Affiliate program's value now, HubSpot shares plunge 12%, Syed Balkhi's WordPress M&A Tips, & more

Is it the end of affiliate marketing, right? If you look at WPBeginner and a lot of the WordPress or just blogs out there, a lot of them generate quite a bit of income from affiliate revenue, right? They'll try to rank for terms like web hosting or whatever it may be and just try to clean up. But we've seen in the past, you know, less than a year, maybe year and a half, Google's been whacking a lot of the affiliate sites that have been ranking for these terms and that's been killing a lot of the revenue for these quote unquote affiliates.

Dude, we had an online flower retailer reach out to us and so what happened was that all their affiliates that were ranking well for the flower keywords, they all got destroyed. They all got pushed down, right? And it's all like Reddit and like communities that are like number, like number 1 through 3 now. So they're trying to figure out another strategy. So, you know, businesses that relied on affiliates are getting crushed and affiliates are getting crushed as well. So I, I mean, we've both done affiliate marketing. My take is it's probably easier to have your own products and services. So.

I agree with Eric on this. I would also say though, as a business and a marketing channel, you should include affiliate in the mix. Just don't expect it to do as well as it used to.

It's not a panacea.

Yeah, and everything goes through ups and downs and waves, and that's okay. Just like SEO, sometimes SEO does better for you or paid ads on Google, or then, you know, Apple rolls out a change with the iOS, which affects Facebook advertising and who you're targeting. So then maybe your Facebook ads don't work as well. pretty much taking an omnichannel approach. And if you take an omnichannel approach, some of the channels rise up, some of them rise down, but overall, hopefully the channels are rising up.

You know, I'll say if you're starting out though, it's probably worth learning affiliate marketing because when I started, I learned the most doing affiliate marketing because you learn about all these different channels and you're trying to like make things happen, right? There's a number that you have to hit, which is your livelihood, right? And that pushes you really hard. But I would just say as quickly as you can, try to get out of it. Because the other thing too is if you go too deep into the affiliate space, you'll find that there's a lot, A lot of people are— I'm sorry to generalize here, but many people I've met in affiliate space are unpleasant. And they're very, you know, me, me, me, me, me, very inward focused. And the sooner you can get away from that, the better. And you usually find that people that are building their own products and services, especially as, you know, the businesses get bigger, these people are generally more pleasant.

Dude, I'm with you on that. You first started, you learned quite a bit in affiliate. What was the next thing that you ended up learning?

Actually, I started with SEO first.

SEO first, then affiliate?

Then affiliate. Yeah.

Yeah, mine was SEO first, then social media marketing.

Really?

Yeah. Digg, Reddit.

Oh yeah, yeah, yeah, yeah, yeah, yeah. You're pretty good at that. You're pretty good at Digg. Yeah, I was really good at Digg back in the day. You're known for Digg.

Yeah, I had like a top 10 user account.

Yeah, I mean, back in the day too. So when I used to visit Neil's place, this is like 13 years ago in Seattle, Neil would have a separate computer just for following people on Twitter. I had that going too. That worked really well.

Yeah, that worked really well. Social media did really well back in the day. HubSpot shares plunged 12% on the report that Alphabet, AKA Google, is shelving interest in acquiring the software company. I'm assuming, Eric, you saw the news that Google was interested in buying them a few times, right?

Yeah, a couple months ago.

Yeah, yeah. It came out a few times. reported that they never were in detailed discussions about due diligence, which means—

It never was a real thing.

Or it was never that far.

Exactly.

It wasn't a real thing, never got that far, and it doesn't look like Google was ever truly interested. If they did buy HubSpot, it would be more than double the size of their biggest deal that they ever acquired in the past, which I believe was Motorola Mobility or Motorola something. Nokia? Was it Nokia?

I thought it was Motorola. Maybe Motorola. Oh, actually, I think you're right.

You're right.

I think Motorola. I think Nokia was more related to Microsoft.

I could be wrong. Yeah. Google's largest deal, $12.5 billion, Motorola Mobility, which they acquired in 2011.

I remember they talked about this on the All In podcast and they're like, yeah, this makes a lot of sense, blah, blah, blah. They're tying all their data. I was like, it kind of seemed like a stretch. But yeah.

I agree. We talked about this a while ago and, you know, my take on it, and I know you agreed on this as well, was if Google's going to acquire someone, they're better off just going and acquire— HubSpot's a great company, by the way, right? Eric and I are both speaking at Inbound.

We both use it.

Yeah, the founders are both great. And it's not about if it's a great company or not, it's more of, is it a fit? Right now, the race with search is AI and Google's off better spending money on AI or something that helps them with that objective. and protect their $2+ trillion market cap than buy something that is generating, call it, $2 to $3 billion a year in revenue, which is great revenue. I don't have a company that's generating $2 to $3 billion, but for Google, that is a drop in the bucket.

You know, it's one of our, uh, one of the guys we know at Microsoft who's— he's a senior guy at Microsoft. He told me that all of their budget right now is going towards AI. So he has like, everything's towards AI. Like, if it's not AI, we don't care about it, right? And it's an arms race right now for the magnificent Magnificent 7. So you have Amazon's going hard, Nvidia's going hard, Google's going hard, Microsoft. They have to compete. And to spend $30 million, you're right, the money is probably better allocated somewhere else. And again, hey, this is our little ad for HubSpot too. So you guys should check out HubSpot Inbound. Neil and I are both going to be speaking there. That's, I think it's September 17th through 20th or something. And so we're going to do a live marketing school. We're going to do a behind-the-scenes marketing school where we share stuff that we haven't shared before. And we're also going to do solo talks each, so.

Yeah, and funny enough, speaking of Microsoft, I was talking to someone today. So they built up a SaaS company, $60+ million, and they ended up selling it. But what was interesting is they used to work at Microsoft and they were telling me and teaching me something about the enterprise sales reps at Microsoft. Now I knew this for some of the corporations. I didn't know Microsoft has this as well. The enterprise sales reps have a target. There's nothing new about that, right? Every sales rep typically has a target. If you don't, then you're managing your sales rep wrong. And what a Microsoft sales rep will do is they'll sell into the ecosystem, anything Azure, anything Microsoft 360. And to help hit their numbers, what they'll also do is they'll look at other things in the ecosystem that may be useful for that company and sell them that product as well. And Microsoft will just pay out a portion of the money that they collect to the other business that they, Sold their software solution to.

So affiliate?

Kind of like affiliate, but I would say more partner sales.

Yeah.

And it's a smart model. It's how Marketo grew, right, in Salesforce. Marketo leveraged all the Salesforce sales reps to sell their product to the Salesforce customers, and it caused Marketo to get acquired for more than $1 billion, less than, I think, $5 billion.

So they go to all the Salesforce reps and say, hey, we'll give you a cut of each, each one you sell. Like, or did they do that partnership direct with Salesforce? Do you know?

They did a lot of it with the sales reps directly from my understanding.

Oh, that's interesting.

And they got acquired for $4.75 billion.

By Vista?

No, by Adobe. Vista acquired Marketo. Marketo used to be public. Vista then bought them, fixed them up, and then sold them to Adobe for $4.75 billion.

Dude, interestingly enough, I saw a tweet somewhere. I didn't read the entire thing, but it's just talking about how the Vista model of buying companies, fixing them up, the SaaS companies might be potentially broken. I didn't go deep enough into it. I think that's interesting.

But how?

I didn't go deep enough into it. I just, it got a lot of views. I was like, oh, click. And then I like, and then I think I got distracted by something else. So we don't have enough there. So we can come back to that in the future.

It's funny. So I don't know what the article says that it could be broken and what they're saying is broken or not, but forget about the operational or business side. on if it's broken. Let's just look at the economic side. If you buy a business for X dollars and you sell it for Y dollars, and Y dollars is a positive return on X, and ideally more than 20% a year, you got a business that's working. It may not work for the acquirer, but it's working for you. And the way I see it is Vista has been producing amazing returns. I think their AUM is probably getting close to like $100 billion, maybe more now.

Vista, Equity. AUM.

AUM, $100 billion. Yeah, so it has more than $100 billion under management. This is of 2023. And when you look at this, you know, you wouldn't be managing $100 billion unless you're producing returns for people. Whether people believe the way they're buying software companies, fixing them, and scaling them is broken or not, the financial side is showing that it's not broken. Maybe the acquirers aren't having the best of luck when they're buying them, but that's not Vista's problem. This is buying companies, turning them around, selling them for more money, and they're making a profit, which is what their LPs are paying them to do.

I got to take a minute to tell you about the Agency Owners Association. This is a peer group for agency owners. Think YPO or EO, but for agency owners. And I just wanted to read you a couple of testimonials. So this first one comes from Carrie, and we asked her, what do you like most about the group? She said, having a group of people to discuss and bounce ideas. The leads are great too. Yes, we share leads in this group as well. This one from Ollie, and he says, the ability to really post whatever I want and need and the group responds. Great experienced members, getting a lot of insights from conversations with other members, getting a lot of value from sessions from Eric, getting advice from others as well. And so if you want to grow your agency faster and you want a peer group to do so, just go to marketingschool.io/agency. This is a group that both Neil and I created, and our hope here is to create a vibrant community of agency owners and do a lot more with it in the future. So again, marketingschool.io/agency, and we'll see you inside. You know what Vista does really well? This actually dovetails well. Vista Equity. So those that don't know, software PE firm, they are very good at raising prices. And so I have this tweet over here that basically, guys, if you're afraid to raise prices, just look at this. So this is a tweet from Levels.io. It says, if you're ever scared to raise To set your prices too high, try seeing what Statista does. Do you pay for a Statista account?

I do not. Is it owned by Vista Equity?

No, it's not. I'm just— Vista's good at increasing prices, right? So, um, so try seeing what Statista does, right? So one free— first, here's their, their 4 tiers. The first tier is one free visit and then you get an instant paywall, right? Um, so you don't really get much. And then the second one is you get a starter plan for $199 per month billed annually at $2,388. Okay. The second one is a personal plan, which I don't know why this is billed at more, but the personal plan is $549 a month, billed annually at $6,588. Okay. $6,588. It might be reversed. Personal starter. And then the pro plan is $959 per month, billed annually at $11,508.

Wow.

Right? $508. No Fs given. It says just 1,000 users times $6,828 is $6 million ARR. 10,000 users, $68 million ARR. In 2022, they did $140 million million in revenue, so about 20,000 paying customers. So the moral of the story here is to increase your prices, which is what a lot of SaaS companies are scared to do. But when PE buys you up, one of the first things to do, increase prices.

We have a mutual friend named Patrick Campbell who used to run ProfitWell, I believe was the name, or Price Intelligently.

I don't know. Sold it for $250 million.

Okay. And—

$230 million, sorry.

Whatever the number was, he made good money. Smart guy. He had a lot of data on SaaS companies and he would always tell me one thing. Typically when you increase the pricing of your product, sure, you'll lose some people, but your churn typically goes down over time.

Yep.

So it's like you can end up making more money and it's more profitable. Funny enough, we ended up giving it a try. What we found is depending on—

On your stuff?

Yeah, depending on the customer type, we have actually, in majority of the cases, we've seen what Patrick said work. If a lot of your competitors are charging really high for a product and then you end up charging less and less and you're going more bottom of the funnel and just undercutting everyone in price, we're seeing that tend to work better than just increasing your prices like the competition.

Hmm.

It's going back to if they zig, you zag. But we've seen it work in just only a few cases where when we increase the pricing, like on SEO tools, when everyone else is charging $100, It actually becomes harder and harder. But when we decrease the price, not only do we get more conversions, churn actually went down.

Maybe it's a brown person thing. You know, here's why I say this, guys. So not, not, I'm not being racist. So we have a mutual friend, Syed, right? Which I want to talk about in a second, but Syed's very good at charging lower prices when it comes to the WordPress space, right? And you're also very good at charging lower prices too, right? So maybe it's the, that's the aura of brownness where you want to help people save money.

It's worked well, but I tried the other flip side where I tried increasing the pricing. What I saw is decrease in signups proportionally, right? So if you're charging $10 and you're getting 100 signups, in theory, if you're charging $30 and you can maintain 33 signups, you're pretty much breaking even, right? On a monthly standpoint.

Mm-hmm.

What we were seeing is you wouldn't end up getting 33 signups. We were actually getting less than that. And then on the flip side, we also saw churn go up. So we found that when we have lower pricing, more signups and lower churn, but we've, in most cases with SaaS products, I've actually seen increasing pricing improving overall revenue and decreasing churn. The instance I'm talking about is when everyone is continually increasing their price, when you go the opposite direction, that's when I've seen it play out really well.

I think the key takeaway here is it depends and you have to test. I want to take a second to tell you about my podcast co-host's agency. So NP Digital, so Neil Patel Digital. What they do is they do a whole host of marketing services and they are global. They're worldwide. They have SMB services as well. They have mid-market to enterprise services as well. They cover the entire gamut. So you can just go to npdigital.com to learn more about it. And now back to the episode. Let's talk about Syed really quick. So he sent me a text message yesterday and I wanted to talk about Syed Balkhi's smart WordPress M&A strategy.

And so you want to give a background on Syed first?

So Syed, he has a website called WPBeginner. He's well known in the WordPress space. He has a whole host of his portfolio companies, all WordPress companies.

He invested in all of them. His company is called Awesome—

Awesome Motive.

Yeah.

Or WPBeginner is the blog. Awesome Motive is kind of the, I guess, the umbrella company, right? He, you know, plugins like OptinMonster, All-in-One SEO, he's affiliated with all of them. Yesterday he sent me a text. You know how we've been talking about community a little bit, how community might be the new SEO? So he sent me something yesterday. He's like, they basically acquired BuddyPress or whatever, or they invested in BuddyPress. And BuddyPress is like a community tool, right? But it just goes to show that one, he's keeping his ear to the ground and he's listening at what the trends are. And then he's very quickly just figuring out, okay, who's actually good in the WordPress space for this? And then usually he'll take a minority stake. Sometimes he'll take a majority stake. But he's kind of just trying to take as much mindshare as he can, try to get as much distribution as possible. And it's worked out well for him.

It's worked out extremely well for him. I think he's probably the biggest player that I know when it comes to the WordPress plugin ecosystem. And it should have been WordPress who's monetizing like him. But instead, it's him. And good for him for generating all that revenue. Well, I think that's it. Make sure you guys all go to marketingschool.io/agency to join the Agency Owners Association.

You got it. And leave a rating, review, and subscribe too, because we were— we haven't gotten one for a while, so give us one. All right. Goodbye, guys.