How to Build Your Own Profitable Company (An Interview With Dave Collins About Online Advertising and Marketing)

A sleazy salesman. Image courtesy of Csaba Diglics on Flickr.
What do you picture when you hear the phrase “online advertising?”

What’s your first thought when you hear the phrase “online advertising”? If you’re like a lot of people, your gag reflex kicks in as you painfully recall memories of slimy ads pitching miracle weight loss drugs.

But there’s more to online search engine advertising and marketing (SEM for short) than digital snake-oil salesmen shoving flashing banner ads down your throat. It’s a way for New York Times best-selling authors to test their book titles. An opportunity for feel-good doggy daycare companies to get 90% of their business. And a chance for someone like Dave Collins, founder of SoftwarePromotions, to create a company that helps businesses like the feel-good doggy daycares of the world get that business.

In 1996, Dave was on a train in the UK when inspiration hit. Find out how Dave took a brief moment of train-enlightenment and molded his dream job into his own company.

In this post, you’ll hear from Dave Collins on how he started his business helping companies with their Google AdWords and online marketing needs. In addition, you’ll learn about how Google transformed the online advertising landscape into a multibillion dollar industry in the span of a few years.

Dave Collins, a UK native, is one person who realized the importance of online advertising in the early years. In 1996, after seeing the writing on the wall, Dave started learning about digital advertising and marketing:

Back in 1996 I was on a train in the UK, going from London to Manchester. Remember that these were the days before you saw many mobile phones, and you rarely (if ever) saw a laptop on a train. Journeys were a lot quieter, and most people seemed to talk to each other, read or sleep. The good old days!
I was reading a magazine that had an article on Shareware, and when I got home I went to look at some of the websites that were mentioned.
I remember being impressed by the quality of most of the software, but highly unimpressed by the quality and language of the websites. Most of them were selling great applications, but the language used was horribly technical and off-putting. I realised that the web was the future for selling software, but that many such companies needed help with their marketing and presentation.
So I setup a shareware site, started reviewing some of the better applications, sold advertising on the website and then developed the software marketing services that were to become SoftwarePromotions.

When Dave first started, advertising and marketing in the digital landscape was in its infancy. Today? Some of the largest companies you know have ad platforms. Bing has an ad platform. So do LinkedIn and Facebook. Don’t forget about Tumblr either; after they were acquired by Yahoo! one of the first things they aimed to do was improve their ad integration. But the most well-known company that relies primarily on online advertising to fund their business? Google.

Today, Google is valued around $100 billion (based on their assets) and its advertising platform is the lifeblood of their organization. Upwards of 95% of all of Google’s revenue comes from this platform.

It wasn’t always such a large income stream so let’s back up and take a quick look at the history of Google AdWords…

Google began selling text ads in January of 2000. A far cry from the current self-serving CPC platform, the keywords were sold by dedicated sales reps on a CPM basis. For two years Google ads were sold by Google employees directly to the advertiser and, as Sergey Brin said, it didn’t generate much money for Google. But in February of 2002 Google introduced an industry-changing idea to their platform; one that would increase Google’s dominance in the online advertising field: relevance.

When Google introduced relevance they focused primarily on click-through rate (essentially, the percentage of people who saw the ad and clicked) to determine which ad was the most relevant. Other metrics–like max CPC, actual relation to the keyword, landing page quality–didn’t matter. To put Google’s relevance metric into practical terms: if there was an ad with a click-through rate of 4.50% with a $2 max CPC bid and an ad with a 0.91% click-through rate with a max bid of $3, the higher-CTR, lower-CPC ad would have typically won because Google deemed it more relevant based on the percentage of people clicking.

Why was relevance so important? Although most online advertising now follows some form of a relevance model that wasn’t always the case. In the early 2000s, the location of an ad was determined by the highest dollar bid on a keyword. It didn’t matter if your ad was only minimally related to the keyword nor did it matter if your ad wasn’t clicked by many users; all that mattered was you bid more money than your competitors.

Nowadays, Google’s AdWords program is more mature. Google’s relevance model has expanded into a “quality score” metric that tracks max CPC, landing page relevance, ad relevance, and a few other things. Enhanced campaigns have been introduced, as has more in-depth reporting, segmentation, and targeting. AdWords has certainly evolved.

Timeline of Google AdWords

Now that we briefly detailed the history of AdWords let’s hear more from Dave about how he laid for the foundation for SoftwarePromotions.

Through the beginnings of his shareware site Dave was able to learn first-hand how difficult–but rewarding–online marketing could be. As he continued to dig deep into the SEM world, he ran into a roadblock.

At the beginning I had the classic startup problem: I knew that there was potential in the idea, I knew that I had the skills to make it work, and there was certainly demand for the service. When I contacted a number of companies they all liked the idea, but it always came back to a variation of “… but who are you?”.
This “who are you?” question isn’t unique to Dave. Think from a company’s perspective: they’re contacted by someone they don’t know asking to help with their business by doing something they might not understand. Isn’t that petrifying for the company? Throw in the chance that they’ve had bad experiences working with consultants and freelancers or had a friend that failed miserably with SEM and you can see a company’s hesitation to respond. Therefore, the best way to fight through this barrier is to eliminate risk.
[So] I contacted five companies and offered them to work for free. If they were happy with what I did, they would give me a good testimonial and consider paying for our services. If they weren’t impressed, they could walk away no worse off than they started.
All five were very happy with the work that I did, and two of them started paying me to continue.
Both happened to pay me on the same day, and I can remember thinking with absolute conviction: this is going to work.
Three months later we were getting several enquiries a week, I had a healthy list of leads, there weren’t enough hours in the day and I had five paying clients.
I was working around 15-16 hours a day seven days a week, and loving every minute of it.

Free work is a great way to get your foot in the door. When Dave was able to ease the company’s nerves by offering to help them pro bono, companies jumped at his offer and he continued building his business. (Want to hear more about the benefits of free work? Productivity guru–and DMK Thinks favorite–Ramit Sethi has you covered.)

A few good ways to get free work: reach out to companies on Kickstarter and offer help with something you see missing from their campaign, set up a RSS feed of Craigslist postings using a keyword and specifying “part-time” work, or ask people in your network if they know of anyone that needs help in your area of expertise. In addition to getting a testimonial from clients as Dave did, it’s useful to ask at the start of your business relationship, “hey, if I do a great job, can you give me the names of three people that you think would be interested in my services? Again, this is only if I do a fantastic job and blow away your expectations”. If done properly, this can get you quite a few leads.

But getting more clients isn’t the end game. You have to continue to do excellent work, manage client expectations, and deal with the unexpected. Once you’re successful, the blockades certainly don’t stop–they just evolve. Looking back with 17 years of experience, what other blockades did Dave run into? What would he have done differently with the power of hindsight?

I waited too long before taking on our first employee. He was the best hire I’ve ever made by far, and we’re still working together. But I wish I’d started with him a year or two earlier.

I also wish that I’d taken the time to learn some basic time management skills from the outset. I knew that I was lacking in these areas, and always meant to get around to it one day. Stupid mistake. It was the classic “woodcutter too busy to sharpen his saw” scenario.
It also took me too long to learn the value of not making a snap decision, and of thinking beyond the initial phases of each project we launched.
Actually I’m not sure I have learnt that particular skill, but it’s on my to-do list.
[If I were to do this all over again] I’d look after myself better and would build a small team right from the outset.
When building a business the learning never ends. In an industry as new as online marketing and advertising there’s a never-ending cycle of fresh ideas and technologies. In just the past few years, we’ve seen native advertising come onto the scene, an increase in the effectiveness of retargeting, and social media advertising take off. What does Dave think is next up in SEM?
Online marketing is in a never-ending cycle of great new ideas becoming mass-market techniques becoming over-used becoming ineffective.
When I started my company we made a surprising amount of money selling banner ads on one of our websites. Today most people don’t even notice, let alone click on them. The level of exposure is so high that they have become invisible.
Last year I spoke at MicroConf 2013 on Google AdWords, and urged everyone to ride the wave of Google Remarketing while it was lasted. It still works but it’s already a lot less effective, as everyone is using it and most are pushing the boundaries of what’s reasonable.
I don’t know know what the next online marketing big thing will be, but I know that the best time to get on board will be right at the start, and the shelf-life will be brief. Get on while you can.

As the famous quote goes, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” Dave, and the other successful marketers out there, will need to adapt to the new waves of online marketing as they form and before they come crashing down.

QoD: Has your opinion about online advertising and marketing changed after reading this?

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