Podcast 7: Conversation With Jason Yelowitz – Author Of Bathrobe Millionaire

Intro: Welcome to the MakeMoneyOntheInternet.com podcast where you learn tips and strategies from the pros on how to build your own online business. Now, here is your host Chris Guthrie!

Chris: Hello everyone, Chris Guthrie here I’m very excited to have Jason Yelowitz who recently released a book called The Bathrobe Millionaire. Jason’s made a ton of money in affiliate marketing and I’m excited to have him on the show to give us some great tips and strategies in the affiliate space. Thanks for coming on the show, Jason.

Jason: Yeah, no problem. Thanks for having me Chris, it’s good to be here.

Chris: Yeah, yeah. So I know you released a book and we’ll get to that later on but I’m kind of curious, how did you get your start making money online. This is always something I’m interested to hear from the various people that we have on to talk.

Jason: Sure. Well, I was actually pretty late to the internet. So, back in ’95 I was just out of college and I had a roommate who went and started an internet company and I had no idea what he was doing. And in ’97 I spent the whole year travelling the world. I came back in ’98 and my old roommate had raised $5 million. He had 100 employees and I felt you know, wow I must be missing the boat on something. So, the company he started was called Autoweb so he hired me. You know it was like my first real job and I didn’t know what I was doing. I’m not a technology guy. But after dithering around for a couple months I discovered affiliate programs. And I said okay well why don’t we start one for Autoweb, which was a lead generation company and I had such low expectations that we didn’t even build a backend reporting system for the affiliates. So like, there is no way for the affiliates to find out you know how much, how many leads they had sent us. And when we checked the database ourselves we’re like oh my god, these guys are sending, you know, on the very first day they sent you know, 50 or 100 leads or something. We thought wow this is great. So I got to know some of the affiliates and I realized these guys are sitting around in their pajamas doing nothing all day and I’m sending them checks for 30 grand a month and I’m getting paid 4 grand a month, something’s not right. So, you know, I realized the potential but I didn’t know how to get traffic. So what I was good at is sales I went and pitched a bunch of venture capitalists on an idea I had. The VCs put in $10 million. I went and started a company called iCastle.com. I pissed away $10 million in one year which is not easy, I mean, it’s a lot of money per day. Company went out of business when the dotcoms imploded and so then, I moved on to my next business a couple of years later and said, okay I’m going to do the opposite. I’m going to be a total cheapskates, going to work out of my house in my pajamas, no phone, no business cards, no management team, no nothing. And see if I can make money and I discovered Google Adwords and I started generating leads for realtors and I was the perfect time, 2003. There was you know, housing bubble brewing so there was lots of demand for people to find realtors and people had you know, internet marketers didn’t really exist yet. People hadn’t really discovered Google Adwords so I could buy clicks pretty cheap. So that was kind of the start. That was sort of the whole duration and then over time I developed a lot of philosophies about the right way and the wrong way to do things.

Chris: Okay. So I know you mentioned a few things I actually like to step back and talk about. So this Autoweb.com site I actually went to it earlier and saw that was still active. Is that still a company that your friend runs or is it kind of died down a bit.

Jason: Yeah – well, it died down a lot. He is no longer involved. At the peak it was a public company worth $1 billion. At the nadir, at the bottom of the dotcom implosion I think they merged with their archrival Autobytel and I think the value placed on the company was $15 million so it lost 98.5% of its value. Yeah, for any listeners who are too young to remember the dotcom implosion don’t get too wrapped up in the Zynga and Linkedin IPOs because I mean, these companies have the potential to crash big time. It happened in the late – your early 2000s and it could happen again.

Chris: Yeah, actually I used to be – my parents always push me to get into the stock market just to kind of try and instill investing values and business type things when I was younger. So, maybe they didn’t push me in the right direction but I remember buying Drugster.com stock in 1999 I think for $40 a share.

Jason: Ah, geez.

Chris: And it was with my severance money and I believe by the end of the summer it was down like $2 a share.

Jason: Yeah. Well, you actually probably learned a great lesson about individual stocks and trying to beat the market.

Chris: Yeah, and now I kind of focus more on just stuff that I can control at least. I know kind of what I can do with my own business and I invest the money I know kind of where it goes, whereas you know investing in others stocks you don’t know. But I – there is something, you know obviously people make good money with stocks as well, just hasn’t been for me recently.

Jason: Yeah, no I mean I’ve got most of my money in the stock market, probably 70%. But it’s boring, passive index funds with low cost, low turnover and low excitement. I don’t touch individual stocks and I don’t try to guess you know where the Facebook IPO’s going to go because that’s gambling, that’s not really investing.

Chris: Yeah. So you’re probably just using those type of index funds to help hedge against inflation or similar types of things?

Jason: Yeah. I mean over the long long-term you know, I’m not even 40 yet. So I figures I’ve got another 45 years that I need to pay for. So yeah, to hedge against inflation over the long term stock market tends to go up and you have to have the right stomach for it. You know, back when things were crashing in 2008-2009 I was actually buying more rather than selling. So, it’s important I think to know yourself and how you react to stressful times. If you’re the kind of person that buys high and sells low than you’d be better not to own any stocks.

Chris: Yeah, yeah. Definitely. I know you also mentioned iCastle and I think this just might be interesting to touch on is so you actually did the route that you hear about these companies today like you mentioned getting these huge valuations. So you were able to raise $10 million for iCastle.com. What was that company about?

Jason: Sure. It’s a great question. So it was a lead generation company for home improvement contractors. Basically home owner needs a new roof or some plumbing or a paint job so the idea is they’d come to iCastle.com fill out a lead form, we would send their name to a contractor and yeah, we had a – you know, the company was valued at almost $30 million bucks but the problem is you know, it was the late 90s, early 2000s. we didn’t have any traffic to the website, it was all hype and you know, I was pretty young at the time but my hair started going gray because it was so incredibly stressful to run an unprofitable business that was dependent on constantly pitching investors and it wasn’t enjoyable, not nearly as fun as affiliate marketing.

Chris: Yeah, now actually I can relate to the going gray thing. Both my brothers, I have an elder brother and younger brother but neither of them have any gray hair and I’ve already started getting quite a bit since I start being self employed. So.

Jason: Yeah, exactly. So for any listeners out there who think, you know who hear stories about yeah you can make millions on line. It’s true but it’s not usually quick or easy. And you know the stress that it can inflict on you, you have to be the right kind of personality, I think, to deal with it.

Chris: Definitely, that’s good advice. I know that just kind of my first time into it, it was a pretty big shock going from working in a sales job with a bunch of other employees all around, same age and then just going straight into this is my own thing, running websites, making money.

Jason: Exactly. Yeah, there is no salary. You know if you have an off month there’s no one paying you a paycheck anymore.

Chris: Yeah, yeah. So I know that that company, the iCastle didn’t work out very well and it was a lot of stress and then you fast-forward a few years and you’re kind of working from home, doing your own thing. Can you take me from that point and kind of explain what you did next?

Jason: Okay. So after iCastle I tried a couple more businesses. I tried a pick-up and delivery dry cleaning service which I had the misfortune of launching on September 11, 2011 which is…

Chris: Oh, wow.

Jason:…pretty bad in history. You know, as memory serves. So that business went nowhere. Then I launched a door to door sales company which just didn’t go that well. So I had three strikes in a row. And each time I invested less and less of my own net worth because I was becoming more risk averse. So with iCastle I threw half of my life savings into it because I was starry eyed dreamer at the time. I became more and more of a pragmatist so by the fourth company I was like man, you know, I’m so done with entrepreneurship. Everything I touched turns to crap. I want to do something good. So I became a lot smarter. I didn’t spend very much money upfront. I’m not a technical guy so I had developer build me a site and basically I promised him he’d get a cut of the profits once it got profitable. So there really was very little upfront expense. I discovered Google Adwords and I was very cautious in my testing. And boom that one took off. The very first day that we launched the site it made about 2,000 bucks profit and then over the next four years, I averaged about £4 million a year in revenue and the profitability was like in the high 60-something percentile. So you know that one was phenomenal and it was by doing the opposite of iCastle. Rather than starting by raising a bunch of money and having high expectations I started out with no money and very low expectations and my cue – you know, whether it was worth it to take an action is if it was profitable. Only if it was profitable did I keep going with something but if I did a test and I blew a couple hundred bucks I stopped. So it was very much of a change in mindset.

Chris: Yeah, that’s definitely a different perspective and I know that even in Seattle there’s a pretty vibrant start-up community and lots of times I see these companies getting this funding and I don’t even really know what their business model is or let along how they make money whereas when you’re saying when you’re working on your own thing and it’s just what is profitable, what will make me money. I’m going to focus on that only.

Jason: Yeah, and I put another hurdle too. I didn’t want to do anything unethical. I mean I see a lot of products out there that I would classify as money makers but they’re not ethical. The person buying the product doesn’t realize what they’re buying or they don’t realize if their credit card is going to get charged, you know, every month. I never wanted to do anything like that. I wanted to do something that the customer actually wanted. So that adds an additional hurdle compared with some of the money making schemes out there.

Chris: yeah. I know you’re probably referring to re-bills and maybe Acai Berry, those types of things.

Jason: Exactly. Stuff like that.

Chris: Yes.

Jason: Not interested. Some people love that stuff but to me I don’t think I’d be able to love myself in the mirror and also it’s not sustainable. That stuff always comes to an end very quickly.

Chris: Yup, that’s true. Even with just seeing the legislation that’s come about in the recent months with celebrities that used to have their faces on these landing pages when they weren’t really allowed to and huge companies getting taken down by the FTC, I guess, and yeah, that’s definitely good advice too. So it’s better to stick with something that’s more sustainable and then also too just from a personal standpoint it’s just nice to not have to deal with knowing that you’re really selling people crappy stuff.

Jason: Yeah. I mean it’s like if you want to win the race first you need to finish. So you have to do something that’s not going get the Feds breathing down your neck.

Chris: Yeah. So you started affiliate marketing and using pay per click. How did you scale it? Was it just a matter of finding key words that were profitable and then really just going from there or?

Jason: That was part of it. I mean, one thing I discovered is that with Google AdWords in particular after you’ve had your account for about a year Google automatically search to send your more traffic. I don’t know where they get it from but there seems to be like most favorite nation status that you get after you’ve been on Google for a while. So the traffic increased by itself. The housing market was increasing by itself. But then the biggest proactive thing I did was the initial conversion rate on my site was about 2% out of every hundred unique visitors two of them would fill out a lead form. I kept tweaking that and trying things and testing things, eventually I got it up to about 9%. So even if I did nothing else my income is going to go up four times right? Which is about right. The very first day I made 2,000 bucks but then I got to a point where it was averaging 10,000 a day in profit. So increasing the conversion was extremely helpful to scale and then the nice thing is with an affiliate business you don’t really need to scale your expenses. You know, my advertising costs of course went up but I didn’t need to add any staff or an office or anything like that. It was just managing the website itself.

Chris: Yeah. So then in the early years I guess going back to 2003, 2004 with conversion tracking do them even have Google website optimizer or what kind of software – what software do you use today to do your conversion optimizing?

Jason: Well, it’s a good question. Back in the old days we actually built a home grown system where I could track each keyword and figure out if it was profitable. And I would record everything in Excel spreadsheet, not keyword by keyword but I would record my daily stats to make sure I was profitable on each search engine where I was advertising. Today believe or not I’m not much more technical than I was in the past. I use Google Analytics on some of my sites just to keep track of where the traffic is coming from. I use Google’s own conversion tracking to make sure I’m profitable on a keyword by keyword basis and then I use Excel to keep track of the entire business overall just to make sure that every segment of the business is profitable every month. So I think the surprising thing I mean I’m using the equivalent of stone or chisel or paper and pencil compared with the stuff that’s out there today and I think the lesson is the software is great but it’s more important to have the right idea and to have a good business mind as opposed to having the latest and greatest software, in my opinion.

Chris: Definitely. I know since you started in the, I guess you could almost call them, the glory days of AdWords.

Jason: Yeah.

Chris: When there was a lot less restrictions and things were doing really well. I know you mentioned the business eventually turned down a little bit.

Jason: Yeah. Big time.

Chris: How was it like experiencing that?

Jason: It was not unexpected. Because I had gone through the dotcom crash and saw my $30 million iCastle company go down to zero everyday I’m for the unexpected. Which also is why it didn’t faze me when my stocks dropped 60% in 2008. I’m always ready for big, unexpected crashes. So when this one toned down very significantly it was the end of 2008 you know, I was shocked but not surprised. It took me about a day to get over it emotionally and it took me about five minutes to scale down my AdWords spending to let my contractor know that I wasn’t going to be able to keep things going. So again it’s all about a mindset. It’s really preparing – you know, sort of hoping for the best but expecting the worst, being ready for it and not being surprised by it.

Chris: I know some of – what I found even just with own experiences in making money kind of has to do with almost riding trends and this kind of I guess you could say would be somewhat of a longer trend. I mean how do you try and identify these trends and find new ways to make money with pay per click marketing. I know that you’re still doing some now, so?

Jason: Sure. It’s a good question. I mean I only enter into affiliate marketing deals where I feel I’ve got a competitive advantage. So what I look for is either a growing marketing which is the trends you’re talking about and or a relatively untapped market. So when the real estate stuff died down, by then it was 2009 and I thought okay is anything in the economy growing and the answer is no. I mean I think that was the year that you got laid off. Things were going to hell that year. And I thought the only thing growing is the unemployment rate. So I built a site for unemployed people, made money off of lead generation with for profit colleges like University of Phoenix. That kind of thing. And it met my criteria because the market of unemployed people was growing pretty rapidly and it was an untapped area. Nobody was marketing to unemployed folks and my thought was the unemployed are, you know now a days, it’s professionals. It’s smart people, some of whom have money and they’re just being ending up in this position due to a horrible economy. So either having a growing or untapped market is one thing I look for or if I’ve got another competitive advantage. So for instance, I’ve got certain advertisers who I’ve known for 8 or 10 years at this point and they’ll simply pay me more than they paid the other affiliates because they know me and they trust me. That’s a competitive advantage because all other things being equal if I’m completing against you and you’re got the standard affiliate program and I’m getting paid more I can now beat you on Google. So, without a competitive advantage I don’t touch any market or any niche.

Chris: Definitely. And I think that’s a good tip to suggest and an affiliate marketing for those that are listening and don’t know. If you develop a pretty good relationship with your affiliate managers then there’s ways for you to get better pay outs or any other types of different benefits if you’re able to prove that you can help drive more traffic or more revenue or just had a better relationship with that person. And I guess that’s another example. If you’re saying that yes that’s has worked out for you in the past. And then also worked as being a competitive advantage when you’re going against other affiliate marketers.

Jason: Absolutely. One thing that blows my mind is affiliates who don’t keep in touch with their affiliate manager. I mean that affiliate manager can have such power over your life, you really would do yourself a benefit to get to know them at least on the phone, preferably in person; send them a Christmas gift. Stuff like that and you’ll be on their shortlist when they’ve got a new offer or when they need some extra business and they’re willing to offer a temporary incentive or something like that.

Chris: Okay. I know that you’ve made money with pay per click marketing for several years now and I guess almost up to 10 now and I’m curious just, you know, how would someone get started in affiliate marketing today. I mean is it something that you’d say go for a lead generation. What might you just suggest to someone?

Jason: I’ve always been partial to lead gen because the profit margins are higher. If you sell a book on Amazon there’s only so much profit there that Amazon could potentially pay you and it’s pretty low. But lead gen it’s like 100% profit margin. So there’s more money to share. But I think the larger answer is rather than dive in with the intent of making a bunch of money I think it’s more important to identify a need that consumers have and build a website to that need. Once you’re getting traffic there’s a lot of ways to make money off it but it’s more important to build a site that gets traffic first. So you know I think the biggest thing I’m trying to do is dispel the myth that anyone can just sit there and start a site and make a million bucks. You know, it can happen, it has happened, it does happen but the sites that make a lot of money are the ones that are filling some sort of a real need that consumers have.

Chris: Definitely. I know some people that are listening might not be familiar with lead generation. I know it’s basically just selling information about some type of prospect of some type of a service or product but I’m curious which companies have you used and which ones would you recommend for people to check out today either ad networks or lead gen companies or any other resources you might be able to suggest.

Jason: Sure. I actually don’t use any ad networks like Commission Junction. For me I make direct contact. So I figure out what niche am I targeting and can I build a website that will attract users. Once I do that then I figure out okay how do I want to monetize it and for the sake of argument let’s say that I want to do for profit education leads, because that’s you know one of the things I mentioned. I’m going to type get a degree into Google, see who’s advertising and contact those companies directly. So I can’t really give a list of Company A or Company B, but what I’ll say is almost any company in your target niche is going to want to buy your leads as long as the quality of the leads is good enough and as long as your price expectations are reasonable. And, it’s just a matter of picking up the phone.

Chris: Definitely. That’s another example we’re just kind of asking for it. I had a net book website it was just a matter of just contacting the companies that actually made the netbooks and said, of can you send me these so that I can review them for my website.

Jason: And did they give you free netbooks?

Chris: They weren’t giving – they weren’t free but I was able to review them which gave that content and kind of help differentiate myself from competitors. That’s actually good – I didn’t know that you would – done that as well in lead gen. but I guess if it implies in one market, you know, then it’s going to kind of imply universally if you just kind of ask for something generally you can kind of get it to work out. At least with one company even if it’s not with your first few tries.

Jason: You know, when I raised the 10 million for iCastle, that was the result of a cold call. So I’m a big believer. Pick up the phone, don’t be afraid to talk to strangers. The worst they’re going to do is say no.

Chris: Definitely. I mean I know that’s cool too just knowing that being able to just contact companies for different types of lead gens. So have you compared like the payouts that they’re going to offer you to some of these other conglomerate companies that do lead gen and sell leads to other companies?

Jason: Yeah. You know, usually honestly, I’ve gone with the conglomerates because they’ll deal with the customer service aspect as well. If a lead is in good quality they’ll deal with it rather than me having to deal with it. So in addition to wanting to make money I don’t want to work very hard. So I don’t want to have to you know, deal with a direct company about returns. So, generally, I’ve gone to the conglomerates and the payouts are going to be a little bit lower but I am a lot less concerned about payout than with what constitutes a lead. So if Company A wants 30 pieces of information on a lead form, but the conglomerate will let me send them 10 pieces of information chances are my conversion rate is going to be good enough to make up for the lower payout.

Chris: Definitely.

Jason: So, you know, I think it’s a mistake to just say Company A pays 10 bucks a lead, Company B pays nine bucks. I’ll go with A. I think that’s the wrong way to look at it.

Chris: Definitely. That makes sense and it’s kind of one of those things you had to balance different advantages and disadvantages to both.

Jason: And then you test to measure both and see if you’re idea is right or wrong.

Chris: Okay. Cool. And I know you mentioned this at the start of this conversation but you recently released the book Bathrobe Millionaire. And I was just curious you know what made you think to release a book in the first place? Is it just something that you’ve always wanted to do or …?

Jason: You know, it’s – I’m turning 40 in December and it’s kind of a bucket list thing. I think to write to a book. So I wanted to do that before the milestone birthday. And I think more importantly, you know, to be honest I’m not making any money off the book. It’s the least profitable thing I’ve ever done and, the most time consuming. I reason I did it was it’s an interesting story. I mean if I hadn’t lived it I’d be curious how did you raise 10 million bucks for a business; how did you blow 10 million bucks; how did you go and start a business with nothing and make millions of dollars. I would find it pretty interesting and lots of people have asked me about my story. So for anyone listening I just want to give the disclaimer: it’s not a how-to book. You’re not going to get rich from reading the book. It’s an autobiography. It’ll tell you everything that I did in the Bathrobe Millionaire and I think it’s got a lot of helpful points. But if you’re looking for a how-to book, it’s probably not what you’re seeking.

Chris: Okay. How was that experience? I mean you mentioned it was the least profitable thing you’ve done and the most time-consuming. How much time did you get to spend to write the book?

Jason: You know, I’m a pretty fast writer so it’s about 200 pages and I’d say it was about a month of solid writing to get it done. But then, the editing process and the publishing process all that took an extra year and a half.

Chris: Aw, wow.

Jason: Yeah, it is truly time consuming when you figure that you know my peak affiliate years I was earning 10 grands a day and working 30 minutes, you know. The book clearly does not fit my criteria of a good money making idea.

Chris: So then in addition to the book, I mean, what else have you been working on. I know that you’re still active in affiliate marketing. But are there any other projects, everyone can follow along with you like?

Jason: Yeah. You know, I also broker websites. And if anyone listening wants to know what their website is worth, I’ve got a calculator at, can I say the URL?

Chris: Sure.

Jason: Okay. It’s WhatIsMySiteWorth.info, not com .info. And I built a calculator there that’s pretty accurate and that’s also a good way for people to get in touch with me or at BathrobeMillionaire.com and the reason I got into the brokering was frankly I got kind of burnt out on affiliate marketing. At first it was sort of long term money without much work then it started to become more work and the ideas would tend to last for 3 to 6 months and then they would kind of fizzle. And the brokering – it’s a good break from affiliate marketing. It’s more social. I enjoy talking to people so it’s kind of a break for a couple of years until I have my next best idea.

Chris: Okay. I know you mentioned the site WhatIsMySiteWorth.info. What is the typical range of websites that you sell in terms of the total pricing?

Jason: You know, typical is usually about $100,000 up to about $1 million. You know we’ve sold sites that are in the multimillions but there’s a much bigger market in the six figures because there’s a lot more buyers who can afford that. And they’ve got the cash. It’s very hard to get bank financing to buy a website. And there’s not a ton of people out there with a couple million in cash available to buy a site. So you know I tend to gravitate to where the market is and this is what I discovered. You know it’s in the mid-six figure range.

Chris: Okay. Cool. Well, everyone, just want to say thanks again for coming on to talk and I think it’s lot of cool, interesting things that you’ve done. It’s very cool that you’re able to take the initial failure but still turned it into something that was very profitable and really kind of build a strong business from that point. So thanks again for coming on and sharing with everybody.

Jason: Thanks, Chris. I really appreciate it.

Chris: And that was the podcast. If you’d like to check out Jason’s book you can get it from Chrisloves.com/bathrobemillionaire. That is an affiliate link to Amazon, so if you decide to purchase the book I would receive a commission. Thanks again for listening through the entire podcast and if you have any questions or want to talk to me feel free to connect through MakeMoneyOnTheInternet.com and you can also find me on Facebook, MakeMoneyOnTheInternet.com/Facebook. Thanks again and I’ll see you on the next podcast.