Inventing new publishers for affiliate marketing: how Admitad Projects incubator works
Maxim Volokhov, head of Admitad Invest and Admitad Projects, an online projects incubator, talks about how to create a “factory” for testing, launching and scaling business ideas.
Admitad Projects was launched in November 2018 as part of the Admitad Invest fund. Our ambition is to cultivate independent, profitable publishers from scratch so that they could secure future sales for our advertisers. We intend to invest $5 to $10 million dollars a year to pursue this goal.
We want Admitad portfolio to have more tech publishers with exclusive traffic that appeals to our clients. This way, we intend to keep increasing value of affiliate marketing as a traffic source in 20+ countries of Admitad presence (discover more in Admitad report 2018/2019).
One of these high-tech publishers is Sarafan AI. The start-up company is using computer vision to recognize objects in the pictures and videos. Thanks to Sarafan AI, any website with photo or video content can transform into a showcase for advertisers’ goods and gain profit via Cost-per-Action model.
Sarafan AI has already raised investment from Admitad Invest and other funds. We will tell you about this publisher and its business cases in one of the coming articles.
How we transform start-up companies into affiliate publishers
Working with startups or incubators reveals that the vast majority of ideas perish at the early stage – according to the statistics, the attrition rate is 90%. We have decided to find an approach for testing a larger number of ideas with lesser effort.
Over a period of 1-2 months, we study dozens of business ideas, select the best ones, and lead them to their first sales and the MVP version of their products. Consequently, we invest only in projects which have already been tested in real-life market conditions.
Our approach’s current version is transitional and will definitely undergo modifications. I’m confident, however, that our approach will be useful and applicable not only for startup incubators but for other business processes as well, which is why I’m sharing it with the community.
How will Admitad Projects change affiliate marketing?
As we mentioned above, ADP’ primary objective is to find, launch and scale new sources of traffic and new tech publishers. Using our experience and vast network of clients from all over the globe, we seek out and test new business models. Publishers can launch their project faster and take smaller risks within our incubator, and get access to our resources to boost their growth.
ADP is also a testing area for our advertisers. It is a place where they can discover completely new tech projects that no other affiliate network has and get an exclusive contract with Admitad.
Trust towards affiliate marketing is on the rise. However, to increase sales even further one has to develop new channels to attract clients. We believe that our investment in the incubator will help us bring the industry to a whole new level.
What makes the Admitad Projects incubator stand out among the rest?
It’s hard to convince an outside party that your business incubator is somehow different from the others. My own experience with other projects shows that Admitad Projects offers less bureaucracy and more autonomy.
Our approach is built upon a search for strong independent leaders and testing of business ideas by various methods, without a considerable waste of time and money and without engaging developers. Programmers join the project when the online project idea has already passed the market test – at that moment, we already know all the weak spots where we lack sufficient expertise, and we know our customers and whether or not they need the product at all at this point in time.
Experience has shown that this has helped us significantly lower our costs while increasing the speed of hypothesis testing. It would’ve been logical to assume that the product quality has diminished – but, in fact, it has actually improved.
How does our factory for generating and testing business ideas work?
Potential project “scoring”
In Admitad Projects, we gather a database of business ideas potentially suitable for our incubator. Each idea undergoes “scoring” – a quick three-criterion check which takes only a few minutes:
- How much money can be made from it
- How complicated doing it is
- Is it relevant to the tasks of the incubator, the company, and the ecosystem
The results yield a mean score, based on which we either enter the idea in the database or reject it.
At the next stage, the Admitad Projects Lab Team comes into play. Over a one-month period, they run the business idea through an 11-point checklist (I “prophesy” that the list might get even bigger in a year).
- Main criteria: the business model’s ROI, assessment of similar models/competitors, marketing channels, rating + main arguments – these are the prerequisites, ideas, and hypothesis we test
- BM – step-by-step analysis of the business model
- SPACE – assessing if the business model is well balanced
- Queries – examining search engine statistics by targeted searches
- Trends – examining Google Trends data by targeted searches and other tools
- Search – assessing the search results by the main targeted searches in Yandex and Google; searching for similar ideas and competitors
- CPA – assessing offers in the CPA networks’ target categories
- Crunchbase.com – analysis of similar ideas and competitors from a venture investment perspective
- Cases – appraisal of key cases
- Unit analysis – estimating the business model’s economics
- Expert – interviewing an expert and/or customer development as a “second opinion” about the project
After the month-long testing in the Lab, the project is presented before the “Council of Elders” to be evaluated by the incubator management. If the idea gets a “green light”, a search for a project manager begins. The lab can test about 30 ideas per month. The “Council” selects only two or three of them.
The project manager can be one of the incubator project managers whose idea hasn’t survived or an outside person. Over the past several months, we have hired approximately 20 new associates who will get the opportunity to work on new online projects. The new project owner chooses one of the five ideas with a high score-rating from our database or suggests their own idea if it agrees with the incubator’s business tasks.
How to attract strong project leaders to the incubator?
Freedom of action and project autonomy is possible only if you can attract strong leaders to the company. Our formula is as follows:
- Project managers automatically become our partners and receive a good salary plus a large option in the project they create
- We give people the right to choose what they will be doing. They can choose based on the principle “whatever speaks to my heart” or they might already know what projects come most easily to them
- Low bureaucracy and common sense governs everything
So, the new manager has chosen a project. What comes next?
At this stage, the project is carried forth by its manager and a small team of 1-2 people. They go through the following steps:
- Confirm the market value of the product idea
- Customer development – testing the idea on potential users
- Creating the MVP product version (minimum viable product version)
- First sale, then, the first 10 sales
On the “maturation” level, we focus mainly on the results of the first sales and ask ourselves questions: Was the idea correctly formulated? Does it have market value? If we’ve succeeded in selling the product several times to the same customer, do we, ourselves, understand why people buy the product and what makes it valuable?
We don’t assign strict deadlines for completing this stage; it can take a week, or it can take a month and a half.
How do we help our “startups” besides providing expertise and freedom of action? We give them a complete, “ready-made” back office. They get assistance from HR specialists, product analysts, a prototype agency, lawyers, tracker, UI/UX specialists, technical and investment consultants, and advertising specialists. In regular startups, this “operating system” takes a lot of resources and time while the Incubator teams focus on the essence.
However, our assistance doesn’t guarantee that a project will survive – its value is tested by the market. If the sales are weak or we’re not receiving positive feedback, the project manager goes back to the business ideas database and selects another one to develop.
We’re currently working with 15 ideas which are about to undergo their market test. Eight other projects have proven their value and gone on to the next stage.
Scaling and the first $300,000
In order to receive funding for project developing and scaling, the project manager prepares a presentation and defends his business idea before Admitad Projects’ investment committee which is comprised of incubator managers and a couple of external experts. If the “startup” receives unanimous approval, it continues its existence.
To develop the project further, the team receives initial investments of approximately $300,000 (the amount may change depending on the project’s needs). The project manager assembles a full-fledged team, including developers. At the same time, the team executes ten more quick growth quests. Assembling the team and creating the MVP version takes 3-4 months; project scaling as a whole requires from 6 to 9 months.
If everyone has survived the scaling stage, the incubator launches the “home stretch”. The manager meets with the investment committee again, after which the “startup” can go under the supervisory control of Admitad Invest investment fund. Down the road, its future will entail new investments, attracting outside investors, M&A, and even an IPO. Our experience shows that the cycle from the idea’s emergence to the transfer under the investment fund’s “sponsorship” might take anywhere from 6 to 18 months.
Instead of conclusions
The Admitad Projects incubator’s principles I described are far from perfect; we continue recruiting “top players” and testing them in action. What our approach did change for sure is the involvement of the team working in the incubator:
- The team is involved on all higher levels – people’s eyes show no boredom or desperation; they’re hugely enthusiastic about their projects
- We have increased the number of “market”-tested ideas severalfold – with the same budget and time usage
- Lack of futureless and dead projects which we “have a hard time dropping”. We quickly figure out if a certain project is needed by the people on the market
- Idea selection: every month, Admitad Projects Lab selects and tests 30 projects and presents them to the management for evaluation – 2-3 of those are chosen to continue on to the next stage
- Project maturation: 15 projects have received managers and are now about to undergo a market test. Six other projects have proven their value by making their very first sales
- Investment stage: 2 projects have reached Admitad Projects’ big council and received their first investments
- “Team assembly” stage: 4 teams are starting project scaling and assembling their teams
- The incubator employs more than 200 people: back office, incubator management, project managers, specialists assisting the project managers, and the project teams themselves.