In The Beginning – A Brief History | 1998-2002
It doesn’t seem like 15 years, but in 1998 I stumbled into the business of email marketing. It all started when I was running a computer hardware distribution business and we were faxing, yes faxing weekly specials to our 700+ customers. And no, we didn’t send them one at a time; we used an online service to fax them in bulk. I ran into a friend of mine who was selling DirecTV online, and making a killing. He was generating 500+ sales every day and making $150 per sale and $2 residual per month on each subscription. Yes, he was knocking it out of the park and yes, you did the math right. He was taking in $75,000 a day, plus the continually building monthly residual. My first thought was, “I need to get into his business”. After about 10 seconds of sitting there with a blank look on my face and emptiness in my eyes, my second thought was “how is he doing it”. If I could understand how to reach a larger audience, using the same techniques he’s using, I could quickly expand my sales and greatly increase my revenue and income for my own business, so I started picking his brain. So what was the secret sauce he was using to generate the huge sales volume and cash flow? The answer was one I wasn’t really expecting, Email Marketing. He was making so much money, he was happy to share the details of how the entire process worked, in great detail.
How Email Marketing was generating $2.5 million per month in commissions
Email marketing in 1998 was very different than it is today. It was like the Wild Wild West in 1850. Imagine being one of the first people to go out to California and mine for Gold. Before anyone knew what was happening, you were hording huge amounts of gold and making tons of cash. You knew what worked and what didn’t. You knew how to mine, where to mine and how the entire process worked. Getting a head start in a new technology and being an early adopter is always a huge benefit, if the idea works.
Email marketing in 1998 was very similar to this process. In what I refer to as the Early Years of Internet Marketing, there weren’t too many people who understood it, did it for a living or realized how much money they could generate from it. So I took what I learned, setup a dedicated email marketing server and loaded some software. I then started sending my weekly specials via email, to my customers who had email addresses, versus faxing them. The first day, we generated $23,000 in new orders. I remember that day vividly, because we did not have online ordering at that time and the phones were ringing off the hook. Just for comparison purposes, when we sent out our weekly fax, we generated an average of $4,000 – $6,000 in sales the first day. I was blown away with how well email marketing worked. As the wheels turned and twisted in my head, I thought to myself, “OK, I just found my golden goose, how do I attach some udders to it and let it generate some milk for me?” Besides going to a Bi-Weekly Email Special, I thought if I could find an email list of other computer stores, computer users and IT people within businesses, I could really increase my sales. Needless to say, I did get my hands on such a list and within the first three months, I had generated more revenue than I had generated the entire year before. Email marketing for me was like having my own personal printing press and all it printed was cash.
Printing Cash – What’s Next?
While the printing press was going strong and generating tons of new business for my computer distribution company, I had another conversation with my friend who turned me onto email marketing in the first place. He was explaining affiliate marketing to me. What he was telling me was unfathomable to me at the time. He was making an extra $4,000 to $6,000 per day sending out other company’s offers. Since he had the email marketing infrastructure in place, to market for his own satellite sales, he sent other company’s offers after he sent his own. I remember my first thought, “Why would someone pay for having someone fill out a lead form on their website?” (Remember, this was 1998) This wasn’t a sale or even a guaranteed money maker for them. So why would they pay someone $5 for every person you sent to their website who signed up for more information?
I figured why not give it a try and since he gave me such good advice originally, I followed his lead and signed up with an affiliate network and looked through the offers on their website. I remember they had about 25 to choose from. I picked an offer for Auto Insurance that paid $18 for every lead generated, loaded up the email creative, selected a list to deploy it to and pressed send. Well, needless to say, when I checked my stats a few hours later, I had generated 219 leads for a total commission of $3942. It’s actually funny how I can remember all of the details including the number of leads and revenue generated that day. It was like I gave birth to my first child, and there were more to come. It feels like it was yesterday. Words cannot describe how ecstatic I was and how I knew this was going to change everything, from that point forward.
After about 3 months of managing the email marketing for the company and affiliate marketing, the revenue from the affiliate marketing dwarfed the amount of work and revenue I was generating from the computer business, plus it took a lot less time. There was virtually no extra cost involved and I didn’t need inventory or employees. What happened next would change things forever. I sold the computer business and developed our own email marketing platform.
In 1999 eList Manager, our email marketing platform, was developed. It did so much more than any other email marketing platform on the market at that time. We were generating in excess of $150,000 per month in affiliate commissions. I went from 50 employees to 3, had a lot less headaches and made a lot more money doing it. I had minimal expenses, virtually no overhead to speak of and for every $1 made; my cost was about 5 cents. I felt like I had found the pot of gold at the end of the rainbow. By the crash of the Internet Bubble in early 2000, we had 5 employees, 200 servers and were at the top of our game. The bubble bursting really didn’t affect our business and we were generating sales and leads for many different types of companies, including some Fortune 500, on a constant daily basis.
In 2002 the first CPC (Cost per Click) affiliate network hit the market. This was about the same time Google introduced CPC advertising in Adwords. Before this time, Google Adwords charged on a CPM (Cost per Thousand) impression basis. Again, I thought to myself, these guys are going to pay me $0.50 to $3.00 per click, to the email creative we send out. Why would they ever pay me for just a click? (Remember, this is 2002) The CPC Rate was varied based on the type of offer being promoted. At the time, it was based on an average click to conversion ratio. So as an example, if an insurance company was paying $40 for a lead and they knew that for every 10 people that came to their website they generated 1 lead, the math worked. The first day after signing up with the new CPC network, we generated $26,000 in the first few hours of mailing. Needless to say, the next day I received a call from the CEO of the network who wanted to fly down and meet with me about our traffic and figure out ways to drive more of it. I felt like Jed Clampett shootin’ at some food, and up through the ground came a bubblin’ crude. So, “I loaded up the truck and moved to Beverly”.