Not to brag, but I’m a pretty darn good poker player. If I enter a tournament, I usually end up “in the money” (usually the top 10% gets a payout). If a sit down at a regular table in Vegas, I usually walk away with a few hundred dollars after just a few hours.
Why am I so good? Basically, it comes down to three core principles that I bring to my poker playing:
1. Poker is not about “luck” but it is about statistics.
2. Never get emotional.
3. Study your competitors.
The truth is, none of these principles are that secret or complicated, but the other truth is that most people that play poker either don’t accept these principles or aren’t disciplined enough to follow them.
And it turns out, if you follow these same three principles in online advertising, you can also guarantee success. Let me explain them each one by one.
1. Online advertising is not about luck, it’s about statistics.
Anyone who thinks poker is a game of chance is the type of idiot I want sitting at my table. Of course it’s true that you can have a great night of poker simply by getting a royal flush every time you get dealt a hand, and you can also have a terrible night if another player always gets lucky at the last possible minute and beats you.
In the long run, however, consistently profitable poker players make money by maximizing profit when they have great cards and minimizing losses when they have bad cards. And they do this through statistics. Thus, if I am playing Texas Hold ‘Em and I start with a pair of aces in my hand, I know that – statistically – I have a high chance of winning, so I bet like crazy (or I use some sort of bluffing strategy to get other people to bet like crazy for me). On the other hand, if I start with a 2-7 unsuited (the worst possible hand), I fold immediately. I never want to be in a hand where I am starting at a disadvantage and can only hope to win if I get ‘lucky.’
In other words, great players make a lot of money when they are ‘lucky’ and conserve a lot of money when they aren’t. Bad players, on the other hand, make a little less money when they are lucky (because they aren’t doing the math, they probably don’t realize just how good their hand is) and they lose a lot more money on their bad hands (one of the worst mistakes I see is a player staying in with terrible cards in the hopes of getting a ‘miracle card’ at the last minute. It works 10% of the time and the player is exhilarated at the come-from-behind victory, but at the end of the night the 90% of the time that it doesn’t work ends up depleting the player’s wallet).
The same is true for online advertising. When you analyze your data and you find a keyword/publisher/ad text/bid or combination of these data points that is profitable for you, you’ve got to maximize your profit, either through keyword expansion, increased bids, improved ad text, etc. And if you find that there are some ads that just don’t seem to work for you, cut your losses and fold! Don’t be like the guy that ‘wins’ $10 on one ad but losses $90 on nine others!
One important tangent to point out here: to be successful at either online advertising or poker, you’ve got to have complete transparency into your data and your goals. Imagine what would happen if you sat down to a poker table and everyone could see their cards but you? Or imagine that you could see your cards, but you didn’t know the rankings of different poker hands (for example, is a full house better than a pair?).
Sadly, many online advertisers are faced with this predicament. The solution is to develop internal reporting and internal goals for your advertising. At a minimum, you need to get the same transparency that your competitors get; ideally, you want to do even better (imagine what would happen in a poker game if only you could see the next card to be dealt, or – even better- if you could see all your competitors’ hands!)
You also need to define success. Good poker players set hourly objectives for themselves, like “I’m going to play for no more than four hours and try to make $150 an hour.” When they hit their objectives, they leave. Bad players sit down without a strategy. They usually end up on a roller-coaster ride and usually end up leaving the table long after they hit a peak.
So work with your company to set monthly goals for advertising. Do you want to drive a certain number of visitors at a specific cost? Or a minimum level of profit dollars? A certain margin percentage? If you don’t set goals, how do you know if you are winning?
2. Never get emotional
The world’s best poker players never get too excited when they win a big hand, and never get too angry when they lose a big hand. To prove this point, a televised poker show recently started hooking up players to heart-rate monitors. Sure enough, the best players are about as calm when they are sipping water as they are when $100,000 is on the line.
There’s two benefits to not getting emotional in poker. First, when you get emotional, your physiology changes, which can lead to “tells” that other players can use to determine if you have a good or bad hand (an example from one Web site: “Trembling Hands. The trembling of hands is a sign of anxiety. Beware of players that are trembling, it is a sign of a monster hand in many cases.”
Second, and I believe more importantly, is that when you get emotional in poker, you tend to make bad decisions. For example, when a player loses a few close hands and starts to see their chips decline, they often go “on tilt”. This almost always ends badly for the player (but potentially nicely for you!) as they start betting aggressively on every hand, out of a combination of angry and desperation. As it is nicely described on Wikipedia:
lt is a poker term for a state of mental confusion or frustration in which a player knowingly adopts a sub-optimal, over-aggressive strategy. Placing an opponent on tilt or dealing with being on tilt oneself is one of the most important aspects of poker. It is a relatively frequent occurrence, due to frustration, animosity against other players, or simple bad luck. Experienced players recommend learning to recognize that one is experiencing tilt and to avoid allowing it to influence one’s play.
In online advertising, you are constantly making ‘bets’ about which ads will work for you. Most of your bets are actually going to fail, but in the aggregate you will win. For example, if you buy 100 clicks on a specific keyword, the odds are that 90-95 of these won’t drive any sales to your Web site, but the five to 10 that do will drive enough profit to make up for your ‘bad bets.’
There will also be times, however, when your bets don’t pan out. In such cases, you can’t get angry or emotional, you have to chalk it up to learning and move on.
Here are a few more situations where you need to make sure that emotion doesn’t get in the way of cold, hard facts:
- The friendly sales rep. It’s always hard to say no to someone, especially if that someone is particularly nice or attractive. One person I know told me that he never goes out to lunch with sales reps or accepts any gifts, because he doesn’t want to feel obligated at all. I don’t take it to that extreme, but I do agree with the underlying point.
- Bad customer service. Sometimes there’s an ad outlet with great ROI but terrible employees. For example, 90% of the time you make a lot of money but every once in a while a wave of click fraud sweeps in and costs you big time. When you call the company, they feign ignorance or flat-out refuse to talk about a refund. As much as it sucks, swallow your pride and continue to advertise with the company if it makes you money.
- Clever advertising. Don’t get caught up in your wonderful creativity. For example, I once created an ad text for a dieting site that said “Why wait to lose weight?” I thought the double-entendre was super-clever. Sadly, consumers did not. Admit defeat and move on!
3. Study your competitors
Poker is the most profitable game in a casino simply because you aren’t really playing against the casino – instead you are playing against humans. And – as humans – we know that humans make mistakes and bad decisions.
You can learn a lot about a competitor at a poker table in the first 30 minutes that you sit down. Do they understand the rules? Is this their first time playing at a casino? Do they have certain ‘tells’ when they bet? Are they drunk? Do they bluff way too much?
In online poker, you can even take notes about players and track them over many months. This is incredibly valuable information. When I played online, I’d write notes like “if the guy has an ace showing, he always raises, so don’t assume that he has good cards” or, “will only stay in for two betting rounds if he is guaranteed to win. Fold immediately!” This kind of information enables me to maximize profit and minimize gain on a player-by-player basis.
In online advertising, the same rules apply. What are your competitors writing in their ads? What do their landing pages look like? What promotions are they offering? All of this is readily available to you and should be used to your advantage.
One other great parallel to poker is to determine where the best advertisers/players are or are not present. In Las Vegas, for example, there are some casino poker rooms that are mostly filled with tourists from out of town, and others that are filled with the pros. Who would you rather play poker against – a World Series of Poker champion, or Jim-Bob from Des Moines who’s in town for the patio furniture distributors’ conference?
In online advertising, there are some distribution channels that are almost entirely dominated by the pros but others that are either too small or yet-to-be-discovered by the experts. Ideally, you want to be able to compete in both arenas, but I assure you if you can find good distribution channels before the other pros, you can make a killing (basically a form of arbitrage).
These days I don’t play that much poker. Online poker has all-but-disappeared thanks to the US government, and I don’t really have the patience anymore for Vegas poker rooms (basically they are just too slow as compared to online).
The good news, however, is that online advertising is actually a lot more profitable than poker, and you don’t have to spend five hours in a smoke-filled gambling hall to earn your wages!
Final Note: My two favorite books on poker: Winning Poker for the Serious Player and The Theory of Poker.