S14 E1: How Affiliates and Creators Are Redefining Brand Marketing (with Aaron Paul, Co-founder of Paul Street)

0:00Nik:Well, Aaron, I'm excited to have you on Limited Supply. This has been a long time coming. We've been friends for years. Got to build some brands together, have worked together. We have the running joke that you're the Jacob Johnson type of Indian. I'm the Nick Patel type of Indian. i am indian for those who don't know there's christian indians and then there's the rest of indians and aaron paul is a christian indian and if you don't if you don't have the youtube up he's a brown dude sitting in front of me shaking his head from left to right exactly and i'm the indian who does shake his head from left to right but uh but no i'm excited to have you here aaron um thanks man thank you this is fun it's gonna be fun.

0:43Nik:For the people who haven't got to meet you yet, can you give just a quick background of yourself and some of the stuff you've done and almost brag in a way so people are excited to then listen to the rest of this episode? Sweet. Yeah, my bread and butter is affiliate. I've been in the affiliate space for about six years. At this point, we've done a little bit over 500 million in just affiliate revenue. And so we built Paul Street. That's my agency. We started that two years ago and we run PR affiliate, mass media, performance PR, influencer. We do a lot of celebrity marriages, stuff at sports teams for some of the best brands and consumers.

1:23So that's your Hex Swats of the world, the Todd Snyder, so liquid IVs. But yeah, we're having a lot of fun doing it.

1:29Nik:Yeah, it's been, well, it's been fun to watch you build Paul Street from nothing just a couple years ago to um you know inking deals with hex clad and f1 drivers and neuro gum and f1 drivers i mean you're doing hanging out with rufus de soul signing deals with grutman like it's insane what you're doing and and what you're doing to connect like that crazy traditional world of celebrity and this new kind of era of challenger brands and you know it's funny because like all of these big talent agencies have tried to do this for years and take advantage of like how big some of these companies have gotten, but no one's done it successfully and definitely not in, I think, the way that you've done it.

2:12Nik:But we're going to get into that in a second. The first thing I wanted to start with is PR. So PR is something that brands, I mean, for a long time when brands would launch, they would earmark 25 grand a month, 30 grand a month for a PR agency. So people would earmark 25, 30 grand a month for a PR agency. and um you know it got to a point where like pr at first pr was super impactful it was a make or break it type of a thing uh and i feel like that was maybe like six to seven years ago where pr was kind of peaking and uh you know you had to get like a fortune writer or uh bloomberg business like one of these vogue business big outlets to do your break and then you have you know all these follow-on outlets and you get a massive traffic spike and then it kind of slows down but then you get the social proof out of it which is really what like the performance teams really love to use um you know today pr i feel like has shifted so much there was this wave in between where everything was about listicles and you know buzzfeed shopping was a thing insider picks became really big you know like today for brands that are doing pr like uh well first of all i'm curious where do you think pr has evolved to and then i'd love to learn from you like how do you think about PR because I know you're doing PR for brands that previously have paid those crazy retainers for PR agencies in the past and they were not happy.

3:36Nik:So I'm curious how you think about PR, but also how you've evolved that. Basically, what are you doing for these guys? Yeah, I'd say the main reason why a brand may not be happy with PR is just because how we define value to just dollars spent is changing, especially just in marketing. I think today PR is mainly an exercise of credibility building. That's what it is. Maybe six, seven years ago, yeah, you're going there to find audiences, find credibility, attach trust, and that brings in a really qualified audience. Today, I joke internally, but I also don't joke. I feel like I'm real about it.

4:18PR, in the way that we have known it to exist, is quickly dying. And this Venn diagram of PR and affiliate, that common ground is just becoming its own thing. The way we look at PR is how can we fundamentally go down this exercise of attaching a brand with credible outlets to effectively build a foundation that helps with that social proof, that internal, your paid spend and efficiencies there. Obviously, that opens the door for affiliate partners to care about the brands that we represent. Thought leadership is important, but effectively today is how can we marry the brand with anyone with a trustworthy audience or credibility?

5:04So PR today can be creators. PR today can be brand-to-brand partnerships. PR today can be events that are happening in real life. But again, it's about how do you utilize that to effectively run the engine of growth internally. I don't think that PR needs to be this ongoing initiative of how can we get a couple of placements every single month. You're going to get that with a solid affiliate program anyway, but it's a nice tool to have from a sprint-based approach anytime you're raising some capital or you have a new product out in market or you're partnering with a celebrity. So it's those story-worthy moments that you want to go to market with.

5:42It's a good tool for that, but that's how we approach it. We do it from a sprint-based approach, but mainly we do it to build that foundation that gives a affiliate like a launch pad to scale and be successful.

5:54Nik:Yeah. It's like, uh, one thing I like to talk or one thing I talked about before was like so many brands today do not play in the middle of the funnel there. They always think about this top of funnel. You know, I got to go find audience. I got to go like run top of funnel. And then I've got to have the best bottom of funnel, performance marketing, landing pages, etc but that middle of the funnel is is like the pr stuff where or is i think where pr now plays its role which is essentially providing social proof for consumers to feel like they're not about to go get ripped off or that you know whatever they're suffering from is going to get solved because somebody else got that same thing solved for them but it's it's like it doesn't to your point it's not discovering it's just it's like people figure out they want to maybe buy the brand and then they're using that as validation it's not that it's finding people i mean there's articles like uh you know forbes i don't know if they still do this but for a long time always had their viewer count on the web pages i think you can see that these breaking articles have 472 views yeah you're just like okay you do the math on click out rate from there assuming you know a crazy click out rate of even 10 you're talking 47 people and then assuming a 5 conversion rate of 47 people you're talking three people yeah convert that's assuming everything goes right and um so i think a lot i mean yeah anyways pr it seems like is uh is definitely changing are are these brands like are they still like is it still valuable to get pr in outlets like fortune and bloomberg or like is that i mean what like what is the purpose of some of those i guess like if you're a brand that's building right now or a founder who's building like do you need to worry about go getting that type of PR?

7:39Nik:Should you just focus on listicles? What kind of PR do you think is important for these brands that are scaling? Yeah, it's interesting. So from our perspective, we focus a lot of our time and energy on the affiliate side of publisher. And one of the things that we noticed was affiliate is a great mirror of how your brand is perceived. So internally, if the brand is doing really well from a numbers perspective, typically the affiliates will also to do well. But if the brand isn't well known or if it's not really, if it doesn't have any legs, we typically see affiliates not as interested in an offer or a brand that we represent.

8:20If they don't have that credibility, if they don't have organic pickups in affiliate, sorry, in publisher already, their likeliness of even wanting to work with the brand is super low. And so even if you look at that example, it's like...

8:34Nik:And that's because they're looking for their own social proof that this thing is going to Yeah, totally. And it's the same thing with consumers too. Like, yeah, I'll go look at a bunch of HexCloud pans and, you know, it'll be served to me on Facebook or Instagram or whatever. But then I'm going to maybe take a step out of that funnel and go and look at who's talking about it. Like, hey, has Good Housekeeping talked about HexCloud? What's their perspective on this? Maybe because I trust what they have to say. And even if it's not like a make or break deal for me, at least I have that like comfort level when I go to like purchase that product and, you know, to consider other brands in that category.

9:06So it's a nice little like, you know, check of credibility that a place that consumer process, that customer journey. But even from the affiliate perspective, like, you know, we've seen that's a big, you know, ask is affiliates do not want to figure out your business for you. They want to scale your, they want to scale your business. And that's where anything that we can do to solidify it as a brand. And that's why I do say like in the beginning, like having some of those, uh, having a PR initiative to go get some, you know, editors to care, um, you know, do a review, uh, maybe about the founders, you know, what their story is or like why they're building this product.

9:42Nik:Before their affiliate team goes in and starts to see the brand. Yeah. Correct. Yeah. I remember hearing that, like even at Buzzfeed and refinery, they were always like, get it to the editors, get them to write about it organically. And the affiliate side is going to easily write about it. Yeah. And also from an ongoing campaign perspective, we have tons of brands that are investing so much into celebrity partnerships. They're putting your logos on football fields. And having PR as an outlet gives you essentially an avenue to tell the stories maybe you can't as a brand. And so they get to come in from the editorial perspective and shine more light on that.

10:23And that can also be utilized by the brand paid initiatives or just overall marketing storytelling. So PR places place in that aspect. But if you were to look at PR as a source of discovery or a source of revenue, I think those days are well behind us. And I look at discovery as definitely gravy when it comes to PR initiatives. But yeah, if it makes way for a successful foundation for affiliate, then that's when we're cooking. Yeah.

10:53Nik:What's interesting is, is you're saying like that a lot of these things that you're doing that build social proof for customers also basically in turn build social proof for more affiliates. Like, correct. Is what, like what I'm picking up is like, you know, the, the NeuroGum F1 driver partnership is going to get you the top thousand TikTok affiliates to come over because it draws a bunch of attention and hype. Not that exact thing, but like similar concept. Yeah. Yeah. Yeah, exactly. Yeah, I think like any big picture like initiative that a brand invests into. So that can be your, you know, deals with sports teams or deals with Formula One drivers or, you know, you're investing into an ongoing PR inclusion, you know, initiative.

11:35Like these are all like tactics or pieces of the puzzle that essentially gives people more comfort, more credibility to essentially be affiliates for you. Like, you know, they're coming back and purchasing, helps within retail. So yeah, it's all part of that mix as we approach it holistically.

11:53Nik:And how are creators starting to play a role in this world of affiliates, PR, and like, you know, kind of the, I guess, even the evolution of like creators, partnerships, and earned media there? Yeah, I honestly think like the future of PR, like a big, you know, initiative there would be creators, right? Like your Bethany Frangles of the world talks about a product or Oprah, like that's your sign of credibility, but that's also like a pocket of discoverability. You're essentially going to these audiences that, you know, are, are just bought into a certain individual and they're ready to buy. They're ready to buy.

12:29If that fit is there, if there's a fit between, um, that creator and their audience and the brand that they're representing, it's like a match made in heaven. You know, if you look at like Kate Spade, like one of her first things that she did was she sent, the product to the best editors at the best magazines in New York. And that's how she sold out of her first couple of bags. And what we do today is go after creators. So creators are the next evolution of publishers by way of podcasts and sub stacks and their TikToks and Instagram. So there's a diversified approach there. There's ways to get them in organically.

13:08there's ways to get them on CPA, CPC, rev share type deals. There's a way to get them in from a flat fee engagement. Um, but yeah, that's also like a big part of our PR initiative is how can we go get more credible people to talk about it rather than just like a credible publication.

13:24Nik:But yeah, I feel like so many brands they're like, okay, we're going to figure out Facebook and Google and then Tik TOK. And then maybe we'll figure out affiliate as a channel. When do you think is like the right time that brands should start thinking about onboarding affiliate. And maybe it's done in stages. Maybe it's like you don't need an affiliate agency out the gate, but you got to get certain platforms set up or you should start to have an intern building out your creator seeding list or reaching out to affiliates like bloggers and whatnot. How would you recommend that that happens? Yeah.

13:59So before you engage in any affiliate activity, there's one thing that brands just truly need to understand is effectively forget the type of affiliate. Whatever type of affiliate it is that you're going after, you always will have just one shot with them. What that means is, cool, let's just say you get an affiliate to care and they say, yes, we'll talk about the brand. And they go ahead and invest in whatever type of content that it is that they do. And if it for some reason doesn't convert or it's just a negative experience for their audience. They're not coming back. The affiliate is never coming back purely just because if you're an affiliate, every morning you wake up, there's probably 100 to 200 brands in our inbox saying, hey, we're the next best saw company talk about us, right?

14:45There's only one shot. And so really that's on the brand then, hey, when is the right time to go and equip these affiliates to effectively talk about you? And there's two things to also think about when it comes to affiliate. Affiliates are equal parts lazy and they're greedy. From a laziness perspective, give them everything that they need to talk about so they can do the least bit of work to talk about the brand to their audience. What are all the audience?

15:08Nik:These affiliates? Yeah, it's essentially like, hey, here's all of the things that work from a messaging standpoint. So let's just say you're a greens gummy brand. Is there an angle to GLP-1? Is there an angle to vitamin D? Is there an angle to a busy mom that can't put, you know, vitamins into their lunchboxes for their children? Like, what are all the angles that you can go and give an affiliate? So that gives, you know, that gets their brain kind of turning a little bit. So that's when they can come in and utilize their creative liberty to talk about the brand in a way that their audience cares about.

15:36In addition to that, EPCs, earnings per click, it's like if you go to them with a, if you're more than like two to three, four dollars per click, that's a successful offer, right? That's something that's very exciting. Can you break that down? EPCs, what's the math on that? So affiliates typically look at click-based revenue. So every click is a reader or someone that's taking action on their blogs. And if they're now being incentivized from a rev share perspective, so that can be 10 % of order or 15 % or a CPA where your brands that gave$100,$200 CPA, or if they're getting a flat fee deal, everything really comes down to the amount of clicks driven.

16:15And that's what they're looking at from like a conversion perspective as well. In terms of priorities for an affiliate, affiliates typically care for number one, that your offer and your products convert. You can give them a$500 CPA, but if you're sending your traffic to a brick wall and they don't convert, no one's making money, right? So make sure that your pages convert and it's dialed in from that perspective and show them that it does. The second thing that affiliates care about is pay them on time. A Fed affiliate is a happy affiliate. So yes, if an affiliate is driving all this traffic and then you pay them on net 90 terms, if an affiliate drops off, then you're like, what the heck happened?

16:55That was good scale. They're not getting paid, right? And so make sure you pay them on, we pay our affiliates on net seven, net 15, like every two weeks, ideally. So that's what we also do. And then thirdly, that's where the payout really comes into play. And the CPA, the payout structure is never fixed, right? I don't want brands to break their relationship or potential longevity with an affiliate right in the beginning because they're just like, oh, we'll only give you 10%, 15%. The CPA is never fixed. Ideally, when you're going to an affiliate and saying, hey, what would it take for you to care to invest into this relationship?

17:33And they throw out a number and say, hey, we'll give you five more than that number. That's a happy affiliate. And once you've built this rapport with the affiliate, that's when that leverage shifts a little bit more to your side and you can go into a little bit of deal making and say, hey, how about we tackle CPAs by SKU or the type of customer, attribution-based windows? So there's a lot of ways to dynamically approach payout optimization. So never look at it as a blanket 10%, 15 % type of deal, which is what typically most brands make and break their affiliate programs on. Um, but yeah. Yeah.

18:10Nik:Uh, is it fair to say that like a lot of the advanced affiliates, uh, meaning like advanced, uh, advertisers that work with affiliates have a pretty big variety of compensation models depending on the affiliate versus a lot of the affiliate programs you probably see like crash and burn. They're like 10 % across the board standard, you know, that type of thing. Yeah, I'd say like a prime affiliate. Most brands also will see this as like, hey, like 20 % of my revenue in the affiliate program. Sorry, 80 % of the revenue that comes from my affiliate program comes from like about 15 to 20 % of the affiliate.

18:48So if you were to look at those affiliates and just, you know, like churn everybody out and just focus on those. Now there's a set of, you know, dynamic setups that you can set up with that affiliate. So that can be paid initiatives in terms of hitting their audience from a newsletter perspective. There is whitelisting deals that you can do where they're now running traffic on their, you know, Facebook handles and you can set it on a percentage of spend model. You can get access to their articles and run it on your Facebook account. That's a percentage to spend model. There is CPA-based deals.

19:22So arguably, if you're okay to pay Facebook$120 for a net new customer, if you were to set up that type of pixel to fire on a net new customer from an affiliate, why not pay the affiliate$120? I would argue that if it comes by way of an affiliate, they're a little bit more primed, a little bit more, you know, educated. There's a little bit of credibility there. So that would mean it's a higher quality affiliate or customer. So even giving the affiliate that type of CPA in line with what you're paying Facebook, that's on the table. And then, yeah, there's CPC deals to test out different types of content where it's, you know, I'll give you a thousand dollars CPC deal and it'll be a cost per click.

20:03Like we'll kind of take that back and see, hey, did it convert? If it did convert, we'll maybe keep that going or we'll, you know, turn that into a CPA. But there's all these ways of working with an affiliate. You know, let's just call it a listicle. Forbeshealth.com. Like if you go to the Forbes Health, it's called the GLP-1 listicle, right? Every brand on that listicle is fighting to get that number one spot. In order to get that number one spot, because we know number one and number two converts the best, Hey, we're going to give you exclusivity. That means we're not going to work with any other affiliate.

20:35Forbes, you will be our sole publisher that will drive all the traffic. Or we'll give you$30 extra for that. So we're willing to lose money on that partnership because we know that the halo and people that don't go through that funnel might come and purchase through us on Facebook and other channels. So there's all these different ways that brands can typically find an access or an avenue point with an affiliate. but it just comes down to deal making, right? There's never a set way to set up a deal. It's all about negotiating and finding out the best incentive for both parties.

21:10Nik:Yeah, I feel like most people have never even thought that the affiliate marketing world can be that complex because typically you just see platforms where you set up kind of a 10 % evergreen program and hand it to creators or like it gets listed on couponing sites. and that's for the most brands that's the extent of their affiliate program or they hire like a Rakuten and just gets them ranked on a bunch of coupon sites okay a couple weeks ago we were on the terrace having dinner and we were talking about media buyer affiliates which is a concept that I'm sure like three percent of people are going to know about most people have probably not heard about this and don't even realize that this is something that exists.

21:57Nik:So can you tell us a little bit about Media Buyer Affiliates and give us the 101 and then I'll start asking you some questions that I thought that I was really curious about. Yeah. So it's interesting because depending on who you ask, the word affiliate can mean you know, different things. I entered the affiliate world with the type of affiliate that I used to work with was primarily media buyers who would run traffic to brands on a CPA model, right? And so who are these media buyers? These are guys that can run traffic on, if there's an ability to buy traffic on any channel, they're running it on it.

22:37So your Reddits of the world, your Tapjoys, Facebook, YouTube, you know, app loving. And what we found out was these guys are just so darn good at buying media that they don't work at brands. They don't run agencies. They just work with brands who are willing to give them a competitive CPA. And they're arbitraging that differential and just making so much money off of that. So let's just say a brand is paying them$150 for a sale. They're acquiring customers for 80. So they keep that split and they're doing sales per offer in the 1 ,200 to 1 ,500 sales per day type number. So it's very scalable.

23:21This type of affiliate, if you go back 8, 9, 10, 11 years, it got its start in black hat affiliates. So it's like back when there was zero compliance or zero policing, it's like, cool, go find a pill bottle. It can be an empty pill bottle for, you know, no one even cares and make whatever claim you want on Facebook or whatever channel. And it was just a crazy arbitrage game. Back then, there was so much competition. So the affiliates had to get really creative in terms of the type of creative and the type of messaging that they had to invest in. But also optimizing, you know, fully make sure that their landing pages were incredibly CRO, you know, optimized.

24:01So from that perspective, you fast forward five, six years. These are the best storytellers in the world, and they are the best at creating offers and landing pages, right? Because they just know what converts. Now, if you bring in like a legitimate brand, right, and you kind of marry that process in terms of what they're used to, there is this now window of opportunity of how to work with these buyers. So what does that mean? So about a couple of years ago, I joined this affiliate network called Jumbleberry. They were known for being a black hat, gray hat network. and Matt Dobson, who was one of the partners there, had this idea of, okay, cool.

24:36These are some of the best media buyers in the world. How do we now take what they're good at and apply these on some really cool consumer companies? In theory, we should be able to create and drive traffic a lot more efficiently than the brands can. And we tried and failed for a year. We earned some change, but effectively, we found some wins in Goalie Nutrition. Everyone knows Goalie from a couple of years ago have seen. Is this the largest TikTok shop partner? Right now. So it's the largest ever, you know, TikTok shop brand. And again, it's a brand that's not only been built on the backs of affiliate marketing, but it's affiliate marketers who built this brand, right?