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Millionaire Internet marketing entrepreneurs thrive in San Diego

20 November 2009 No Comment

By Helen Kaiao Chang

See original story on SDNN

Tuesday, September 29, 2009

Internet entrepreneur Jason Moffatt works about five hours per week and makes more than $200,000 a year.

His dirty-blonde hair has that windswept look; his arms are covered with tattoos; and his typical work attire is T-shirt, shorts and flip flops. He spends most of his free time surfing.

In the next several months, he expects to make about $500,000 on a new Internet product he will launch.

Yes, it sounds like a dream life. But this guy is for real.

Surfing in San Diego

Moffatt, 34, is one of a growing number of Internet marketing entrepreneurs who have moved to San Diego in recent years — drawn by sand, sky and surf. These entrepreneurs make money selling products online, while teaching others how to do the same.

The products are mostly information goods – books, ebooks, CDs, DVDs, events. They also make money selling other people’s products through affiliate marketing to their databases.

The other entrepreneurs in Moffatt’s circle are legions in this growing industry: Frank KernAndy JenkinsJohn ReesePaul LembergMike KoenigsMatt TrainerAmish Shah and Bob Serling. They mostly live along the North County coast. Many, like Moffatt, spend their free time surfing.

Among his peers, Moffatt is on the low end of the earning pole. His buddies, according to Moffatt, make anywhere from $1 million to $20 million a year.

John Reese made $1 million in one day launching a product called “Traffic Secrets” in 2006. After that, others started breaking the $1 million a day barrier, said Moffatt. One guy made $1.4 million in six hours in 2007.

“I’ve seen it in their PayPal accounts,” said Moffat. “Those guys have money coming out of their ears, wallets, and any crevice you can find.”

Internet hotbed

San Diego is becoming a “hotbed” of Internet marketing experts, said Kevin Koskella, a full-time Internet entrepreneur and organizer of the San Diego Internet Marketers Meetup group, which has about 100 members. This is because San Diego’s lifestyle is more conducive to flexible jobs selling to global consumers, than corporate geography-specific jobs.

Koskella said he is not personally familiar with Moffatt’s network of marketers, though he has heard many of their names mentioned in Meetup gatherings. Koskella also happens to be on Moffatt’s e-mail list, which he never opens. “I’m on a lot of newsletters that I don’t look at,” he said.

Koskella has also met Kern, while both were surfing in La Jolla Shores.

“Frank Kern is one of the biggest names in the industry,” Koskella said.

How they do it

For many Internet entrepreneurs, the goal is to live a lifestyle espoused in The 4-Hour Workweek, by Timothy Ferriss. The bestselling business book talks about pursuing a passionate life, working few hours, and generating income through Web sites by using virtual assistants, outsourcing and Google ads.

In San Diego, these guys are doing it.

“The sky’s the limit,” said Koskella. “If you get into the right topic and the right niche, you can make a ton of money.”

41 Web sites

Moffatt began trading online in 2005, and by early this year, had 41 Web site businesses. They generate anywhere from $200 to $120,000 per site annually.

In recent months, he has been preparing for a new aggregate site, which he projects will make $500,000 in one week. Another new site he and two business partners will launch is an online game – a scavenger hunt, called Find that Tweet.

“This could be huge,” Moffatt said, declining to give numbers.

Database marketing

Moffatt graciously let me visit his home office in Carlsbad, where we logged onto some of his sites and poured over his Web, PayPal and ClickBank accounts.

Moffatt markets these sites mostly through free e-mail newsletters, blogs, affiliate links and copy embedded with words that users search – called SEO keywords.

He currently has 40 databases of about 25,000 people total – sizeable by Internet marketing standards, according to Koskella. They follow Moffatt through his blogs and newsletters, which create enough loyal customers who buy his products.

Moffatt is now at a point where he can generate sales just by writing a few e-mails to his database.

Affiliate income

Depending on the promotion, Moffat has made anywhere from $40 to $40,000 a day, he said. His top three sites grossed more than $200,000 combined in the last year.

The big ticket item was Moffatt’s affiliate site selling Frank Kern’s marketing products, which is only open during certain marketing periods of the year.  Affiliates are like sales agents who earn a commission from selling other people’s products to their database of customers. For this particular product, Moffatt earns 50 percent.

For approximately 18 months from March 2008 to August 2009, commissions for Moffatt from this affiliate site was $108,811.68, minus $13,815.28 in refunds, according to records shown to SDNN. That left a net payment for Moffatt of $94,996.40.

Ebook income

On another site, Moffatt’s made about $36,000 in the last 12 months, records showed. This site is about playing poker and offers an eBook for $47 to $97, depending on the promotion. Moffatt started the site about four years ago and has built a following of about 12,000 on this particular database.

Moffatt’s remaining Web sites bring in anywhere from $200 to $40,000 per site annually. He could probably make more, but he focuses on the ones that make the most dollars for the least amount of effort, he said.

Surfing vs. working

Despite financial success, Moffatt said his lifestyle is more important.

“Could I make $10 million a year? Absolutely,” he said. “If I were to sit in an office five days a week and do what I do all day, and I didn’t make at least $5 million I would feel really let down.

“But that (goes against) my whole persona,” he said. “I don’t’ like to work. I’m a slacker. That’s kind of what I’ve made money on — banking on being a slacker kid.”

Content sources

Some of Moffatt’s Web sites offer information that he himself created – such as how to play poker or how to use video online.

Other sites are based on other people’s content. For example, photoshopguides.com mostly consists of user-generated content – information provided by visitors to the site. The free tutorials attract readers, while advertising and Photoshop products sold on the site bring in revenue.

Moffatt does a balancing act between giving away free content and selling products.

“We’re constantly trying to find something that (consumers) will buy,” he said.

Virtual assistants

Like many Internet entrepreneurs, Moffatt leverages his time and expertise as much as possible. To build and maintain his sites, he uses two virtual assistants, a designer in India and a full-time customer service representative in Hillcrest, who appears via live video stream on one of his sites.

Compulsive shoppers

Many of Moffatt’s customers are compulsive shoppers. Among the customers who buy his online marketing courses, only 5 percent become successful selling products to other people, he said.

Based on the analytics, he estimates that another 5 percent never open the course materials; 50 percent open, but never use them; and 45 percent try, but fail.

Why do so many fail?

“They’re not likeable, not believable or they’re selling shoddy products,” he said.

“Or they don’t learn to market the products effectively. Sometimes people with shoddy products sell more than people with great products, just because they know how to market them.”

Trustworthy personas

As an Internet marketing coach hired by celebrity trainers and motivational speakers, Moffatt has had clients with great products and marketing copy, but sales are still low.

Their personas lack likeability or charisma, so customers don’t trust them enough to buy, he said. In these cases, Moffatt tells clients: “You have to work on you.”

More competition

Going forward, Moffatt sees more competition, as Internet shopping gains popularity and more laid off workers go online to make money.

Moffatt also foresees more government restrictions, “and rightly so,” he said. Businesses will need to have more transparency, as social media gains popularity and creates instant feedback from consumers, he said.

Congress and the Federal Trade Commission are also considering various measures, which will regulate online advertising and marketing behavior. Moffatt’s mentor Kern has already had run-ins with the FTC. In 2003, the FTC filed a lawsuit against Kern for “false and misleading income claims.”

But this created more fodder for Kern’s blogs and has not stopped Kern from growing his business online.

Koskella of the Meetup group said, “It’s not a red flag,” noting that such FTC filings are not uncommon in the business.

More collaboration

Moffatt said the increased competition, regulation and transparency can also help Internet businesses. It will force people to collaborate, such as with affiliate programs to cross-sell and cross-promote products, he said.

Despite the competition, Moffatt believes a few expert marketers will continue to lead the pack, because they have pioneered the industry. And they have put in their time, he said.

Moffatt said part of the reason he is able to work so few hours and make so much money now is because of the long hours he’s spent in previous years.

“The surfing image is because we have worked our asses off,” he said.

Living in the “now”

Moffatt grew up in a lower-middle class family in Portland, Ore., where the family sometimes needed food assistance. As a teenager inspired by violent rap music and TV shows, he got involved in drugs, guns and theft.

In his early 20s, fed up with crime, Moffatt started reading books a friend gave him. The books were by Osho, a controversial Indian spiritual teacher who started an ashram in Oregon in the 1980s. For two years, the young man devoured the books and began to meditate.

This taught Moffatt to “live in the now” and “watch my thoughts,” he said. “It’s real simple, you know: Love people, do good, be nice — even to the ones that you might not want to be nice to or love.”

Throughout his 20s, Moffatt worked variously as a street magician, private investigator, and cable salesperson.

Today, Moffatt lives with his girlfriend in Carlsbad, in a five-bedroom house overlooking the ocean. He pays $4,000 in rent, whereas the landlord pays $8,000 for the mortgage, he said. He also owns a house in Portland.

On a tour of the house, Moffatt showed off the balcony view of the beach, the granite-covered kitchen, the music room, where he keeps his guitars, the yoga room with weights, and the garage, where he stores his dozen or so surfboards.

Marketing and spirituality

But Moffatt’s marketing efforts sometimes clash with his spiritual beliefs.

“I love it and I hate it,” he said.

“I hate it because I don’t necessarily like taking money from people, but I love it because we give so much value to people. I hate it because a lot of people don’t do well. And I love it because I see a small group of people that do do well, and I watch it affect their lives, their kids’ lives, the people around them. I watch how people are able to contribute to charities and stuff.”

“The money is cool because it does allow you to do the things you’ve always wanted to do,” he said. “But it’s just money. More money is not going to make a difference in my life.

“However, it can make a difference in other’s people lives. Money can definitely allow me to help other people out. If you have an excess of money and you’re looking at people who can’t even eat, that’s no fun.”

See related stories:

San Diego’s Internet entrepreneurs find new income streams

Small businesses use social media to attract customers

Follow Helen on Twitter @helenchang.

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