Supernatural Agency: Online business tales

Running the numbers on a developed site can be a little confusing but understanding how they work can really help you value a site and determine where to spend your time and money.

We track Adsense on quite a few sites. Here’s how I parse the data:

• Make sure you set up channels for each site and ad unit. This is absolutely essential.
• Look at your thirty day totals by channel/site to determine highest performing site(s)
• Remember that Google measures by impression not page view. Three units per page (the max they allow) means 3 impressions per page view
• Google eCPM rate is your earnings per 1000 impressions. If you have three units per page then you have to triple that number to get your average revenue per page view

An example: We have a top performing site that, using the tools above, returns 4.8 cents per page view or $48 per 1000 page views. This was surprising to me but the knowledge meant that we needed to focus a lot more attention on driving traffic to this site since even a slight daily bump adds up really fast.

The same site averages 2.9 page views per visit so a visit is worth an average of $.14. A thousand visits a day is worth around $140 so spending anything up to that amount daily to drive traffic is worth it, remembering that sites generating $50,000 in annual revenues (which is about what those 1000 visits per day gets you) are worth a multiple of those revenues to a buyer, probably at least $300k. You could argue that spending far more to drive traffic makes sense because you’re losing in the short term (aka, investing) but building equity in the long term.

Know your numbers- you can easily set up a spreadsheet to track them.

BTW, the site I’m using as an example is in an enormous, information-hungry consumer market involving a lot of spending. I’ve also left affiliate revenue out of the equation to simplify things.

It is increasingly apparent to me that we curently have two distinct business models on the web. Online applications including search, e-commerce, productivity and information management are replacing the antiquidated desktop proprietary software model. The challenges with this model are monetization and scale.

The other model is content delivery or media property development. Here we create sites that either deliver news or vertical-interest information including social components. Monetization is naturalized due to the relevancy algorithms used by ad networks and search advertising. The challenge is the creation of highly relevant and profitable content combined with developing traffic.

Semantic search is going to combine these two models in ways that will make them indistinguishable to the user. A query involving a potential shopping decision already combines search, reviews, specifications, pricing and transaction-capability, vis a vis Amazon. Hundreds or even thousands of web resources are utilized in these semantic searches and combined to create an idealized response, one that completes the search in one destination. Understanding and building these semantic destinations will be the new Internet business model.

Are we domainers or web site owners? Are we in the media business or trading commodities? Are we more interested in the value of a domain or the site associated with that domain?

Increasingly as I’ve been participating in the domain blogosphere I end up asking myself these questions. Unlike many domainers we came into this as hard core Internet marketers and site developers (one partner) and content developers (me). I have to admit that it seems stupid to me to buy very marginal domains, park them and then flip them as opposed to development. Yet I have to admit that what got me into this originally a few years ago was selling a domain I’d registered a month earlier for $3000, a 3000% gain. That’s not bad except…that domain, developed as envisioned, would be worth a lot more than that now.

So I think we’re coming full circle and viewing ourselves as an online media network rather than as domain investors. We’ve bought domains based on this model and bought domains just because they would get type-in traffic. In doing an analysis of our portfolios, the obvious priority, given our strengths is to develop the strong domains, those with an obvious long term value as media properties, and sit on the rest. Maybe we’ll hold a garage sale: Anyone interested in GetLaidEveryNight.com? We bought it but it doesn’t interest us much at this point.

We’ve been developing a site at KitchenDesignInsights.com. It’s not a type-in domain but it is a brandable site and the revenue and traffic potential is off the charts. As a domain this might be worth 4-low 5 figures. As a fully functioning media property a year from now with good traffic and sponsors, affiliates, etc., how much will it be worth? Suppose it were throwing off $10k/month, maybe with a major appliance site sponsor like SubZero or GE?

It is common wisdom that the first thing to scale back during downtimes is your marketing budget.
This is screwy for a number of reasons and can be downright dangerous to the future of the business. Here’s why:

• Typically, by the time we know we’re in a recession it has been going on for several months.
• The average recession lasts around eight months.
• The lead time for effectiveness of any marketing campaign including online is 2-6 months. Last year we had a Google rep tell us that you cannot judge the effectiveness of PPC until it has been running at least six weeks. Of course he would not give details and it’s in their interest to encourage long tests, but I can see the logic.
• If you stop or cut back your marketing during a downtime you’re cutting off your nose to spite your face. Let’s say I decide I’m in a recession and business is down so I need to economize. I cut back drastically on my marketing. Since I probably stalled on my decision while trying to figure out whether we really were in a recession let’s assume that four months of the actual recession have passed when I cut bait. Three months later things are looking up so I start ramping up again.

A month later the recession ends and business starts to swing upward but my marketing has two more months to regain a foothold. I lose a potential big burst of business optimism because my market needs to learn over again that I’m around to do business with.

Lesson: We are marketing now for sales later. Reacting to situations now in ways that hurt us later is bad strategy. You’d be better off increasing your marketing at that point when things seem to be at the bottom so you can have a head-start when the up cycle begins anew.