActiveGrowth.com/Patreon.

                                        And for me personally, this way of thinking about the world, and as an entrepreneur especially I think this is one of my key habits, and it's no coincidence that if you've been following me for a long time you know that at one point I was fairly regularly commenting on and criticizing online marketing trends and internet marketing products. I would always be the guy you know would be some spectacular launch of a new simple way to make money forever and I'd be the guy making videos about here's what's wrong with this. Right. Here's the problem. Here's how this fits into the greater context for me I think that was like my practice that that was very practiced seeing the bigger picture.

                                        And it's one of those skills, I think it's one of those hidden skills. It's not obvious that this is something I do, and it's not obvious ... there's no direct connection between this thinking habit I have and the bottom line of my business. But there is a connection, like that if I didn't do this the bottom line of my business would look different.

                                        In that way it is similar to the stuff we've talked about regarding communication skills. Communication skills also, it's not a line item in the accounting right. We're not sure how exactly this influence the bottom line. All I can tell you is that for sure if I hadn't developed my communication skills the way I have, my business would look very different, and probably worse than it does now.

Hanne Vervaeck:             Now, right there you just opened up a whole new can of worms, Shane. I feel like this is just a completely different episode, and how you can actually develop this habit of thinking more broadly and not just seeing the one thing, not focusing on this one specific thing but seeing the broader picture. So maybe that's that's something that we should elaborate on, and maybe we can ask people whether they think. Is this is something that they would like to hear more about, that they would like to learn about? Then for sure, let us know and the show notes, maybe we'll do that.

Shane Melaugh:             Yeah, that's good. Also, oops I didn't mean to do that. But yeah that would be great, so leave a comment or a voice message telling us if you want to hear more about this kind of thing. And also in general, let us know if you appreciate the kind of Active Growth philosophy our type of content. Because for sure we could do more of it.

                                        It's just that I like to create content that is highly practical and implementable, but I also like talking about more conceptual stuff. So let us know what you prefer. And like I said, at the top you can send us questions and comments to @ActiGrow on Twitter, or you can go to the show notes and leave a voice message right there.

                                        And that is it for today's episode. Go to ActiveGrowth.com/35 to get the links and resources for this episode, which includes a link to the post about the reasons why you should create your own products, and why to create value-based business that I recommend you read if you haven't yet.

                                        Also at ActiveGrowth.com/35 you can leave us comment, or you can send in a message. You can just tap on a button and leave a voice message and we might answer it on the show, as you heard at the beginning of today's episode.

                                        We really love hearing back from you, we love interacting with you like this, so head on over to show notes and leave us a message or a comment. Let me also add that lately we've been doing a lot of these episodes where basically every episode is an island. We pick a topic, we sometimes respond to comments and so on. But we haven't done a series in a while.

                                        So if you look at the early series of the podcast, we used to cover topics in more detail over a course of several episodes. Now this is something we haven't given up on. In fact, we have been working on a new series that's coming pretty soon, which is going to be on the topic of how to generate traffic if you don't have money to spend on that traffic. So that is in the works and coming soon, stay tuned for that new series.

                                        All right, that's it. I'm signing off. Thank you for listening, and I'll catch you in the next one.