some good advice
Real Revenue Model Statistics For Small Websites
We analyzed 100 recent small website sales to get some hard numbers around why some sites make more than others. The expected profit of a small website can be predicted by analyzing the audience, content type, and revenue model.
This article is the full version of our website revenue model analysis. For those of you in a hurry to play with some numbers, we packaged up the ideas behind this article in a website revenue estimator. This tool will estimate the revenue for your website and suggests appropriate strategies for increasing the value of your business.
There were three key metrics we looked at
- Average Valuation: Sale Price as a multiple of monthly profit
- Average Profit / Visitor – Profit per Unique Monthly Visitor. Provides insight into the intrinsic value of the website’s traffic. It also is a constraint on using PPC campaigns to rapidly scale your traffic.
- Average Profit / 1K pageviews (aka RPM) – Profit per mille; the relevant metric for advertising supported websites. Content sites are fixated on this metric.
We started by segmenting the websites into four groups based on the “buying interest” of their traffic. In rating a site, we evaluated three factors about the site’s audience.
- Audience Type: Is the audience a cross-section of the general public (0 points ) or a targeted audience where we can identify a relevant offers (1 point)?
- Conversion Value: If we can identify a target audience and offer, will advertisers pay a little (0 points) or a lot (1 point) for incoming clicks from this audience? If the site sells their own product or service, we gave them the point since the site will enjoy a greater share of the revenue generated by any sales.
- Buying funnel Position: If we can identify a target audience and set of offers, are they close to making a purchase (Yes = 1 point, No = 0 points)?
Casual Visitors (0 points)
Wallets (1 point)
Whales (2 points)
Motivated Buyers (3 points)
It is possible to make significant amounts of money in each of these audiences. Your objective should be to focus your promotion strategy and revenue goals so they are appropriate to the your target audience. Once you’ve solved for the big picture, you can define segments and customer groups as good / bad based on how they fit into your strategy.
Revenue Model Comparisons
Our next cut of data looked at revenue performance by site type.
You can cluster this into three broad sets:
- Blogs – content based sites which require a regular stream of new articles
- Content – content sites that can be managed as a process once you have established an appropriate level of traffic. Where possible, we deducted a “management cost” if regular upkeep was required.
- Product/Service Sites – built around buying / selling a product or service.
Some insights from this data:
- For those of you with “casual” audience types, your revenue per visitor will stink. Small sites should consider simplifying their objectives. Implement a managed advertising program and spend your time figuring out how to get more traffic…
- However, be ready to take advantage of the promotional value of a big “casual” content site. The top sites in this space padded their earnings by developing sponsorship / direct ad deals, doing paid articles, and other promotional support. This approach earned them about 60% more than a typical managed ads deal.
- Websites with high value traffic (eg. “wallets” and “whales”) should consider building an affiliate marketing program. The lead generation model was an absolute powerhouse.
- Promoting your own Products and Services crushes all of the advertising models. If you have an idea for a product in your niche, test it! Imagine going from a $3 – $10 RPM to an RPM of $150 by launching your own product.
Deming, one of the founders of the modern quality movement, once said:
85% of a worker’s effectiveness is determined by the system he works within, only 15% by his own skill.
The same concept applies to your site’s earnings. Think about how you’re positioning your site from a strategic perspective. What level of “buying interest” are your targeting? How deeply do you want to market to your visitors? Then set appropriate goals.
Profitable websites exist targeting each of these traffic types. You need to understand where your site fits into this model and market accordingly. Market too soft and you will leave money on the table. Market too aggressively and you will lose your audience.