Overture, when their keyword tool worked and showed number just like Google does now, inflated their numbers. Why? Well, why not? When you have a new advertiser come in, it is nice to be able to point them to the numbers and say “you see, you can have all this traffic. All you have to do is sign up with us”.

Now Google is doing the same thing. How do I know? I’m an Adwords advertiser and have been for awhile, so it’s not hard to figure out.

Let’s say I was at an average position of 2.3 for the keyword [keyword] (original – I know). Let’s say I was not budget, geographically, or schedule limited, which I was not. Let’s say that I had 1 keyword, [keyword], in 1 adgroup. Let’s say that in my Adwords account, they stated that I was getting 21,748 impressions every month. Let’s say that the Google keyword tool was showing that there are about 37,000 searches for [keyword] every month.

Wait… huh?

Am I saying that my statistics for my Adwords account was showing for every single search for [keyword]? I don’t know – I thought it was.

Am I instead saying that Google’s numbers are inflated? I don’t know – Overture’s was.

So somewhere something fishy is going on in the land of Mountainview. Why aren’t I showing up for almost half of the searches? I have no idea. Unfortunately I’ll probably never know. That’s the way Google works. Just be mindful of their numbers. They may not be the truth.

For those who don’t know, network marketing is the business model in which independent representatives (sometimes called distributors) are the primary method for a company to market products. Think of Pampered Chef, Amway, Avon, Discovery Toys, etc. How did you hear about those products? Probably not from a Super Bowl commercial, but instead from a friend or family who is trying to sell them.

The Business Model

The business model runs off the extremely successful theory that the best type of marketing is word of mouth, or endorsement marketing. It has been around for decades and will be around for a long time to come. The commission structure is different for every company, but usually it is a multi-tiered commission structure.

For example, if I sign up under my sponsor, Person A, for every sale I make, not only do I get paid, but my sponsor (Person A) gets paid a small portion as well. If I sign up you, my reader (Person B), every sale you make will pay me a commission, and for some companies will also pay my sponsor, Person A, a commission as well. Terms such as upline, downline, "team", roll-up, one-up, two-up, residuals, and many more are used to describe the payment structure.

Network Marketing vs. MLM

Multi-level Marketing, or MLM, is a type of company that has multiple levels of commissions. Like the example above, if you, Person B, makes a sale, I get a commission, my sponsor (Person A) gets a commission, his sponsor gets a commission, and so on. For your first sale, everyone gets a commission except, well, you, the person who made a sale. Some companies (called 2-ups) even have the policy that you won’t get paid until after your first TWO sales.

MLM has had a very checkered past and does not enjoy the best of reputations. They have been hit pretty hard by the FTC and rightfully so. It is illegal (in the US) to require someone to join a program in order to sell it. For instance, it is illegal for the a company like the Global Resorts Network (GRN) to make you buy one of their vacation packages before you can sell it. This law came about when people were joining Amway, buying thousands of dollars of stuff in order to be able to sell it, and would go bankrupt because they couldn’t sell it.

The way current MLM companies get away with this type of practice is requiring what they call "qualifying sales". If you do not buy the product or service, the MLM company segregates you from the rest of the distributors who did, and requires you to make even more sales before you start receiving your commissions. It is not uncommon to have to make 5, 6, or even 10 sales before you get paid for your first sale. Even worse, all the people who sign up as distributors will be signed up under your sponsor instead of you, potentially costing you thousands of dollars.

As you can see, this is shady at best. Because of these practices, the MLM industry has gotten a bad name. It is so bad, in fact, that my best advertising ads included the phrase "NOT MLM!"

So the term "Network marketing" was born. Sometimes it is synonomous with MLM, sometimes it means something completely different, but the concept is the same. The MLM business model is slowly dying away but is being replaced with the direct sales model, in which you get paid, from day 1, for every sale you make. In addition, your sponsor will get paid, and that’s it.

The Stigma and How They Get You to Join

Quickly (maybe it’s obvious), I found out that the best people to join your "team" are those who want to start a business and market the product themselves, not someone who wants to buy the product just for the product. This way, you can take advantage of the residual income they make for you by selling the product (no advertising cost for me). I’m sure you’ve heard the pitch: what if, you were to get 5 people to join, and they got 5 people, and they got 5 people. It’d be easy to make millions! (in truth, you may get 5 people to join, but any one of those 5 people may get a total of 3 people, only 1 of which will actually make commissions for you, and it goes on from there)

So for you relatively advanced marketers, it should be obvious that the ideal persona for these companies is a business opportunity seeker with enough cash to spend a significant amount of money on advertising. In fact, the best chance to get someone in your downline is by recruiting them from another company. MLM is extremely incestuous, with the top earners usually coming off a bad experience with another company.

Herein lies the first fundamental problem of running a network marketing/MLM business online. I’ll discuss that in a second, but first I want to get into the basics of who profits from MLM companies.

Who Profits, and How Many Fail?

It should be obvious that the people who profit the most in an MLM company are those who are at the top. Who is higher than the original founders of the company? There are a few sporadic cases of extreme success sprinkled throughout the organization, but by and far the most successful people are the ones who "got in at the ground floor".

The reason behind this is one that not many people see right-off-the-bat. I’ll put it in another light.

What if I, right here and now, revealed that I was making about $100,000 a month in the croquet niche? Then I went on to say that the way I made this money was by selling croquet balls, and I told you who my manufacturer was, what my keywords were in Adwords that I was advertising on, where I placed my banner ads, etc. all for the low price of $39.99. Then I went on to say that you, too can get into the croquet niche, sell the same balls, and make the same amount of money? What would you do? Would you go out and start your own croquet site using all my information? Maybe some of you wouldn’t, but most of you would.

What just happened? I became rich selling croquet balls. Then, I got rich again, selling information on how to sell croquet balls. What else did I just do? I made it a million times harder to sell those croquet balls because my competition just went from 0 or very low to extremely high. The same thing happens over the lifetime of a MLM or network marketing company. As the number of distributors increase, so does competition.

Besides, what USP are they going to have? They haven’t been successful yet, so they can’t talk about that. If you couple this with the fact that most people who start a network marketing business do not have much experience in marketing and have very little time and money to devote to success, you get a failure rate of 98%.

Seriously, a failure rate of 98%

What I personally started to see is that as soon as the company started getting very popular, the top distributors in the company started accepting the fact that they would break even, or even lose money their first sale.

In my company, this was a $2,000 product that we were breaking even on!!

How can you possibly expect a new distributor to get started if they 1) have to pay for a $2,000 product, 2) don’t make money on any of their follow-on sales and instead make money from their residual check.

If you’re a numbers person, here are the graphs from the Direct Sales Association, the guys who want to legalize pyramid schemes:

Keep in mind, these are THEIR number, and they are estimates. (they’re still not good)…

US Sales (Worldwide is worse):

US Sales FORCE…

 From this data, this is what I have determined. Amount of sales, per person, per year (in dollars):

Now here’s the sick part. Amount of yearly sales, per person, after adjusted for inflation:

WOW! Not a very good trend, huh? Would you invest in a company with trends like this? Not only that, but the average person only sells about $2117 a year in the US and $1866 a year worldwide! That’s about $176 a month. And here’s the kicker: commission is usually around 10-20%, so that’s what, $17 a month? What kind of business is that? Do you think that offsets the fact that they had to buy hundreds of dollars of equipment to get started? Absolutely not. The numbers do not lie, folks.

They’re all Liars

So what drives so many people to network marketing? The money. There seriously is a lot of money to be made if you are successful, and the people who make the millions shine very brightly and attract a lot of distributors.

How do the new distributors attract other distributors when they don’t have a great success story? When a prospect calls and says "how much money have you made so far", how do they say, "Well, actually, I haven’t made any money, but I’m sure I will soon."

It’s simple… they lie.

I did it. Everyone under me did it. Everyone above me did it. I didn’t tell them over the phone that I was successful, but I did on my landing page. I joined a marketing company called Carbon Copy Pro. The landing page says "A Realistic $250k First Year Income". It tells the story of Jay Kubassek and how successful he was with this exact same marketing system.

I bet 80-90% of the people who opted into my system thought I was Jay Kubassek. They had no idea who I was until they bought from Jay me.

The Present and Future State of Network Marketing, Particularly Online

Network Marketing and MLM are here to stay. If you don’t think so, just google the term "business opportunity" and see what ads pop up. Advertising, however, is to the point where it is too expensive to compete unless you can make a significant amount of money on each sale. The companies where you make $5 or $12 a sale will not be able to advertise on any sort of bid-based medium (which most ad platforms are now)

The success rate will stay the same – around 2% – because most who join do not have the deep pockets or heavy time commitment required to participate in Web 2.0, pay-per-click, or banner advertising. That’s the statistics I saw in my business and that’s what I believe it will be.

Even though there are successes in this industry, I DO NOT recommend getting started in it. If its purely for the money, there are plenty of other ways to make just as much money online with a much higher success rate and in a much more honorable way.

I personally am quitting the company I’m in because I cannot market something that claims to be able to transform anyone into millionaires overnight and doesn’t deliver. After 9 months, I felt sleezier than ever before when I started to find out that the honeymoon may be over for my company. I would much rather focus on my guilt-free businesses.

For instance, let’s say you’re a horse lover, and you just don’t know how to start a business, information product or otherwise, that can be profitable on the internet. Obvsiously the horse market is way too vague and general. You could never start a profitable business in a market that was this broad.

Enter Google Sets. Google sets will come up with some lateral phrases that Wordtracker, Wordze, Keyword Discovery, Quintura, or any of the scraper tools will come up with. With every one of those lateral (or horizontal) phrases that Google Sets will come up with is a possible market in itself.

Let’s take our example of the horse market. I just randomly put three horse related terms that came to the top of my head into Google sets: horse, thoroughbred, and equine. I pressed the "large sets" button and here is what it came up with:

horses
equine
thoroughbred
horse
equestrian
racing
sports
ponies
tack
pony
dressage
jockies
stick
riding
show
saddles
country
art
foal
appaloosa
action
flat
vet
cross
in
horseracing
jockey
gambling
dog
animal
equus
saddlery
race
equines
weatherford
complaint
veterinarian
handpainted

Here are just a few markets (most of them are wide open) it came up with. Remember, I came up with the horse market off the top of my head. You could have just as easily picked anything else. I included the amount of searches for that term and the average click price. 

Horse Tack: According to Wiki, Tack is a term used to describe any of the various equipment and accessories worn by horses in the course of their use as domesticated animals. Saddles, stirrups, bridles, halters, reins, bits, harnesses, martingales, and breastplates are all forms of horse tack. Equipping a horse is often referred to as tacking up.

[horse tack]: 450 searches a day with $1.30 as the average click cost for a #1 bid.

Wordtracker found this keyword when typing in horse

Dressage:  a path and destination of competitive horse training, with competitions held at all levels from amateur to the Olympics. Jeff Walker used someone who was in the dressage market in his case studies for PLF 2.

dressage: over 3,000 searches a day with $0.60 as the average click cost

Wordtracker did NOT find this keyword when typing in horse 

Stick Horses: Exactly that, the horses head is on a stick. You know, like what we had when we were kids before Nintendo came out. 

stick horse: over 120 searches a day with $0.60 as the average click cost

Wordtracker did NOT find this keyword when typing in horse 

Appaloosa: horse breed known for its preferred leopard-spotted coat color and other distinctive physical characteristics. 

appaloosa: over 350 searches a day with $0.25 as the average click cost

Wordtracker did find this keyword when typing in horse 

 Equus: Latin for horse or steed

equus: over 1,500 searches a day with $0.50 average click cost

Wordtracker did find this keyword when typing in horse 

Maybe it is just because I’m not a horse lover, but I just uncovered two markets that I wouldn’t have found by using Wordtracker or any other keyword tool. It may not be the answer to your prayers, but it should serve as another tool to put in your toolbox for doing market research and trying to expand on that keyword list.

That’s when it happened…

Google came around and made sure I knew who was boss. "No bidding on semi-irrelevant keywords for you, sir," THEY said, as they proceeded to cut my business by 20% by bumping up my minimum bids on that keyword and the others in the associated campaign to $10 and $5, but mostly $10. I need that keyword. It’s making me fat and happy.

I had heard the stories and read the gossip, but it never happened to me before. So, instead of going on a forum and whining about it, I fixed it. My PPC bid manager and I sat down and tested about 15 different things. No gossip or rumors allowed, here is exactly how we broke out of jail with the worst possible quality score (QS) ($10 min bid) and started advertising on that keyword again with a GREAT quality score and min bid of $0.04 and $0.05 again, and how you can too:

1. Regroup your keywords into tight adgroups. Start off with one keyword per adgroup.

   Yes, Google is telling you how to structure your campaign, and it is a huge pain to create such small adgroups. However, through testing, we found that Google will penalize you for:

   • Having too many keywords in the adgroup. I had about 50 keywords in one adgroup, all related, but a lot of super longtail searches. Yes, this rumor has been confirmed by me. We took the same keywords and put it in a different adgroup, but all alone. This alone lowered my bid to $1 from $10.
   • Having too many unrelated keywords in one adgroup. Just don’t do it. This actually wasn’t an issue for my account, but I tried an experiment a few months ago and found that they penalize you for it (the group only had 4 keywords, but they were very different from each other).

2. Build a site and link to the rest of your site from your landing page. Possibly include links to relevant external pages.

   This had the second biggest impact on my QS. While the site did have actual pages, they were not linked to from the landing page. Good converting pages give the visitor two options: the option you want them to take (in this case opting in), or the back button. No links to external pages, or else you will lose visitors to those links.

   Well, I guess Google thinks this provides a "bad user experience", which it probably does, but I’m not in the business of user experience. I’m in the business of making money. I put a few links at the footer to my sitemap and the QS went up. I then added a link to the #1 organic term for that keyword and the QS went WAY up. I only recommend you do that if you need to have a GREAT QS to compete. If a visitor clicks on that link, there is no way they’re coming back to your site.

3. Put the keyword in the meta tags and title tag. Possibly think about adding your keyword to the landing page ad copy, but that didn’t have as much of an effect.

   Yes, yes, I know. This is simple SEO. However, through testing, I found a better converting title tag. Unfortunately the adwords bot thought the great converting title tage made the page irrelevant to the search that was being conducted. Once again, what is good for Google was not good for sales. Such is life.

4. Create a silo for your page.

   This is a little more advanced, and not completely necessary for everyone, but this is how we got all the way down to $0.04 min bids. It’s not hard to create articles and they don’t even have to be unique. Steal some articles from an article directory focused around your keyword and link all of them to your landing page. Once again, a little SEO, and not always necessary, but it requires very little effort and may have great payoffs, especially if the other people in your niche know nothing about it.

5. If all else fails, create a new campaign and if necessary use a new domain.

   I know this may not be an option for everyone, but this was actually what happened to me. My site was hand reviewed and hand penalized. We did everything above and only got the min bid down to $5 (POOR QS). I was afraid that my entire account was banned, but I looked at some of the other businesses I own and they were unaffected. I was very relieved

   I created a new campaign with all of the above in place and the bid stayed at $5. My other keywords in other adgroups were unaffected. This led me to believe they penalized the keyword or the domain. Here’s the kicker: I started a new domain and loaded the exact same content onto it, and boom: $0.05 minimum bid and GREAT QS (I added the external link and siloing and got it to $0.04). We won!

   It has been long enough for me to honestly say that the hand edit will not be coming back. What I think may have happened is that my site triggered an alarm/audit since the adwords bot could not see the rest of my site from my landing page. Then the human reviewer came around and said "Hey, this isn’t relevant!", either that or they just were in a bad mood because they hadn’t received their daily massage yet. Silly Googlers. Sometimes I wonder…

So here she is after the first day out of jail. One of the keywords listed above  (note the very high CTR and high original bid. That’s for another post ) As said before, we went down to $0.04 min bid after that by siloing, and in this niche I’m competing in, every little bit counts. 

That’s it! If you do these actions, I can absolutely guarantee you’ll be unslapped, even if temporarily. There is always the human reviewer factor, but the unslapping will get you up and started again and at least give you another fair shake with another reviewer.

If your account is banned, well, I’m not sure I nor anyone can help you. I’m also not sure Google can/will help you. I’ve experienced their Customer Service (stricken to avoid confusion where some people may think they have a customer service department).

Hope this helps. If you have any questions, please feel free to ask.

Just so you can get an appreciation for them, my friend that works at Google gave me a training video for their Adwords developers: