There’s a bonus I’ve seen some people offering that I wanted to warn you about.

Some people are offering “your own opt-in list of 100,000″ or some other large number.

People keep telling you the money is in the list, so these offers might look tempting. No doubt you’ve heard of people who have a list of 100,000 or more who make a fortune from it and might think this offer is a way to get yourself to that level.

Sometimes in business it makes sense to buy things rather than doing them yourselves- for example, you can pay people to get links to your site, to write articles for you, and so on, trading your money to save time, both personal work hours and calendar time.

A list like this might look to some like this type of opportunity, so I am writing this to correct that impression.

There are many reasons I would steer clear of these lists.

First, they aren’t your list. You’ll see in the fine print that they are being given to several people.

These subscribers did not sign up for your list and probably have never heard of you, your website, or your product. So what do you think will happen if you start emailing them?

Many people will assume your messages are spam or at least resent getting them since they never signed up to get email from you.

A list like this might technically be opt-in since the people did subscribe to something. However they never opted in to YOUR list, and that is the key problem, ethically, legally, and in terms of effectiveness.

Such a list of 100,000 is nowhere near the same thing as a list of 100,000 you built yourself the right way (by getting people to fill out a form to get info on a specific subject from you). In fact, I’d rather have a list of 500 people built the right way than one of these lists of 100,000.

These lists are NOT the same ones the guru offering them to you sends his messages to- they would never give up their good list.

Also consider that you are being offered the list for a cheap price, usually as a bonus to some product that costs a few hundred dollars.

If the list is any good, why is it being offered for so little? Why doesn’t the person just keep it and mail to it himself?

The answer to both is that the list is not worth much.

If you get a list like this, one of the first things you’ll learn is that most autoresponder companies (like aweber) won’t let you use it with their service. Some will, but you will have to import it very slowly, so it will take a long time to get the whole list into the system. The longer you wait to contact people, the less effective the list will be.

You may decide to go the route of using an autoresponder script on your server to get around this. If you don’t already have a script, there’s another expense to be able to use your new list.

Then if you have shared hosting (what most people have), you may find your account shut down once the spam complaints start flowing in. Plus the odds are high your IP address will quickly get blacklisted and a big percentage of your messages will never get delivered.

One of the great things about a service like aweber is that since the emails get sent from their servers, the spam complaints go to them, not your hosting company. And no matter how you build your list, you will get some spam complaints – some email providers make it too easy to make complaints by pressing one button (easy to do by mistake). Plus some people are just idiots and sign up for your list, then make a spam complaint anyway instead of just unsubscribing.

Once you go with an autoresponder script on your server, you might decide to go with a dedicated server, which gives you more control and protects you from someone else’s activities getting your emails blacklisted.

Have you priced dedicated servers lately? They can run a few hundred dollars a month, and if you don’t already have one it would be a big waste to get one just so you can use your new list of 100,000. You’d be lucky to make enough to pay for the server.

By now you may be wondering how these lists are created. Usually there is a website with a signup form with a fairly generic offer on it, such as “Please send me info on work at home opportunities.” Then lots of traffic is sent to that page and eventually lots of people sign up. The offer is intentionally broad and vague so it will cover lots of different areas, so later it can be claimed that people opted in for the messages.

Sure, technically they did opt in, but most people who fill out the form probably expect to hear from one company, not to have their info passed around to a bunch of others who will send them email. What privacy policy was stated? You don’t know.

Think about it- terms like “work at home” or “business opportunity” could cover anything from babysitting to stuffing envelopes to ebay or any of 1000 other things. That means the list is highly untargeted from the beginning. When you add in the fact that the people don’t know you and don’t recall asking for info from you, the list is about as effective as going door to door to sell stuff.

What if your niche is something like pets, travel, or health? Then the list of “opportunity seekers” or “home business” people is even less targeted.

Let me give you an example of something I tried long ago that illustrates just how useless these lists are. I found a service that offered to send me subscribers cheap- something like 500 subscribers for under $50. And I got to provide the name and description of my list, which people would see on the page where they could subscribe. So these would be only people who saw my description and checked a box indicating they wanted to be on my list.

These subscribers were delivered right to my autoresponder. Out of 500, how many do you think confirmed their address? I think it was literally 2 or 3 people. That’s not even 1%, and remember they had seen the exact description of my list.

So just imagine how much worse the numbers would be if they hadn’t seen my description, just a generic one.

I was able to see the unconfirmed names and addresses, and many of them were obviously fake – many obscene and unprintable. You have to wonder why, since these people were not offered any gifts or incentives to sign up.

The service DID send me 500, but as I said the number who actually confirmed was so low that it wasn’t worth the time it took me to sign up for the service, let alone the money I spent.

Again I would avoid any lists someone offers to sell you cheap, since they are so ineffective, and I would also think twice about buying anything from someone who is providing these lists.

I think they are taking advantage of people’s desire to have a big list fast and lack of knowledge about what the list actually is, just to sell more copies of their main product.

And I think intentionally selling something (even as a bonus) to people when you know it is practically useless to them is a crock.

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There’s a common belief online that selling downloadable products means that your profit margins are 100%. Today I will debunk that myth.

I’m sure this idea comes from the fact that there is no inventory to buy or make, no storage space needed, no packing materials or shipping costs involved, and so on.

But let’s look at the other costs involved.

Unless all your customers are sending you checks or cash in the mail, you’ll have to use a payment processor to take credit card orders, and they will charge a fee.

If you have affiliates or JV partners, about half your retail price is gone right there. (And if you don’t, you are probably missing a lot of sales you could be making.)

So you make all your sales on your own? Are you paying for advertising, such as PPC or ezine ads?

Oh, you’re just relying on free search engine traffic? Did you spend any money to achieve that- maybe by buying links, hiring a freelancer to run a linking campaign or write articles for you, using an SEO company (*cough*), or maybe paying someone $800 a month to teach you?

If not, then you probably put a lot of time into getting and maintaining high enough rankings to get that free traffic.

Maybe you are just marketing to your own lists… if so, you are missing a lot of potential customers. And didn’t you invest some money and/or time into building those lists?

If you’re making 100% profits I assume you are using free hosting, free autoresponders, and so on. You’re either doing all the work yourself or found someone who will work for free, and apparently you (or they) don’t assign any monetary value to time.

You’re probably also running an illegal business if you aren’t spending any money on licenses or taxes.

Let’s look at an example with real (rounded) numbers. A $40 ebook is sold. The payment processor, such as Clickbank, PayPal, 2checkout, or your merchant account, takes $2-4 of that.

Oops, did I call 2checkout a payment processor? How silly of me! It is actually “an authorized retailer of goods and services provided by a vendor”. Even though the only reason you as a marketer would use its services is to process your payments.

And Tony Soprano is in the waste management business.

If an affiliate was involved, there’s another $15-20.

Now we’re down to $16-23 on a $40 sale, without considering any overhead or product development costs or taxes.

Oh, some of my products involve a partner who gets half of the “net”, so on this $40 sale, I’m down to as little as $8 for me on a $40 sale. That’s 20%, quite a bit less than that 100% the others are claiming.

If I used PayPal (cheaper fees), there was no affiliate, and I used a really good PPC ad, I might have $30 out of the $40 left. That’s 75%, before splitting with a partner.

So what’s my point? I’m not here today to demonstrate my math skills, but I have some key things to point out that you should recognize:

1. You (and other people) are not making as much as you think you are. In other words, don’t confuse your sales (gross) with your income (net). I make a lot of sales through PayPal, so when I see $300 or $500 or whatever come in, it’s easy to think I made that much. But I still have to pay for advertising and affiliate commissions and a bunch of other things from that.

It can be tough to tell exactly what you’re really making (i.e., your “take home pay”, what you can actually spend outside of business).

2. Your profit per sale is less than your customer thinks it is, and you should ask yourself how much of your time people are entitled to when they buy a low-priced product. To them, they spent $40 and downloaded the product, so they think you made $40 profit. So some customers think nothing of expecting you to provide hours of free consulting, answering unlimited questions about whatever subject your product covers.

I’m not talking about basic support issues, like people who had downloading problems or lost login info or things like that.

I’m talking about people who buy an ebook on something like weightlifting, and then expect you to set up a customized workout plan just for them, for free.

(Of course, I’m assuming your website doesn’t promise this type of personalized service. If it does, you need to deliver.)

I’ve found that the more questions like this someone asks, the more likely they are to ask for a refund after using all your personal time. It’s sad but true- you might spend several hours over a month answering a dozen questions for someone (most of which are covered in your product), and the thanks you get is having to give back the money. You just went from making Wal-Mart wages to zero.

There’s something about the Internet that raises people’s expectations. In the offline world, nobody would expect this type of free consulting. If you bought a Donald Trump hardcover book, would you think that entitles you to spend an hour or 2 on the phone with him? Or have him personally answer your email questions? Of course not.

Maybe you think Trump is a clown, but you still have to agree it’s pretty silly to expect some of his personal time to be included with your low-priced purchase.

You need to decide how much of your time you’re willing to give in exchange for that $15 or $20 you just netted. Should you have to spend 3 or 4 hours answering questions? I don’t think so, unless you have some back-end consulting program and are providing some free help to get clients into it.

Or maybe you are doing this to get testimonials for a new product, or compiling people’s questions and your answers for a followup product. Those are good ideas.

I know some people will misread this, and say I’m telling you to ignore your customers, not help them, and so on. That’s not the case at all.

I’m not saying don’t answer questions, just keep in mind what you are really making per sale and what your time is worth.

Say you made 10 sales of this product per day that netted you $200. If each customer expected an hour of your time, there’s 10 hours a day right there. When are you going to get your other work done?

Remember, the whole point of selling downloadable products like ebooks is supposed to be that, once the product is created and set up on a site, the sales and delivery is automated so that you can focus on marketing and creating other products.

So why put yourself in a position where you have to all this after-the-sale pro bono consulting?

Even if you love doing it, what happens when you start selling 50 or 100 per day?

3. Keep #2 in mind when you are the customer.

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