A Florida-based marketing company is proving that the old adage, “high reward = high risk” isn’t necessarily true. The company, Harbor City DMA Ventures LLC is an internet marketing company and since 2013 it has been racking up huge returns for its investors in the inherently low risk Online Performance Marketing (OPM) industry.
For example, investors who take part in the company’s “DMA Profit Program” are promised a return of $250 monthly for an investment of $5,000 in the company. That adds up to a whopping 60% return annually-and the company has achieved this in it’s first year of business.
How does the company do it? The company’s founder and CEO, J.P. Maroney, says it comes down to their secret recipe-a proprietary mix of the economies of scale, special training, and using the best tools and task specialists available. Any mom and pop lead generation company can go out and promote an offer for an advertiser, he says. “What sets Harbor City apart is doing it on a much larger scale.”
Maroney has dubbed Harbor City’s particular OPM niche as Digital Marketing Arbitrage or DMA. Put simply, the company creates revenues by generating leads for advertisers and selling them at a higher price than the cost of each lead.
To do so, the company creating creates a “sales conversion path” or “funnel” that consists of a series of engaging steps aimed at converting prospects into action takers using banner ads and other web-based advertisements. The idea is to get consumers to take a desired action such as filling out a form or providing their email address. In the process, Harbor City gathers and analyzes a great deal of valuable data. Moreover, the leads they produce as a result of the refinement of their sales funnels over time are of higher quality and cost less than anyone else can produce them.
“Any business is going to have competition,” Maroney says, “But if you’re going to be a successful business, you have to exploit your competitive edge. I think we’ve got several, but ours is primarily our ability to seek out and negotiate very lucrative deals with large scale, high volume networks. In that regard, we separated ourselves from our competition really quickly. We have CEOs of advertising networks who personally talk to us where most of our competitors would get some third or fourth level representative or an affiliate manager talking to them.”
OPM is an industry with many players that distinguish themselves with subtle variations on the affiliate advertising format first pioneered by Amazon.com. As much as 40% of the goods sold on Amazon.com are sold by affiliates, accounting for up to 12% of the company’s revenues, which last year totalled an astounding $74.5 billion. These affiliates-literally hundreds of thousands of people with funnels and capture pages, websites and blogs around the world-help to promote the myriad products available for purchase at Amazon.com. Any sales they generate lead to a commission for the affiliate.
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“That was kind of the beginning of an industry that was based on performance and results,” Maroney says. “What we did differently was we said, “I’ll bet there are some economies of scale and I’ll bet if we could go in and buy all of the media in a particular niche, and generate a large volume of these results, then there might be some specific advantages for us where we’d make more money than the mom and pop blogger that was trying to do it in the cottage industry.”
It turns out that Maroney was right beyond even his own expectations.
Not only did the larger programs prove to be successful, but by creating such high volume affiliate campaigns Harbor City became a favourite of the advertising networks and their clients. The larger volume translated into more favourable terms from the advertising networks, lower costs and better commissions.
Additionally, advertisers, impressed by Harbor City’s remarkable success, were willing to make payouts faster. Whereas small affiliates get paid every thirty to sixty days, Harbour City typically receives a wire payment within two to seven days of a campaign. This meant more campaigns, more turns on capital and greater profits as the capital and ROI from Harbor City’s increasingly large campaigns was in play more often, rather than being held in an advertiser’s accounts.
Shortly after launching the company in 2013, Maroney realised he “had a tiger by the tail.” He began to seek out investors to provide the capital necessary to further increase the volume of the marketing campaigns. Harbor City has since partnered with Hong Kong-based venture capital company called Global DMA518 Ltd, that will raise up to $100 million to ramp up the capital at Harbor City’s disposal.
By Maroney’s account, 2014 was a bumper year for the company. In 2013, the company set capital raising targets for the next three years: $5 million by the end of 2014, $10 million by the end of 2015 and $25 million by the end of 2016.
“Here we are in early February 2015 and within the next two and a half months we’ll be at $10 million,” Maroney exudes. “We beat our first year goal by a month-we did it in 11 months. We will beat our second year goal probably within the first 4 months of the year. And we’ll beat our third target by the end of 2015, almost a year ahead of schedule.”
In a world of low investment returns, Harbor City has distinguished itself by its ability to consistently prove you can have high, double digit returns with minimal risk. The difference, Maroney says, is that Digital Marketing Arbitrage is a highly trackable process, so unlike conventional advertising, the success of a DMA campaign can be monitored, tweaked and made profitable every single time.
Maroney compares his online performance marketing campaigns to a Super Bowl advertisement. “Super Bowl advertisements have become an industry unto themselves,” he says. “People pay huge, huge sums of money for these ads. Some are funny, some are emotionally evocative, but, as far as I know, never have any of the advertising agencies who run those ads used any significant measurements to test their efficacy. I mean, did those ads actually generate a profit or a return on investment? Not likely… that is a pure branding exercise great for egos but not bottom lines!”
Conversely, Harbor City operates in the performance space, where advertisers and affiliates must prove the success of their campaigns by providing the advertiser with a specific, measurable result, such as a filled out form, an email address or a sale.
“In the online space, our links are all trackable,” Maroney goes on to explain. “If you’ve ever spent a dollar in online advertising in the pay per click advertising space, not only is it trackable and not only do you know if it produced a result and got an ROI, but you actually didn’t have to pay for it until it fully generated a result. Until it generated a click.”
Each marketing campaign run by Harbor City begins with market testing. Maroney says that marketers have to be “absolutely obsessed” with testing in every aspect of a campaign.
“That’s the cool thing about marketing,” he says. “You’ve got an ad out there and that ad can have countless variables that can be tested. Then you have a landing page that has a headline on that page, you’ve got copy, placement of your hook, links that lead to your opt-in page, or whatever your offer is. You’ve got colors to test. You can have a sidebar on the left versus sidebar on the right. It can have links at the top versus no links. You can have a logo versus a straight text name.
“You’re talking multiple steps, multiple variables and that’s what makes what we’re doing exciting, because one little change can move the dial two or three points and that change in volume can have a dramatic impact on your bottom line.”
To compete in the increasingly competitive online performance space, Maroney has had to focus his efforts on rapid growth. To do so, he’s focused on three aspects of the company that distinguish it from its competitors.
“Our secret sauce is about people and then it’s the systems and then the tools,” he says. “I decided, about 6 months into this business, that instead of trying to go out and buy or hire racehorses we were going to raise our own. So we’ve trained the people, created the checklists and systems and the back end system and all this has allowed us to manage the campaigns we’re running so effectively, where we’re bringing a lead in for $2.50 and selling it for $7.”
If a campaign set up by Harbor City underperforms, Maroney says, there are a lot of options available to his team to tweak the campaign and make it profitable. “When we are watching the numbers on the first test of a campaign and we see something performing less than optimally,” he explains, “we can slow it down, we can reduce the budget, or we can pause it. We can tweak the messaging or the imaging. Or, if it’s an email buy and if it’s still in the process of being sent, we could pause the send.”
Compare that with conventional advertising where tens or hundreds of thousands of dollars, and sometimes even millions of dollars, are spent with little concrete evidence of return on investment.
This accountability helps to explain the rising popularity of OPM. Once dismissed as a niche form of online sales that generated only “silly commissions” OPM has, since 2006, been the preferred format for online advertisers. In its 2014 review of the US internet advertising industry, PwC stated that online performance marketing now accounts for an estimated 65% of revenues generated or about $27 billion in the US annually.
With such a huge market at his disposal, Maroney’s excitement is palpable. Every new dollar invested into the company is put straight to work he says. “We have a lot of offers that are actually running at 10% to 20% of their capacity. The moment we get new capital in, it goes towards those campaigns, to scale them and throttle them up. There is no testing done with investor money, that money is never at risk, since the campaigns have already been repeatedly tested. That’s one of the beauties of having multiple campaigns and a pipeline of offers that are constantly going online.”
Maroney, a 25-year entrepreneur with a colorful pedigree that boasts everything from publishing and real estate to textiles and training, says he came up with the idea over the course of a decade of watching the online advertising space grow and evolve.
“There have been plenty of people that have built investments funds, and there have been plenty of people that have done online performance marketing, but as far as I know, no one ever combined the two,” he says. “I consider myself very, very fortunate to have stumbled across an idea that worked so successfully. With online marketing, online advertising, your up-front risk is negligible at best. It’s almost nonexistent.”