The Transcript

How to Build a Profitable Email List with Social Media Advertising

Brian Clark: Hey there, Rainmakers. Welcome to the show. I am Brian Clark, founder and CEO of Copyblogger Media. Today’s episode is another one in the series that I’m calling free consulting. I have a specific thing I want to learn more about, and I think about who’s the smartest person I know for this topic. That person today is Noah Kagan because we want to talk about using Facebook ads to build our email list.

You guys know, I launched a new curated email newsletter on personal development called Further. It’s doing fine organically, but what if I’ve got more money than time at this point? How can I use advertising to grow that list smartly? Well, that’s what we’re going to ask Noah.

If you’re not familiar with Noah, he was actually employee number 30 at Facebook but that’s not what I want to talk to him, because what he did after he left Facebook was build AppSumo, which is a huge gigantic email-powered business, kind of like Groupon for web developers and online marketers. People like us. Now he has branched out and expanded that into a business that is way beyond the Groupon model. We’re going to talk to him about that a little bit. In fact, why don’t we get Noah to tell us. Noah, how are you?

Noah Kagan: Good, Brian. Thanks for having me, man.

Brian Clark: Thanks for coming, man. Hope you appreciate being our victim in our free consulting. I want to know something, and I want to share it with them. It makes for a good show.

Noah Kagan: Wow. I’m not getting paid for this. I ll help you out.

Noah s Story

Brian Clark: I forgot to mention that part to you. Why don’t you tell people a little bit about the story. Obviously, you were early on in Facebook. You were early on at Mint, and now you’re your own guy as a founder of AppSumo. Give us the sketch of how you got here.

Noah Kagan: Yeah, man. I’ll start with the AppSumo part. Everything else is kind of online. I think what’s interesting is that I started seeing all these web apps come out, and I was like, “Man, one of the hardest things for every single business online is marketing.” In my previous business, I kept getting shit on, and I was a credit card payments guy for Facebook games. We did all the payments, and everyone hated us because they’re like, “You re a payments guy, we don t care about you. Get us more customers.”

Noah Kagan: So I wanted to do something that was more on the top of the funnel, which was getting people customers. We realized with AppSumo, if we created some type of distribution that everyone would actually like us and be like, “Hey, promote our products,” and the customers would be like, “Oh, cool. Thanks for discovering cool things for us.”

So we ve spent the past four years building that up. Ninety percent of our business comes through email. That’s not something I ever really did before or thought of, but I basically became a super huge email advocate, which is, in my opinion, the number one way to communicate with your customers.

Brian Clark: Absolutely.

Noah Kagan: Since then we’ve built tools. We basically took all the tools we’ve been building at AppSumo and put that into a tool kit called Sumo.com. Those are tools that we’ve been using internally to grow our own email list and get more traffic.

Brian Clark: Excellent. We will link that up in the show notes, so everyone can check that out. I actually have someone who produces a site for me who is recommending Sumo tools, and I was like, “Yeah. I know that’s Noah, right?”

Noah Kagan: Awesome.

Brian Clark: It’s cool though.

Why You Should Focus on Fundamentals Instead of Facebook

Brian Clark: Okay. I kind of set the stage. I have this new email newsletter. It’s curated. It’s really just fun for me. It’s like my personal blog. By the way, why did you name your personal blog OkDork?

Noah Kagan: I bought it in 2000, which now is 15 years ago. I thought I would buy domains and get rich, and that was one of the names I came up with. I have that one. I have everspeed.com, and the only one I’ve ever been offered is for Community Next, which is a Jewish group in Michigan. They offered me a $1,000 for that. I never got rich off domains, but that was one of ones I bought.

Brian Clark: I had the same idea. Usually, I would buy domains as a placeholder for an idea, and if I decided to do it, you do it. If not, you let it lapse. But no one’s ever paid me a substantial amount of money for any of them. I had actually do the work of building sites out of them. What a pain in the arse.

Noah Kagan: I think that’s a key thing that maybe it should be the theme of Facebook ads, and in general, is that you read articles where this guy or girl buys domains, and they made a shit load of money. Then you do the exact same thing that you’ve read, and it doesn’t work out. I think that’s kind of the same that I’ve noticed with Facebook ads.

You read this article, 2,000% return when I bought my Facebook ads. You copy them, and then it doesn’t work. So the thing to understand is why is it not working for you and then how can you improve that? Or are there other ways that you should be considering, just versus doing what everybody else is telling you to do.

Brian Clark: Yeah. That’s why this show is going to be about the fundamentals. Facebook changes all the time. Tactics change all the time. Even you’ll tell us that your own approach that works will stop working at some point. You have to continue to reiterate on it.

Is Facebook Now a Pay-to-Play Platform for Marketers?

Brian Clark: Here’s really where I want to start out because I have a love-hate relationship with Facebook, mostly hate. We killed the Copyblogger page because we get traffic from Facebook, but it’s by other people sharing. Our page, unless we paid, really did nothing. On the other hand, I have a local Boulder site, and it does wonderfully on Facebook, organically. I can’t really figure that out, but for the most part, it seems that the sentiment is Facebook is now a pay-to-play platform for marketers. True?

Noah Kagan: Yeah. A concept that I have always been surprised at is that I pay to tell everyone to go to Facebook, and then I have to pay to tell everyone to come back to me. With email, what I’ve realized is it’s the most control you can have in communicating with your customers. You’re married right, Brian?

Brian Clark: Yes.

Noah Kagan: You don’t have someone else talk to your wife, do you?

Brian Clark: I haven’t worked that out, but no.

Noah Kagan: You talk to her yourself. And that’s what Facebook is doing. They’re talking to your customers, so you don’t even know who really gets to see it. It’s, 4,000 people today saw your boosted post. I think what Facebook is good for is actually what you pointed out about your Boulder site, which is for organic or social reach — it s able to spread something, but in terms of a marketing channel that you want to be wary of giving someone else control of your business and of your outcomes.

Brian Clark: Yeah. We call it digital sharecropping, and home-base is always your site with your list, but it seems that you have been incredibly effective at taking Facebook traffic and converting it into that higher value email relationship. That’s why you’re on the hot seat today.

Now you wrote a great article, we’re going to link this up to about a year ago about how you spent $2,000,000 on Facebook ads and built massive lists and what you learned from it, which was very useful. A year later, where are you at today with Facebook as far as your own advertising and what you think about where the platform’s headed?

How to Convert Social Traffic into Email Subscriptions

Noah Kagan: Specifically for Facebook, we’re spending only $3,000 a month on Facebook. That’s $36,000 a year, which is much less. I think at our peak when we were doing somewhere between $200,000 to $300,000 a month. It’s dramatically gone down for us. I think what people have to do with their marketing is consider the effectiveness. If I have $300,000, what is actually the most effective way for us, at that time, which is growing our email list. Right now it’s trying to get people to install Sumo.com. I basically take $300,000, and I say, “Which will help me get the most amount of people to install it?”

Facebook actually hasn’t been that. It’s very expensive for us. A lot of the traffic is mobile, which converts pretty horribly. A lot of it’s international. It converts horribly. You have to be careful of that. You have to look at, Are there other channels I could spend that on? What more people need to do is sponsor smaller sites. Instead of going to Facebook, go to JonLoomer.com, who s a great guy for Facebook ads. For us, WordPress sites are great. Go sponsor smaller WordPress sites, instead of just Facebook as the only way of thinking about how to do your marketing.

Brian Clark: Here’s my dilemma and my scenario. I’m starting off with a new list, small project, so I don’t think the over-saturation issue would affect me. Here’s my problem, because you, like I, are an ROI marketer as everyone should be, but think back to when I started Copyblogger. For the first 18, 19 months, I didn’t sell anything. All I did was build audience. In that period of time, I figured out what the audience wanted to buy. We built it, sold it, and the rest is history. We have done that every year since.

I have that same mentality with this new project, and yet, like I mentioned, at this point I’ve got more money than time. Advertising to build that list — because I know how valuable that audience will be to me to figure out what to sell them — yet that means I’m coming out of pocket with no chance for immediate ROI. Would you ever do that yourself?

Noah Kagan: No.

Brian Clark: I knew you’re going to say that. That’s generally how I feel, too.

A Longer (More Profitable) View of Social Media Advertising

Noah Kagan: I’ll tell you why. Sometimes, just knowing that people do a certain tactic is just as important as knowing why they’re doing that tactic. When you’re starting a lot of new businesses out, it’s easy to just spend on ads because you don’t have to kiss anybody’s arse, and that’s why I loved it for AppSumo. We did no content marketing whatsoever, and content marketing is all the rage, which is also the same thing as blogging. The point is we didn’t do any of it because I didn’t want to have to go write a post and hope someone would link to it and hope I’d get in a directory or any of that stuff. I was like, “If I buy ads, I can just put in 10, and I get out 20.” It scaled really well.

The difference, though, is that if you go and spend money on ads and it’s not working, 1) you might actually think it s your product that’s off. You’re like, “Well, no one really wants this,” which may not be the case. So you’re like, “Oh. Well no one’s clicking and buying and doing whatever I want them to do. Well this product s wrong, which is not true.

Secondly, you’re spending a lot of money that you don’t really know if there’s going to be an ROI on. You’re going to get a 1000 emails subscribers. Great job. Are any of them going to buy, Who knows! What we’ve encouraged people to do and what I personally encourage people to do — is go validate with offline or one-to-one or other methods, so you’re confident you ll make that money back before you start spending money on advertising.

Brian Clark: When you started AppSumo, were those effectively affiliate offers?

What You Should Do If an Ad Spend Is Profitable

Noah Kagan: When we started AppSumo.com, just like Groupon, we basically lined up exclusive deals. So I would come to you and say, “Brian, you sell your course for a $100 or your web product for a $100. We’ll sell it for $50, and then we split $25-$25.” So I would buy ads. I’ll give you basically the general metric that I was targeting. If you had a $100 product, I sold it for $50, and I get 50% margin. That means I had $25 profit, gross profit. Are you still with me?

Brian Clark: Yeah. Of course.

Noah Kagan: I basically, on Facebook ads, would spend what it would take to get $25. If I could get within $25 of profit within 30 days from those people, then I would say this is a good ad spend, and I would spend as much as I can until it taps out. I just want to repeat that because I think that s a little unclear. It s like, “What the hell is he talking about?” Two things. One, when someone comes to your website to make a purchase, only about 2 percent around there are going to purchase. So you need to collect email addresses. Sumo.com does that, or there are other tools you can use to do that.

So collect email addresses, which will get you another 10 percent. What we did is that, even if people didn t buy right away, I basically looked at, from that spend on that day, how much money came back to me in 30 days, and if it was at least the amount of money that I needed. If I spent $100, and I got my $100 back from selling four of those products, I was like, “Awesome.”

What I think most people do is they are kind of like, “Oh, okay. I think it s working. Fine, but what you need to do — and what’s the ideal gold mine — is that let’s say that it’s $25 for a product. I spend $25 that day, and I make back $25 right away. I basically go and spend unlimited. I think what happens to too many people, Brian, is that they spend it, they make a little bit of profit, and then they keep it that way. If I find that there’s any profit, I basically try to maximize it and turn up as high as I can. That’s why we got to $300,000 right away.

How to Make Sure Your Ad Campaigns Will Work

Brian Clark: That’s a truism from old school