Episode #005 – How to know when you need online marketing (and how to avoid wasting money when you start)

You're listening to the REI Marketing Nerds Podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Adwords Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads in deals online. Outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

Dan: All right, hello everybody and welcome to this episode of the REI Marketing Nerds Podcast. Super happy to have you here. It is like a mind-blowingly beautiful day here in Connecticut. I got the sun shining in through my office window, and that’s making me feel good so I hope you are feelin’ good wherever you’re listening to this.

Today, we are going to be talking about how to know when you need online marketing and how to avoid wasting money when you start. This is a pretty deep question because really what we are getting into is how to figure what the highest and best use of your money as an investor, right, if you’ve got a certain amount of money that you’re putting aside for marketing; how to find the highest and best use of that money just like you would try to find the highest and best use for a piece of real estate. This is not really an easy question because we all go out there, and we try a whole bunch of stuff whether it’s in your business or it’s in your personal life or whatever. Maybe you’re having trouble sleeping, and you start taking melatonin. I am pulling this from my actual life. You start taking melatonin, and you sleep really well, and that’s really cool, but you don’t really know what to compare that to; maybe there’s a different supplement where you would sleep better; maybe you wouldn’t feel so groggy in the morning; maybe if you just stopped looking at your iPhone five minutes before you tried to fall asleep, you wouldn’t need melatonin at all. So we always get into this question of "Hey I did this thing but I don't know if it’s the best use of my effort or the best use of my time." So we are going to get into this for online marketing because I think one of the worse things you can do really is just kind of jump into this without any kind of plan or any kind of sense of what your risk tolerance is or what your spend tolerance is. I mean, you're just not going to have a good time. You're not going to know to whether you're being successful. You're not going to know when to quit, and you really have the opportunity or the potential rather to leave a lot of money on the table.

So let's start, I think, with the primary question, which is like do you need online marketing at all, right? Like should you get into this world of internet leads and trying to find motivated seller leads at all, and I think most of you listening to this are going to assume that I'm going to tell you that like, yes, you totally need to be on the internet, the internet is the future, man… You know, like that kind of thing, and I'm actually not going to tell you that, right? Because I think… Look, I could definitely throw stats at you, and I've done this in the past, right? I could throw stats at you about tons and tons of people use the internet, and Google search volume is going up every day, and Grandma is on the internet, and I think everybody understands, everybody listen to this. I mean, after all, you are listening to a podcast, right? You get the internet is a big deal, the internet is changing the world, yada, yada, yada, soon we're all going to be virtual intelligences inside drones or whatever. You get it, right? [laughter] We've all seen someone literally walk into oncoming traffic while playing Farmville on their phone or whatever it is, Bubble Bobble, or whatever, [laughter]… Bubble Bobble… They're playing a video game from the 80s… Whatever! We've seen people just completely walk into traffic on their phones, so we all get it's a big deal, but the question is, not like is the internet a big deal? That's kind of like a hand-wavy marketing guy-way of skipping the question because we all get the internet's a big deal. The question is does it make sense for you? Is it the best place for you to put your marketing dollars in order to do more deals?

And that's not always the case, right? It just isn't always the case for everybody. You can assume that I'm going to say yes because I am like The Guy to do online marketing for real estate investors. That's like my entire career, right? [laughter] And obviously I've seen enormous positive impact that this stuff that we do has on our clients and coaching students and everything, so it's something I deeply believe in, right? It's something that I deeply believe in and see and work on every day. You've got to take what I say with a grain of salt always, but I don't think it's right for everyone all the time. I think that's a myth, and I think a better way to get at this question or a better way to kind of ask this question of yourself is, okay, you've got to find that highest and best use for your money, all right? So how do we do that? Rather than saying, is the internet a big deal, is the internet the highest and best use of marketing dollars right now?

I've got a couple ways that I sort of approach this. One is like do you have a profitable marketing channel you can scale right now by just spending more? The most common one is direct mail, and if you are doing direct mail, and it's crushin' for you, like you're just doing awesome, and you're sending out pieces, and you're making money, and it's got a positive ROI, could you just scale that by putting more money into it? If you can, I generally like to scale what's working first, right? Because I'm like, hey, it's just the easiest way to make more money if I know if I'm putting out a dollar and I'm getting out 3 dollars, just keeping putting in money until you can't do that anymore. There's always going to come a natural point, and this is true in direct mail just like it's true online and it's true of every marketing channel ever, there's going to come a point where you can't do that. You're gonna be like, hey, I'm maxing out my list; hey, I'm mailing too many pieces already, right? My ROI is dropping. If that's the case, generally that's when you're going to start looking for a new marketing channel, or if you don't have a marketing channel that's working for you right now, like direct mail has never worked for you, bandit signs aren't working for you, then yeah, you start looking at the online space, or I think if you're generally just really tech savvy and that's what you like, that's a big deal. Actually, I didn't even write that down in my notes, but I do want to take a second and talk about that.

If you like doing the online stuff, do it, right? That's how I got in this business. I generally like it. I think a lot of investors don't. [laughter] A lot of investors do not like it, and they don't want to touch it. This is the example I use is I have a riding lawnmower at my house, I have like a decent riding lawnmower. It's actually got a little drink holder so you can put like a beer in there, that's pretty cool, and I did it a bunch of times, and I'm like this makes me feel cool. I feel like a homeowner, you know? I feel like an adult, mowing my lawn on a riding lawnmower, but genuinely, I don't really enjoy mowing the lawn, and I don't do a great job at it, so I pay some dude $25 to mow my lawn, and I have a riding lawnmower, I still pay someone because it's just not what I want to do. Online marketing is kind of the same thing. If you dig it and you want to get into it, get into it because it's a fascinating field, and if you don't want to get into it, don't get into it. You can always pay someone.

But generally back to direct mail, if you can scale it up by spending more, spend more. Don't make it more difficult than it needs to be, but if you are having trouble scaling and/or you're new and you're just looking for the first channel that you want to get into or you've tested a bunch channels and nothing has really worked, online is a really good fit for you.

The other thing I'll point out is that don't think of this as something where you have to jump in with like a bajillion dollars, okay? Because I don't think that's the case either. There's a really fantastic concept, and I wish I could remember the book. The guy that wrote from Good to Great, which is a really classic business book. He's got a like a million books that all have basically the same title, like it's from Great to Better Than Great, and then From Awesome to Awesomer, and I can't remember the titles, but this one is particularly in this idea, but he has this idea of small bullets, and the idea of small bullets is like at all times, you should be spending about 10% to 20% of your time, effort, resources testing something new. It can be a new marketing channel, it could be a new offer, a new way to sell, whatever it is. So you're testing things that have potentially a really big impact on your business. That's a really good, kind of mental model to use for this because that way you're not sinking a bunch of resources into something you don't know is going to perform, but at the same time, you're not just growing stagnant. You're always trying to spend some percentage of your time testing something new. I think that's also a really useful way of thinking about it.

But honestly, the question of does online marketing make sense at all is very hard for me to answer in this kind of environment because I don't know much about you, and one of the main takeaways I want you to get from this particular episode is this question is all about you. It's not about the market. It's to about online marketing, it's not about what you need to budget. It's not about your competition. It is about you and what is right for you. So, I'll just say, if you want to dig more into that specific question, you really need to talk to someone, and I would just say talk to someone on my team. They do this literally every day. All they do is talk to investors, learn about their markets, figure out if online marketing makes sense, so if you want to do that, you can get a free strategy session with them by going to oldsite.adwordsnerds.com/strategy. So oldsite.adwordsnerds.com/strategy if you want to just talk to someone and figure that out for yourself, but for the sake of the podcast and for most people, most investors have a basic idea of whether they want to do online marketing or not.

So let's assume you want to, and what we're trying to break down here and answer is how do you get started? You know you want to do online marketing, how do you get started in the best way? How do avoid wasting money? To do that, we need to break down the two primary modes of online marketing, and this is going to be a review for some of you, but I want you to definitely listen to this, think through it, listen to what I'm going to say because these are big, strategic decisions and have a huge impact on how things go for you long term.

The two primary modes of online marketing, we divide this up into paid and organic. I'm going to break down what those mean.

Paid are basically ad channels like Google Adwords, Facebook Ads, Bing Ads, YouTube Ads, whatever. Anything that runs an ad that's a pay traffic channel, and usually this is something that is going to be charged on a cost per click basis, meaning you pay a certain amount whenever someone clicks on your ad or a per thousand views basis. So you're basically paying whatever it is, 1 dollar, 3 dollars, 5 dollars, whatever, every time a thousand people view your ad, view your video, whatever. So we've got cost-per-click and cost-per-view. That's the most… Cost-per-thousand views, I should say. That's the most common pricing model.

Now, the primary strength of paid traffic as a marketing channel is speed and focus. What do we mean by that? Well, paid traffic… You can get started right away. I could literally… You could start up a Google Adwords account today. You could create your stuff in less than 30 minutes. You could have it running within an hour. That's no joke. If you compare that to direct mail or even like bandit signs, you've got to make the postcard, you've got to mail them out, you've got to get the sign, you've got to drive to the thing, you've got to climb the telephone pole, like I don't know… [laughter] I don't actually know how people do it. I picture investors climbing telephone poles. I'm absolutely sure I'm going to get emails telling me that that's not how it is done. [laughter] You don't have to send me that email. That's just what I like to picture. That's what I like to picture, okay?

It's very, very fast. You can get started right away, get started generating traffic right away, leads right away, it's fast, right? And the focus is no joke either because you can get very, very focused on very tiny audiences, whether that's a very small list of keywords, whether that's a certain kind of interest, a certain demographic in certain zip code, whether that's a mailing list that you have. These are very focused audiences, and so that can give you a really good performance rating. Whether that's how often they convert on your website, how often they click, that kind of thing. They tend to be well motivated. It's relatively low labor. Like I said, you can set up an Adwords campaign, and if you're not really in it all the time and managing it all the time, it can pretty much run on its own. There's not a ton of labor there, depending on how you want to run it, and the data that you're getting is highly actionable, so you're learning where people are clicking, what ads they're clicking on, where they're converting. You can use that data to really increase your performance, lower your costs. That's a lot of strength in that channel, right?

Now the primary weakness… Remember we said the primary strength of paid is speed of focus. The primary weakness is cost. You are going to pay for the privilege to have that speed and focus. To get that data, to get that actionable data, to have that relatively low labor, to have that quick setup cost, you are paying for that privilege, and almost all of these paid traffic channels are going to run as an auction, and the thing about auctions is that the more competitive they get, the more expensive they get. If you're in a really hot market, you're in a competitive market, you're in a market with high deal values, you will pay more for clicks in that market, and there is really almost no way around that.

The analogy I'm going to use is the stock market. If you are a really good stock investor, you can get great returns for your clients, right? If you're like a stockbroker or whatever it is, but if the market is up, you are paying more. That is just how it works, and so similarly with paid traffic, you can get your costs down by increasing performance, but where the market goes… If the market is floating up and prices are floating up, your costs are floating up. So the primary weakness to paid traffic is always going to be that cost. We are paying for every click that we generate.

Now that's paid traffic, right? Primary strength of paid traffic is speed and focus. Primary weakness of paid traffic is cost.

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Now let’s get into organic. Now organic… Really when I say organic method or organic marketing, I should say, what I mean is anything that pushes your website up the rankings in Google. Someone types in sell my house; you want your website to show up higher in Google. That's going to get you more clicks, and so organic marketing is really anything that does that.

If you want to get pedantic about it, usually organic marketing is going to include just posting on Facebook, not doing paid traffic, just posting on Facebook. I'm not even going to talk about that. It's just not a huge deal for investors. I don't think of it as a primary or even a secondary channel for motivated seller leads at all. I'm not saying you can't do it. I just think it's not super common. It doesn't work very consistently. We're talking about organic, not paid on Facebook. So, really what organic is for investors is hey, Google, like me! [laughter] Right? You're basically sucking up to Google, that's what it is. Now typically you are doing this by improving your website, you're getting valuable links to your website, you're making awesome content… You know that kind of stuff.

The primary strength of organic as a channel is cost. The primary weakness of paid was cost. The strength of organic is cost. It is a huge channel with many potential leads. We're talking literally like 4 to 5 times the size of the paid channels that we're usually looking at, and when you get clicks from organic, they're free. You don't pay per click. What you do is put in the work and get the clicks for free, and so the marginal return on investment for organic is incredibly high, and, in fact, I would say that out of any marketing channel you could use, direct mail, bandit signs, TV, radio, paid traffic, everything, organic marketing, search engine marketing, search engine optimization, whatever you want to call it, has the highest return on investment of any marketing you could possibly do. That is a huge strength.

The primary weakness of organic is speed and focus. You remember the strengths of paid were speed and focus, and the weakness was cost? For organic, the strength is cost, but the weakness is speed and focus. What do I mean by that?

It takes a relatively long time to really get going. We're talking about months of consistent effort with relatively high labor in order to really get the needle moving, and I'm not talking about like your first month, you only get five leads. I mean like months 1 through 4, a lot of time, you don't get anything, right? So that's a lot of time to get the needle moving, and it's a lot of effort. You don't really control also what you rank for. So you can target whatever keyword you want on your website. You can say, hey, I’m optimizing my website for sell my house fast, but in reality, you are going to rank for whatever Google thinks you should rank for, and you don't have a ton of control over that. So unlike with pay-per-click, where I can pick say just one keyword and only target that keyword and only get traffic from that keyword, for organic, it's kind of all over the place. You just kind of put yourself out there and see what happens.

I'm going to try to put together a metaphor on the fly. Paid traffic is lot like Tinder. Now, caveat here, I have never actually used Tinder. I'm a married man, so I've never… I got out of the dating game before these things were a thing. So I don't actually know a whole lot about how Tinder works, but I'm trying to make this hip for the kids. [laughter] So let's say you're on Tinder, and you see a girl or a guy that you think is really cute, and you swipe on them, and they swipe on you, and it's like, hey, you match, and you get to choose basically who you're matching with, okay? That's like paid traffic. You get to choose.

Organic is kind of like you just dress yourself up and you try to look real hot, and then you just walk around the mall and see who approaches you. [laughter] Okay? So like you're dressing up real nice, lots of people are going to approach you, you're getting a lot more people approaching you then you would on Tinder, but, hey, you don't really have any control over who decides to make that leap and say, hey, can I get your number or whatever? I have no idea if that's a helpful metaphor. You can let me know in the comments! [laughter] I don't know much about how modern dating works; that's how I imagine it works!

Anyway, you just remember that paid is all about speed and focus but has a high cost, and you think about organic is all about low cost, high ROI, but has a really long time horizon and a lack of focus.

So the question becomes if you want to do online marketing, you're looking for more motivated sellers, you want to grow here. We're looking for the highest best use of our time, effort, dollars. How do you choose what to do and what to start?

I have a general rule for this, okay? I have a general rule for this. I use this with clients. I use this with coaching students. I use this online. Basically I throw this question out all the time. It's not even a question. It's an if/than statement. If you have more money than you have time, you do pay-per-click. You do paid marketing. If you have more time than you have money, you do organic.

I'm going to say that again. If you have more money than you have time, you go paid. If you have more time than you have money, you go organic.

So let me break that down. If you are doing pay-per-click, you're doing paid traffic, paid online marketing for motivated sellers specifically, I want you to think of that as a 6-month experiment, and the 6-month number is not arbitrary. It my opinion, you need to give paid traffic at least 6 months to prove its case. This doesn't matter if you're working with someone, it doesn't matter if you're doing it on your own. It doesn't matter. You need to give it 6 months to prove its case. You need to think about it that way because if you don't give it that amount of time, you're really not going to answer the question of does this work in your market? You just can't. It's just not statistically significant. It is just not particularly useful. So think of it as a 6-month test.

Now think about what you could budget every month for 6 months if you knew – if you knew for a fact – it would not pay off until the end of month 6. All right? I want you to think about this again. What could you budget every month for paid traffic for 6 months if you knew for a fact it wouldn't pay off until the end of month 6?

If your answer to that question is over $1000 a month, I say get into pay-per-click. I put it this way because when I talk about budgets, everyone wants to talk about budgets, what do I need to budget for pay-per-click in my market, and I come back with kind of like a vague answer. It's like, well what can you afford? And people always… Investors will pretty much always say the exact same thing. Investors will always say, well, look, if I know it's paying off, I can put way more money into it. If I know I'm making money, if I know I'm doing deals, I can definitely spend more. And that is the point, okay? You don't know it's going to pay off. You do not know that. There is no way you can know that. If you're in the end of month one, and you haven't done a deal, it doesn't mean it's not positive ROI. It could be your best marketing channel. You just don't know. You don't know if it's going to pay off. Of course, you are going to put more money into something that is an infinite money machine. If I give you a machine, and I say if you put a dollar, you get 10 dollars out, of course you are going to put a bunch of money into the machine. The question is how much money are you putting into the machine if you don't know what it's going to pay out? Right? So the question here is not would you put money into something you know is working? The question is do you have the cash flow to float when it's not working? Do you have the cash flow to be consistent when the market is quiet? When you're not getting any leads? When you haven't done a deal in 6 weeks?

When you are doing the work to make it work, when you are tweaking and you're improving and analyzing and optimizing, which by the way is what you need to do, do you have the money, the risk tolerance, the cash flow to do that? Because sometimes paid traffic hits right away and it's awesome. We've literally had clients do deals in their first week, and that's awesome, and like we all celebrate, but that's not normal. Sometimes it doesn’t hit. Sometimes in the markets with the biggest… actually I would say this is the most common situation... The markets with the biggest potential payoff, competition is the toughest, and it takes the longest to work.

Alright? Think about that. The markets with the biggest potential payoff, the highest potential ROI, competition is usually the toughest and it takes the longest to make it work.

And that makes sense, right? You expect something with incredible ROI and a high payoff potential to be competitive, to be difficult. If it was easy, everyone would do it. So the question is, is the payoff worth the investment to you? Can you even handle the investment? That is what you need to know.

So, again, think about this rule. Think about it like a 6-month experiment. This is for paid traffic. Think about it like a 6-month experiment. What can you budget every month for 6 months if you knew for a fact it wouldn't pay off until the end of month 6? If you're over $1000 for that, I say get into pay-per-click. Obviously, everyone is going to be a little different, and I'm not saying you need to spend $1000 to do well on PPC or paid traffic. I don't think that. But I think that's an incredibly useful rule of thumb for answering this question for yourself.

Now let's get into organic. Organic is highly labor intensive. It takes a long time, but it takes no upfront investment if you're doing it yourself or if you hire someone to do it, it takes significantly less investment than paid because you don't have to pay for ads. So SEO is both less of a financial investment if you want to go that route, but it's labor intensive if you go the do-it-yourself route. So organic can really build a foundation for you. It can a build a lot of cash flow. It can a build a lot of deal flow. It can really be the bedrock on which you build your other marketing channels, but it's going to take time, and you need to have that patience. This is like if you plant a garden, and you put your seeds in the ground and you water them and you fertilize them, and then a week in, you don't have tomatoes so you just dig up your garden, right? It doesn't work that way. You need to have that patience. You need to have the mindset and the sort of frame of mind where you're putting in the work and you know you're not going to see the results until a ways down the line. Are you patient enough? Do you have time horizon to handle that? Some people need to do deals right now. They need to do deals right away and waiting 6 months to get their first lead is not good for them. That's too much pressure, it's too much work, it doesn't fit in.

The return on investment for both of these channels is absolutely massive. We've seen that time and again. It's just something that so many people have done at this point. I don't think that is really up for debate, except for specific situations, but both of these channels require effort. Of course they do, right? Of course it's competitive. If I was giving away deals, you'd have to fight to get to my front door. And so similarly if Google and Facebook and these channels are giving away deals, then you're going to have to fight to get to their front door. It's not like other investors aren't hearing this podcast. It's not like no other investors know about Facebook ads. People know about this stuff now. It's competitive. You expect that competition going into it, and you increase your chances of success by picking the marketing method that aligns best with your needs, your personality. This is what I meant when I said in the beginning that this is really about you, whether you are ready, whether you are ready for the investment, whether the investment… whether it is of time or effort or money is worth it to you.

Remember like I said in the beginning, hey, man, if I've got an easy marketing channel to scale up, that’s going to be a lot easier than starting a whole new thing.

All the metrics and the numbers and the stats and the fancy stuff I can throw out, they don't make sense, and they're not going to make this make sense if it doesn’t make sense for you as an individual, as an unique investor with your own set of strengths and likes and dislikes.

I can't stress this enough. Picking the thing that makes sense that you know you can work with, that you have the right expectations for, that's what maximizes your chances of success. If you pick the thing that's like the hot thing now because somebody told you to do it, and it's not right for you and it's not right for the business, you're never going to make it, and that kills me when it happens because I see investors with tons of potential, tons of growth potential, tons of potential in their market, and they just can't grab onto it because they put themselves in a tough situation from the start.

So guys, I hope that makes sense. I hope that was useful. As always, you can get Show Notes to this episode at www.oldsite.adwordsnerds.com/podcast, and hey, this podcast came out of our Facebook Group, which is totally awesome. The REI Marketing Nerds Facebook Group. It's totally free. I'm in there every week doing a bunch of free trainings, lots of cool investors sharing their favorite tips and strategies and data. It's just a really incredibly high-quality place. No spam. No spammy-stuff. It's just a really great place to hang out. If you're interested in joining the group, you can go to www.oldsite.adwordsnerds.com/group, and it will forward you to the Facebook Group or just search on Facebook for REI Marketing Nerds.

Once again, oldsite.adwordsnerds.com/group to find the group, and oldsite.adwordsnerds.com/podcast to get all the Show Notes from this podcast, and listen to all our other episodes! I would really appreciate that!

Thanks guys, I hope you're having an awesome day. I’m going to go outside and enjoy some sunshine, and I'll talk to you soon. Bye…