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The Deal Closers Podcast: eCommerce advertising and scaling in a post iOS 14 world

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Alex Fedotoff Deal Closers Podcast

When you’re relying on apps or websites that you don’t own to sell your products, it can be pretty scary. Sometimes, when we think we have things figured out, the goalposts really start moving on us. You have Facebook nailed down, the revenue is rolling in and then, something changes and things just drop off a cliff. In a post iOS 14 world, this happens all too often – but Alex Fedotoff is here to tell you how to protect your eCommerce business.

Alex Fedotoff started his eCommerce journey as a cookie salesman, making $100 a month from his parent’s apartment in Ukraine in 2014. Now, he’s the founder of eCommerce Scaling Secrets and the founder of several seven and eight-figure eCommerce brands. In this episode, he shares some of his secrets to eCommerce success even as things change.

Deal Closers is hosted by Izach Porter and is produced by Earfluence.

Transcript

Izach Porter

All right, you’re listening to “The Deal Closers Podcast” brought to you by websiteclosers.com. This is a show about how to build your eCommerce business to be profitable, scalable, and one day even sellable. I’m Izach Porter. On the show today we have my good friend and eCommerce genius Alex Fedotoff. He’s joining us to talk about advertising and scaling eCommerce brands in a post iOS 14 worlds. In eCommerce Sometimes when we think we have things figured out, the goalposts really start moving on us. Maybe you have Facebook nailed down. The revenue is rolling in, and then someone changes the algorithm and things just drop off a cliff. Google, SEO strategies, like link building might work one day, and then they’re completely gone from the index. On the next day, an operating system updates, and we have a spike or a drop in traffic, and we’re not really sure why. When you’re relying on apps or websites that you don’t own to sell your products, it can be pretty scary. So let’s meet our guest, Alex Fedotoff, starting in 2014 from his parents Apartment in Ukraine, Alex’s eCommerce journey started as a cookie salesman, making $100 a month. He is now the founder of Ecommerce Scaling Secrets and also the founder of several seven and eight-figure eCommerce brands. Alex, how’s it going? Great to have you on the show. 

Alex Fedotoff

Good, my man. Thank you for having me.

Izach Porter

Yeah, dude. Really excited to talk with you. I want to talk about iOS 15 and the post iOS 14 world and kind of how you’re coaching your students on this and how you’re using kind of strategies yourself to continue to advertise successfully. But before we get into that, I need to know more about the cookie salesman work that you did. Walk us through the early days of your e commerce life.

Alex Fedotoff

Sure, I graduated in Ukraine, like in Ukraine, average salary is like, $300 a month and so I didn’t know what I wanted to do with my life. I definitely didn’t want to work like a regular job because that didn’t show any promise. But I didn’t have many options at that time. So, yeah, cookie salesman was one of my positions. I was not very good at it. So they had this performance structure. You get compensated based on the number of cookies to sell, but because I didn’t like it, I wasn’t passionate about it. I didn’t sell that many, and so, yeah, typically would make $100, and my rent was like, $200. 

Izach Porter

Tell me the truth, did you eat some of the cookies? 

Alex Fedotoff

For sure. I had a high metabolism. I had my fat, like, now if I would eat cookies every day, I would be like…

Izach Porter

Yeah, I’ve got that going on, too. That happens sometimes in our 40s. Look, man, you’ve come to a world away from selling cookies. You’ve had huge success with your own brands, and you’ve taught a lot of other people how to do this. But for you and your business, what’s been the scariest kind of like, oh, crap update? If it’s from Google or Amazon or Facebook. The world is constantly changing in this area.

Alex Fedotoff

Because we’ve constantly been relying on Facebook pretty much since we’ve been in business. Facebook has been always at least 80-90% of our traffic at times It’s like 100%. So the updates on Facebook have been the most kind of impactful from a negative standpoint. So whether it’s like Facebook sometimes the end of like quarter when they have a lot of advertisers, a lot of competition, sometimes they would just like, shut down the accounts or business managers or pages out of nowhere. So there’s like a big wave of bands. So those things have been, like, very impactful for us, like in a negative way, and then obviously the ios update, which happened approximately, like April May this year. It’s kind of like in the short term, it kind of impacted our business slightly for, like, a few months. But then we have found ways to kind of make it still works, and some of those ways I’ll share with your audience as well.

Izach Porter

I talk with founders and folks who own eCommerce businesses every day getting ready to sell them, and the iOS update has been having really impacted in a negative way. A lot of these companies that we’re working with, can you just kind of give us just a 30,000-foot overview of, like, what was the change and kind of how did it impact Facebook.

Alex Fedotoff

You see mostly impacted on several levels. So Facebook is pretty much like why Facebook is so powerful, why so many people are using it because of the data Facebook accumulates. Right. So when the ios update happened, then users have the rights pretty much. If they have the pop-up, they don’t want to be trapped in certain ads apps, including, let’s say, the Facebook app. So all of their activity where they click what they buy is not tracked. So then that person is not necessarily in a Facebook database. So they wouldn’t like to say, say if they’ve. The person is buying a lot of clothes. Let’s say so then Facebook wouldn’t know the person is buying a lot of clothing because they’ve chosen to not be tracked, and so the overall pool of buyers, potential buyers that advertisers have access to just decrease significantly. On the other side, Facebook is pretty much like overall performance predicated by Pixel and how well it’s fed by the good data. So then if less people are kind of like tracked, then the last purchases are being attributed to Facebook. So the less data is being communicated to Pixel, and so pretty much the whole kind of cycle slows down. You get less data that you can make your decisions on. Like, for example, this audience or this ad is working, and so that’s kind of like what we have to work with currently.

Izach Porter

Got it. Okay. So change is somewhat of a constant in this industry, right? I mean, changes happen before they’ll happen again. How can an eCommerce company keep their business update proof, or how can you be nimble enough to pivot and kind of figure out what you need to do next?

Alex Fedotoff

I think over-dependence in general. I think this whole update just exposed businesses that have been over-dependent on Facebook, including our business. We are so dependent on Facebook that any change is pretty much very detrimental. In the short term, long term, we always figure out there are always solutions. There are always those. I will talk about those in a second. But in the short term, it impacts business significantly what it has taught us, and even on the transaction that we work together. Right. So we are looking into other sources of traffic. We’re looking at businesses and to acquire businesses that utilize other sources of traffic rather than just pay. Because if we have paid and then we have like, brand ambassadors, we have organic. We have influencers. We have, let’s say, Google performing on a decent level. So if we have all of those, then even if one platform doesn’t perform, then more or less your business remains stable, and especially that’s important, as you have a lot of overhead and you must maintain a certain sales level profit level on a monthly basis just to break even just to pay the bills, just to pay salaries, just to pay for all the overhead of the business.

Izach Porter

I hear a lot of discussions when I’m talking to buyers about Omnichannel distribution for eCommerce businesses. If they’ve got Amazon and D2C websites, maybe they’ve got some retail multiple sites. Maybe they’re on Walmart. But I think kind of what you’re talking about sounds to me like being able to drive traffic to your site from multiple sources so that anyone particular source is not, you’re protected and mitigating your risk by having multiple traffic sources.

Alex Fedotoff

For sure. It’s kind of like the same as with skews. If you’re already kind of like on one skew, then if something happens with the demand for that product or it’s kind of like drops in performance, and your business is very significantly impacted. So coming down to that same kind of diversification  and having multiple ways to drive the traffic in order to keep the business more sustainable. 

Izach Porter

Okay, well, that’s a really important concept. I think so. What are some of the tips? What have you learned? You’ve figured out some things since the spring when these changes went into effect. What are you doing? And what are some takeaways that our listeners could use to help their businesses if they’ve been impacted by these updates? Or maybe they’re really just dependent on one particular traffic source.

Alex Fedotoff

I would just critically evaluate your business, and I think the first step is always awareness and just realizing. Ok. So I am over-dependent on one traffic channel, one skew and then deciding to change it. I think that’s like step number one because a lot of people would realize they have an issue, but then it’s kind of like, oh, it’s okay. I mean, it’s not critical, and then they continue to do it. But the only direction it will go is like D2C will become more and more competitive. Amazon will become more and more competitive. Facebook will become more and more strict. They already introducing a kind of like the feedback score, like on the Facebook page. You have the feedback score. That feedback score will be visible. Every app you will see what is the actual feedback score? So if customers see that, let’s say your feedback scores, like three out of five, that your customer experience is not good, that will impact your conversion rates. Even thinking from that perspective how vulnerable your business is so you can make the necessary adjustments. On the tactical level, and Facebook is my area of expertise. So on Facebook, what we’re doing is we’re using Google Analytics. We’re using UTM parameters to double-check and cross-check basically the attribution from each of the apps. So then we can compare it with the Facebook dashboard and make decisions based on that. Also, we are using external tools or external tools, like Hires, for example, or some of our clients using Wicked Reports, which have that extra layer of tracking. So let’s say once you click on an ad, it kind of registers with their cookie, and then it kind of like passes to their dashboard and then their dashboard you can actually use for the optimization. So it gives you more kind of visibility in terms of which ads, which creatives, which targeting audiences are actually working. So using that extra layer.

Izach Porter

You’re doing more of the tracking yourself or through these other software tools.

Alex Fedotoff

You have to, right? Because Facebook is not necessary. There’s also, like, one custom solution that we are currently testing that just allows you to populate all of the data back to the Facebook kind of like to server to server set up. I mean, if you have, like, a good developer that can do it for you. So basically server tracking, and so that would reflect more of the kind of, like transactions that have occurred and will achieve it down to the right type of ads. on the tactical level as well., What we’re doing is we’re keeping the structure simpler, which means we don’t have that many campaigns as many assets because we don’t want that tracking to be all over the place. So if you know, let’s say one asset is working and the data shows it, and then asset only has, let’s say, like three ads in it, then we are just like living it around. We’re not touching it. But instead, if we have 20 different ads in there, then it would be a lot more difficult to track. Let’s say each one of them spends, like, $20. It’s like 20 ads. So it’s like $400. Just spend some kind of, like, initial validation, and then if you have issues with traffic, then it would be difficult to attribute a certain ad to a certain sale, and so that just messes things up. So the simpler your structure is on the campaign level, ad set level, and on the lead level, the better it is. Obviously, you have to test new creatives. This is one of the very crucial parts you still have to ask for it. So having a separate campaign where you test, like, new creatives, and what we do is we’re getting new creatives for our customers or from influencer’s user-generated content. We’re testing it in a separate campaign. Once those are working, well, then we’re pushing them to the main campaigns where we spend the most budget.

Izach Porter

Wow. You’re like the professor of online marketing, man. It’s awesome information. I really appreciate you sharing some of those ideas with us. So tell us a little bit about e-commerce scaling secrets. What are you doing? And what are you teaching other people who are selling products online?

Alex Fedotoff

Initially, it was just like people reaching out to me. Hey, Alex, I have a business. Can you help me to scale it? And so I would advise people like one on one. Overtime It turned into the community we have, for example, people who do, like, seven, eight figures in sales. So pretty much it’s kind of a collaborative experience because I think the community part, like, let’s see how eCommerce business, right. If you’re in a community with other eCommerce businesses, let’s say one business owner does like D2C. Another one does, like Amazon. Another one does retail. You can learn a lot from those people and also see your business from different angles. You can see the kind of like different business models. You can see how they can make it work. Anytime you have challenges, you can just reach out and get help, and so I was in many of those communities myself, and I mean, some of them are good. Some of them are not as good, and we pretty much have, I guess, the best community right now. That’s what a lot of our members said for eCommerce entrepreneurs because we have people that are not only doing good numbers but also people that they’re willing to share kind of like what’s working for them, and so I’m learning a lot. I did it partially for selfish reasons, partially for non-selfish reasons, because I want to help people. But even for selfish reasons, I see so many businesses, so many business models to see what’s working, and that also helps us to grow our own business in turn.

Izach Porter

Yeah. Just going back to a couple of things that you said. I think in my position, I see a lot of businesses that are for sale, and I talked to literally thousands of buyers, and I know the strategies that you’re talking about, diversifying the channels that are driving traffic to your website, as well as diversifying the channels where you’re able to sell your products drive value for businesses. Buyers value that diversity and lack of concentration because it reduces the perceived risk. Now, there are some buyers, some aggregators out there that are looking specifically for single-channel strategies to roll into a bigger platform. But the majority of buyers really see value in diversification, and I think if you’re a business owner and you’re thinking about maybe you realize you’ve got a concentration in paid traffic from one source. I think it’s worth, you know, if you have the idea of an exit mind, it’s worth investing in building out a strategy for another traffic source because it will add value to your business, and it will make it more attractive to the market. I think what you teach people to do is how to scale their businesses, and it’s not just the size of the business that will add value if they decide they want to exit their business. But it’s the structure of the business also, a combination of those things really can make a company attractive for a buyer, and that can be really lucrative for the founder. So what are some of the fun stories you can share from your clients or yourself who’ve taken their business to the next level?

Alex Fedotoff

Horror story. I have some horror stories, very scary.

Izach Porter

Tell us a horror story. Tells a good story and a bad story.

Alex Fedotoff

Oh, yeah. Let me tell you a good story. So I have a client, right, and the client is based in India. He’s an amazing guy, like, very smart. But I’m from Ukraine. If you want to sell stuff in Ukraine, I have to travel to Poland, which is across the border to just open the PayPal account. You can get it in Ukraine. I mean, at least when I was there, you couldn’t get it. The barrier of entry is not like, okay, I have to figure out what to sell, but I have to figure out even what kind of like payment processors to use to even collect money from people, even if I don’t. So it’s more complex. So he’s in India. Amazing guy. He’s doing right now, like, $15,000, $20,000 a day. But the problem is, for example, in India, they have this tax like we are tax, you pay like 18% or something like a tax on your ad spend. So if you’re spending, let’s say $100,000 per month on ads, you’re paying extra like $18,000 in ad spend. You’re paying $18,000 on top of that in tax, right. So it’s like 118, not $100, which makes your margins shrink significantly. Because a lot of businesses function like 20% 30% margins, and so we have this conversation with him, and obviously he’s not happy with these margins. He’s doing good numbers in terms of revenue, but not his margins, and I tell him, okay. So why don’t you introduce, like, a digital product like a course, that has high perceived value, but at the same time, it doesn’t have a lot of costs. You pay for it just once, and you see all of these companies, like, even Peloton, is based on physical products and digital kind of like the media. Right. So this is kind of like one of where we are heading right now in a few years. If you don’t have media with your business, this is just like a physical product. Unless you’re hyper-efficient, you will be struggling to compete because that media aspect increases retention. It adds subscription revenue. Like even Alo, there’s a company called Alo Yoga. They have this whole training class from yoga classes and stuff. So you buy the apparel. But then you have all of the classes that you can actually exercise, and charging you on a subscription basis adds another revenue stream to the business, makes the business more stable and also adds customers that are more loyal, increases their retention, and so he found someone who created a course, and so he paid them $400 to create that, like, course recorded videos, kind of like educational stuff, and he put it in the course, and he started selling it as an upsell for one of his products, and so he spent $400 on it. He paid, like, one time to the person he already has generated $100,000 in extra revenue with the product last, like two months or so, and that obviously has no cost. You don’t have to fulfill it. It’s just an automated email that sends you access to that digital product, and so that just shows that you have to constantly evaluate your business and be open-minded. You’re not just in a physical product business. You’re not just like Amazon’s business. You’re not just like a retail business. Like you’re like, whatever business model you could integrate into it. Obviously, you have to weigh in kind of like how much effort it will take to put together, but sounds like a digital product, and so we were laughing about it because I told it to probably 100 of our students, and he’s the one who’s actually done it. I was so happy because this is such a massive part of the margin, part of the profitability game.

Izach Porter

Oh, for sure. Yeah, and the ability to create that kind of recurring revenue stream drives tremendous value for an exit process, too. It makes the cash flow that a buyer buys much more stable. And so they’re willing to pay more for it because it continues on in perpetuity. So not only does that help his margins, but it dramatically improves the value of his business, too.

Alex Fedotoff

Exactly. One of the horror stories I can share is like, a lot of businesses. We were using Stripe. It was two years ago, and it was Q four, and we were doing decent numbers, like $20,000, $25,000, like $30,000 a day in sales, and we were pushing cue for a good time, and our company at that point was established in Singapore, and Singapore is like with their reason, they have a seven day payout time on a kind of like on transactions. If you generate sales today, Stripe holds for seven days, and then they give it to you, and so during that, pretty much like Q four week, we have accumulated, like, $200,000 on Stripe and then Stripe, just like, one morning I wake up after that was after 2017 or 2018 around the same time as now, and I woke up and they sent me an email. We decided to terminate your kind of relationship with you because we don’t seem like we seem like you’re too risky for our business model, and we will hold your money for 120 days, and then we’ll release it back to you.

Izach Porter

What?

Izach Porter

Yeah, that’s like, 200, and I was sending emails and tried to, like, obviously, provide all of the proof. those situations, you got to go with a lawyer. I mean, then you have a shot. Kind of like if you send a letter. But the best thing is even, like, very clean, compliant businesses. They have issues with Stripe. With PayPal. Those businesses are very,  sometimes they’re very strict, like, out of nowhere, something triggers, like security check, and they terminate the relationship with you. Some of our clients would say they have $30,000, $60,000 on PayPal, and it just locked, and then PayPal says, okay, we’ll not release it because you terminated some of the, Let’s say it’s drop shipping from China, and you haven’t disclosed it or something like this. Then they have the right to keep that money, and those are the type of horror situation. So what I would recommend for entrepreneurs to have, like, a backup merchant processor, especially if your payout times are not as fast. Especially maybe if it’s, like, seven days, you definitely have to, need to have a few of the processors. So then you kind of diversify. Let’s say you send $10,000 to follow you here a day, then another $10,000 here, and so you kind of, like, spread it between multiple processors. Even if one goes down, you still get the payout from other ones.

Izach Porter

Yeah, totally. That makes a lot of sense. So did you get your $200,000 back? Did you have to wait?

Alex Fedotoff

Yeah, I got it. It was very stressful. But I’m seeing this last few years. This happens all over the place, and I think the key here is kind of like to look again, like, look at your business more like critically. Okay. So what parts in the business have to integrate? and be part of the community,  

I think other entrepreneurs help you to kind of get perspective, maybe from people who are doing bigger numbers than you. So then you would know about the issues you don’t even have yet. But you will have because on each stage of scale and as you’ve seen as well, we’re still having conversations with so many founders on each stage of the scale of the business revenue level, it’s like six, seven, eight-figure. It is like a nine-figure. You work on those complex transactions. You see different types of challenges that business owners face. So being somehow prepared for those helps tremendously. 

Izach Porter

Yeah. We recently recorded an episode on Getting a Board of Advisors, and I think the concept of a community that’s got experience like this is similar where you can draw from those experiences, and you can talk to somebody who’s at an account shutdown. I’ve heard the merchant service account shut down. That happens a lot to a lot of e-commerce businesses. In a lot of cases. It’s not a question of if, but probably when that will happen. Do you have a plan that you can pivot quickly and not be kind of dead in the water? And then how can our listeners contact you if they want to be part of your eCommerce scaling seekers community and maybe talk to you and get some more details?

Alex Fedotoff

I can be found on Instagram. Hopefully, I’ll get my account back. My account got down for some reason. It’s Alex Fedotoff with three F at the end, and then it’s just ecommercescalingsecrets.com. You can Google it, and it will give you suggestions. Quick. You can book a call with one of our team members. You know, like, the other thing that we do, and this is, you know, what we also talked about before is like, we are looking for businesses that we can and we can help to grow. Like, let’s say if someone joins our program and they’re doing, like, six, seven figures and amazing founders that know what to do. But maybe they have issues with cash flow. Maybe they have issues with, just like, relying on one traffic channel, whatever the issue is, and if it’s, like, a good fit, we might even invest into those businesses and partner up with them to take them. Let’s say, from, like, seven-figure level to, like, mid-seven-figure level or even eight-figure level, and then obviously working with professionals like yourself to help exit those businesses. So that’s another thing that we’ve discovered that we can add a lot of value to businesses because they already have the foundation, and we can just add the things that we’ve learned to their businesses to just make them exponentially more valuable.

Izach Porter

Awesome. Yeah, That’s pretty exciting, Right. You’re doing direct investments with some of the companies you’re working with.

Alex Fedotoff

First, our clients pay us to join our program, then we pay our clients a lot more to partner up with them. But we just see so many amazing people outside of the community that you see their potential, and it’s kind of like overtime, you start seeing the talent. The talents are very talented people, and you know that these people will be so far ahead if they have the right resources, and if you can help them to get there, then you get part of the action, and it’s the same as like, Doctor Dre was believing in Eminem when no one was believing in him. I don’t know if you know that story.

Izach Porter

Oh, for sure. Yeah.

Alex Fedotoff

So he was seeing that in him, like, from day one and believe in him and made him one of the biggest stars of all time.

Izach Porter

Yeah. It goes to the point of you need to put a team around yourself, and what I see is that a lot of to be successful in eCommerce, you have to be able to wear a lot of hats, especially if you’re starting out on your own, and so as the company grows, each one of the tasks that you do take up more time and at some point, you run out of time, and so it’s like, can you identify what you’re really good at and drive value? And then can you put a team around yourself to help you with all the other parts? What I see a lot of times with founders is they’re really good at one or two things, and they’ve become very successful. But what buyers are looking for is can they add value in the other areas that that founder wasn’t as good in. I think that’s kind of what you’re saying is that you can identify these companies and then you can help them by investing in them and maybe professionalizing their marketing operations and advertising. 

Thanks, everyone for listening to this episode of The Deal Closer Podcast brought to you by websiteclosers.com. If you like the show, be sure to rate us. Write a review, press the follow button, share it with your network, and of course, if you’re looking for help selling your eCommerce business, be sure to visit websiteclosers.com. This episode was edited and produced by Earfluence. I’m Izach Porter. Follow me on LinkedIn and we’ll see you next time on the Deal Closer Podcast. 

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