GE 133: How Smart Marketer Generated $41K in E-commerce Sales From Just $775 in Pinterest Ad Spend (a 5,190% ROI!) [podcast] With Ge 133

Ezra Firestone Smart Marketer

Hey everyone! Today’s interview is with Ezra Firestone, founder and creative director of Smart Marketer, an information hub for do-it-yourself entrepreneurs, as well as a partner in Boom by Cindy Joseph and the company’s head of digital marketing.

Today we’re talking about paid advertising (like his $41K in Pinterest sales experience!), why you have to go beyond query-based targeting to do any kind of scale, and why he puts 98% of his advertising budget into content amplification.

From Communal Living to Communicating Effectively

Ezra grew up in an alternative lifestyle—communal living—and the group he grew up with taught courses like jealousy, money, possessions, the things that almost always come up when you’re relating to other people. The group taught him how to have winning and profitable relationships in both personal and professional scenarios.

He had a completely normal life, except that he didn’t go home to a white picket fence and two parents, he went home to group of people who essentially gave him a background on how to be successful at communication. He’s been marketing online for about 10 years and what he’s come to realize is that marketing is basically just communication. And if you can communicate effectively, you can reach people, sell more, and move your audience to make decisions toward your brand and product.

He started selling Halloween wigs back in 2006 (and was the #1 retailer of mullet wig one year!) so he’s seen e-commerce evolve from the faceless e-commerce store days to Amazon selling private label products to people coming up with their own brands. He’s been in the industry long enough to see all these ebbs and flows.

Maybe it was luck or timing, but his first e-commerce brand did really well. It was mostly SEO and Google AdWords back then and it was really easy to generate visibility with those two mediums. Now they do over $1M a month in their e-commerce businesses and Smart Marketer the information publishing brand does a couple million a year.

What Exactly Is Smart Marketer?

Smart Marketer is an information-only company. They’re not a services agency so they don’t do anything for anyone. His team of 20 virtual folks (designers, optimization specialists, ads managers, customer support, etc.) documents what they’re doing in their e-commerce businesses and what’s working for them and then share how to do it with others. So they’ve got landing page templates, courses on Pinterest advertising, on how to build a Shopify store that include a theme, on Facebook advertising, on customer retention and reengagement, on how to set up and sell on Amazon, etc.

In terms of their pricing structure—they are a “good-to-better” brand, which means that they’re not for starters. But if you want to scale, if you want to understand structure, if you want to build a team and no longer be a sole operator, if you want to do large scale direct response advertising—this is where they can help you. They offer a lot of free videos and courses on their blog and then once you engage with their paid courses, it’s $1,000 or more.

Smart Marketer’s Revenues and Number of Customers Today 

Smart Marketer just hit $2 million in revenue as of 2015. The cool thing about the information-only business is that the profit is very high. So for $2M in revenue, that’s about $800,000 in profit. On the other hand, his e-commerce business does about $1M a month in revenue but only about $150,000 in profit.

So the information business is much more profitable, but the problem is that it’s not really an asset—meaning that it’s built on Ezra, on his brand, so if he stops working it, it stops making money, and he can’t sell the business to anyone. Which is why they’re moving it to more of a SaaS model so that it’s more of a recurring model and not as launch based. The e-commerce business doesn’t have as high of a cash flow, but you could sell it because it’s inherently valuable as a brand.

Moving From a Launch-Based Business Model to a Recurring Model

Of their $2M in revenue, about $500,000 comes from recurring subscriptions, so they have a level of subscription revenue that covers team salaries and stuff like that. But 75% of their revenue comes from launches, so what they’re looking to do on the information side is have it be more of a sustainable model—and as far as Ezra is concerned, subscription-based revenue is sustainable.

When you look at the multiples that an SaaS business like his friend Clay Collins’ LeadPages does—and Ezra has watched him build that company from the ground up to now about 170 employees, $20M a year in recurring, and $40M in VC funding—that business will get a 10-15 multiple because of that built-in monthly recurring customer base.

In comparison, a traditional e-commerce store will get a 3 multiple and an information business like Smart Marketer has a zero multiple because he’s relying on his relationship with his subscribers to generate revenue. Which is why he’s moving it to a more subscription-based model—it’s built on less shaky ground.

How Ezra Generated $41K in E-commerce Sales from $775 in Pinterest Ad Spend

First of all, although it did happen, Ezra doesn’t want to create unrealistic expectations. So here’s what happened. Pinterest Ads had just launched to the general public. The beautiful thing about Pinterest advertising for a physical product retailer is that it combines contextual targeting with query-based targeting.

Traditional targeting and traffic generation on physical products was all query based—someone types in a query on Google and you rank organically or you buy ads for it. That was the original source. And then there was Yahoo! and Bing, and eventually comparison shopping engines like Price Grabber and The Find and Google Shopping. And now there’s Amazon.

This is all query-based traffic, which is great because people are already in the shopping process and if they’re looking for it, you just show them the product. So what Pinterest does is combine query based with contextual based (targeting people based on context, like gender, age, geography), which is about 80% of their traffic.

Pinterest has a very large user base—180M people—which is made up of 80% women of whom a large percentage have a $100,000+ income. So this was the perfect market for them because they sell cosmetics and they hit Pinterest at the perfect time (when ad sources launch they’re cheap to start on). Now Pinterest is twice as expensive as even just 9-10 months ago.

When you drive query-based traffic you don’t have to do a whole lot—people are looking for that product or service anyway. But when you’re driving contextual traffic, that requires a bit more work. You have to move someone from simply looking at a picture to making a buying decision. And the way to do that is to send people to a “pre-selling engagement page” with an article on the topic or problem they’re interested in that alludes to a solution which then transitions into how your product can help. At that point the reader clicks the link to chase the offer and then goes to the sales page.

So the article could be “5 Beauty Tips for Women Over 40” and then you kind of say “Oh, by the way here’s a product…” So they drive all their traffic to these pre-selling engagement articles. If the user doesn’t click the link, they retarget, and if they do click the link, then they retarget with more aggressive sales material.

Why Spend Money on Content When it’s Going to Drive the Cost Up?

If you want to do any kind of scale, you have to go beyond query-based targeting. You can’t scale query-based targeting—Google AdWords is too expensive for most people and Google Shopping requires you to have 50 or 100 SKUs to make it work at any kind of volume.

So what if you’re some guy like Ezra who only has 8 SKUs and you want to be able to use direct response advertising to generate visibility for your offer and you don’t want to have all your business be on Amazon where you don’t even own the customers? You’ve got to be able to drive contextual traffic: buy visibility, buy leads in a contextual setting on Facebook or Pinterest or Instagram and turn them into customers.

And to do that, you’ve got to have some kind of a sales funnel—and this is the best sales funnel they’ve found. As Ezra says, they’re not the ones who invented content marketing. Johnson & Johnson and Dove created soap operas to engage housewives in order to sell them home products.

Using content as a medium to engage someone and then make them an offer is one of the oldest ways of selling and they’ve just transitioned it to online sales.

The Chocolate-Covered Carrot

To build a relationship with someone who doesn’t know who you are you’ve got to engage them in a conversation about something they’re interested in.

Ezra has a whole course on this called Pincommerce, which teaches people how Smart Market did this on Pinterest. But what it teaches even more in depth is the sales funnel—which he calls The Chocolate-Covered Carrot. The chocolate is Pinterest advertising—that’s what people buy it for—and then he feeds them the carrot, which is teaching them a direct response sales funnel that can be used to sell anything: local business, services, physical products, software, information.

Take Boom (his cosmetics line) for example: if you produce one good piece of content that costs you $100,000 and two years of your time in testing and tweaking to get one good pre-sell article, it’s worth it. Because one pre-sell article can be worth $15-20M a year for you.

Allocating Your Budget to Content Promotion

If, for example, you have a $20,000-per-month marketing budget, Ezra suggests allocating it all to promoting content. After all, what else are you going to promote? How else are you going to generate sales for your product? He says put all of that budget towards direct response advertising to generate leads and sales. Your product may be relevant for query-based traffic on Google Shopping or Google AdWords, so if you can get profitable traffic there, then spend your whole $20,000 there.

However, it’s very likely that you can’t get profitable traffic there, that Google AdWords is going to cost you $2 per click, that Google Shopping is not going to give you the kind of scale that you need, that Amazon will only enable you to break even. So Ezra would probably put $5,000 into query-based advertising and take the other $15,000 and figure out a way to make some kind of sales funnel work, like content amplification.

Content Amplification

Ezra spends several hundred thousand dollars a month on advertising and 98% of it is content amplification. The other 2% is retargeting content and a very small fraction is on query-based advertising. If you include Pinterest which is technically query-based advertising source, then actually about 15% of their spend is there.

Keep in mind that content amplification takes a very long time—a couple months to a year at least. The reason no one teaches courses on it is that it’s not an easy win.

Content amplification is a marathon, not a sprint.

Be prepared to go at it in a slow and steady way and have a good time with it. You want to come out with something that’s profitable and sustainable and the way to do that is to build a sales funnel which is amplifying a piece of content that leads to a sales page.

How long this will take to see results depends on how much money you have, how good your copy writing is, your ability to run a split test, the traffic source you’re using, the market you’re in, etc. There are so many variables that asking how long it will take is not the right question. The right question is: what am I willing to bring to this on a daily basis? Ask yourself what you can afford to invest and if you can give yourself a year to succeed.

It’s Not the Platform, It’s the Process You Use

Ezra lets Facebook do the bidding for them all on a CPC (cost per click) basis. It’s auction-based bidding and Facebook tries to get them the most clicks to their website. One of their best placements right now is iPad only. He would never run the right rail on Facebook—he says they suck and they’re getting killed on the right rail ads—so instead they do desktop newsfeed, mobile newsfeed on iPhones, mobile newsfeed on the iPad, and Instagram mobile newsfeed on the iPad and iPhone.

The cost per click will depend on your profit margin, your conversion rate, your lifetime customer value, your average order value. Direct response is a really in-depth process.

He has a Mastermind group with about 6 or 7 business owners who’ve been asking how to do this. So he just launched what he likes to call Train Your Traffic Guy Bootcamp, where for 3 days they train you and your traffic person on the process of generating visibility and optimizing direct response campaigns on Pinterest, Google, and Facebook. Essentially, it’s not the platform, it’s the process you use.

One Piece of Advice He’d Give To His 25-Year-Old Self

At 29, he’s pretty happy so far with how things have gone. He’s always chosen lifestyle over money and his number one priority has always been his relationship with his wife (whom he married at 21). They’ve always been chasing intimacy and pleasure, and that may or may not include money. Most people are chasing success and they think success looks like how much money they have, but then they make a bunch of money and they’re still miserable.

He has a post called Rich and Miserable which is about how people define success. He thinks that the most important things are intimacy, connection, and communication. So at 25 he would have learned how to delegate and build a team around him sooner because that’s what has allowed him to scale.

How To Build a Team

As a sole operator you can probably get to couple hundred grand yourself, but if you want to grow and scale, you’re going to need to buy help. Ezra feels that most people buy help and then don’t invest in these people and wonder why they don’t work out. Even though you’ve hired someone who is an expert in their particular field, you still have to invest in them and get them to really understand your business. He has a How To Build a Team video post on his blog about this.

His Ideal Day

His job is to hold the vision of what they are doing and to hold people accountable. He hasn’t been in operations for a while, but he figures out what needs to be done and then inspires people to do it and checks in on them.

Since he is Smart Marketer, a lot of his focus is on creating content these days. He also focuses on general strategy with individual team members (and he’s got a team of 20 people). For example, he talks to the Ads Manager every night about what they’re doing.

He has an outline for a book which is similar to his podcast ThinkActGet—what you think determines how you act which determines what you get—which is all about mindset and how you operate in the world. People want to know how to grow their business, but what you actually have to teach them is how to be a better (i.e. more deliberate) person and that ultimately allows them to grow their business.

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Disclaimer: As with any digital marketing campaign, your individual results may vary.