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.

Even though we put some Adsense units on this site we never had any expectations for them beyond a few clicks here and there. That’s because readers don’t come to this site with a purchase or product research in mind. The subject matter (Internet marketing and business) isn’t closely associated with buying.

Gawker Media, the big blog network, announced that it was selling off a few assets including Wonkette, a very popular inside Washington political blog that had over 5 million pageviews last month. With that kind of traffic you’d think they’d be crazy to dump an otherwise successful site. My guess is, that with a downturn  economy, a site like Wonkette which never had a strong advertising model- readers go there for opinions and gossip, not shopping, was probably seeing a big drop in ad revenues. I’m guessing their CPMs were in the toilet despite the high traffic.

To make money with a site you have to choose your subject matter carefully. Is the information you’re providing something people seek during a buying process? Are the types of purchases associated with the site Internet e-commerce friendly? Things like books, jewelry, gadgets, courses and other high value, easily shipped, high margin products work best. Things that are heavy, cheap and have low margins like pet supplies, large appliances and groceries don’t cut it.

Is the subject matter information-intensive? If the buying decision is easy you can’t add enough value via a web site or blog. Look at the ads on general news, opinion and lifestyle blogs/sites- they are often big brand ads for cars, insurance and other generic subjects that are neutral in relevance to the content. These kinds of ads generate almost nothing in CPMs (measured in cents per thousand impressions) and contribute to banner blindness.

Getting a formula that delivers higher revenues requires something a lot of Internet media entrepreneurs don’t want to do: hard work. I’m in the process of inserting relevant affiliate text links into the hundreds of articles on one of our kitchen design sites. We have display affiliate ads but they draw very poorly. The text links are carefully chosen for very high relevance but it’s a lot of work:

• Determine what the reader of the article is most likely to be interested in at that moment. I have an article that recommends getting material samples when planning a new kitchen. The reader wants to know where they can get these.
• I go through the various affiliate programs and find a vendor that not only offers samples but pays out for sample requests, in this case $15 for a sample order (because they know that if you have a flooring sample you like you’re likely to order that specific flooring- resulting in a big sale). This takes a lot of time to research.
• I build a text link with the affiliate code that includes the appropriate anchor text. Free Flooring Samples from XYZ, for example
• I choose the appropriate place the article and insert the link text inline with the content. I don’t hide that it is a link (different color) nor do I hide the brand because I want it clear to the search police that I’m offering legitimate relevant content even if it is commercial. And I want the reader to know that I considered their interest, time and needs when selecting this revenue model.

This is a lot of picky busy work but when I’m done I’ll have an information site that is optimized for revenue-generation in a way that the consumer appreciates. And it is sustainable because once the work is done the site is self-sufficient. On to the next one…

This list covers just about everything I’ve ever heard of or thought about for raising cash to get started. If anything it shows the degree of commitment and risk you need to have to get out there and succeed.

This is not an endorsement of all of these techniques!

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.