Justin Cooke

June 9, 2011

Joe and I have discussed over the years how much we like and appreciate free value as users.  From a business perspective, we have huge amounts of respect for those that are able to see the long-term value of building community through social platforms with the intention to monetize as something that comes second, almost as an afterthought.  Many of our favorite programs and tools exploit this and provide massive value through their free or “Freemium” models.  (Think the big guys like Google Apps, DropBox, etc. and the smaller companies like OnlyWire, ListCrew, etc.)  We’ve been thinking about our niche website strategy in terms of user acquisition, comparing the sites themselves to the users and have come up with some interesting ideas we wanted to share.  Hopefully, viewing your approach through this lens may give you some unique perspectives on strategies that help to grow your business as well.

While some of the better known social networking and SaaS sites have exploded their growth by going viral and becoming household names (Twitter, Facebook), many others are resigned to a less organic strategy that includes a cost-per-acquisition (CPA) model for the customers and/or users. (CTR Theme, Market Samurai)  When it comes to monetization, all of these platforms are constantly looking at two things, Lifetime Value of a customer (LTV) and their Cost Per Acquired Customer (CPA).  These companies live and breathe on that margin and are consistently looking for ways to increase their LTV and decrease their CPA to rake in additional profits.

We’ve had some interesting discussions recently with people who argue adamantly that we should have sites that are returning a higher value per month.  Their point is not much different from those who say you should charge more per user, increasing your LTV for the niche sites or users.  While that makes sense on some levels, our strategy is to follow those that have built up HUGE user numbers and then look to improve LTV for all of the users (niche sites) at once and at scale.  Once we have the numbers, any changes we make will be multiplied because of the massive scale at which we operate.  If we can squeeze an additional $3.00 out of each “user” or niche website per month, that’s a significant improvement when you have 500, 1,000, or 3,000 sites.

Here are some of the benefits of having MORE sites (users) that we think compare to those in the social networking or SaaS communities:

  • Less Risk – Having more sites/users creates a level of diversification that’s inherently less risky than having a small group of higher-paying sites/users.
  • Better Data – Our sites/users cover so many different niches that we’re able to look at some interesting numbers across a wide range of categories.
  • Decreased CPA – It’s extremely cost-effective to add to our niches sites or “userbase”.
  • Repeatable process – The fact that the CPA is relatively low and the results can be seen within 2-3 months, this is a relatively simple process to show others how to do and they can quickly see whether or not this is something they’d like to continue with long-term.

After we’ve built a significant network of sites, the thought is to continue to expand AND improve our earnings for all the previous sites we’ve created.  If we can significantly improve our LTV there, we’ll make both production of new sites and expansion of previous sites the priority.  One of the last things we’ve discussed is decreasing the CPA through the use of automation.  With our low-cost labor, we feel this would have the least effect on the margin between LTV and CPA and so we’ll table this for now, but we do have some interesting ideas on automation that we’d like to explore in the future.

What ways do you think are best at improving LTV for minisites?  Do you agree with our strategy to get as many sites (users) as possible and then work on monetizing?  Let us know in the comments below.

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  1. Less Risk – Having more sites/users creates a level of diversification that’s inherently less risky than having a small group of higher-paying sites/users……. Yup we lost 5 clients this month and we will feel the effect of that. If the number of visitors to your sites dropped by 5 people it would make no difference at all. We really need and want to create a services or site that is different to our outsourcing site in that way. We currently offer no free value to our users and maybe that’s something we need to change.

    • JustinWCooke says:

      Hey Matt…I did miss this comment…you’re right! lol

      I agree about offering value to your readers. I think it’s MUCH easier to build an audience first…and the best way to do that is to pile on true value for free. The more information you can give away that’s truly helpful to people and that stands out from the herd, the more successful you’ll be at drawing people in. If you’re able to build a good base of readers/listeners, good things will just happen naturally. You’ll have requests to hire agents, offers for JV’s and partnerships, etc.

      Much of what you guys have done here is VERY specific…but if someone was looking to come to the Philippines for the FIRST time and setup a team, where would they start? Who would they talk to? How would they setup a corporation? How would they get people in for an interview? What should they look for when hiring VA’s? What are some signs of problems that would come in the future? Some of that would only apply specifically to people coming here to setup the business, but some of it would easily apply to those looking to hire a VA remotely as well.

  2. JoshuaG says:

    Also, sorry for being critical! It’s a trait I’m not particularly proud of.

  3. JoshuaG says:

    A discussion of LTV in terms of adsense moniziation on micro niches sites is a bit of a joke. *USUALLY* the nature of your sites is such that users will only be visiting your sites once.

    If you want to increase the LTV of your visitors you need to focus on niches where people will want to return to your site frequently. Which means creating authority sites with lots of content or at least a site with frequently changing content that people wont want to miss. You also have to give visitors reasons to return.

    These niches also need to have fanatics who are continually buying more and learning more about the subject. A hobby site would be a good example of this.

    On these sites you could further increase LTV by changing the layout frequently to prevent ad-blindness.

    With your current business model your LTV lies more with the people who are buying the sites you are flipping for obvious reasons.

    Cheers,
    Joshua G.

    • jwcooke says:

      Joshua,

      Thanks for stopping by!

      I would agree with you if we were comparing our visitors to our niche sites to users, but that’s not the comparison I was trying to make. Instead, I was comparing the sites themselves to “users”…and stating that we should look at increasing the LTV of the actual niche sites.

      In this case, do you feel that comparing the sites (not the people that visit/click on them) to users is a fair comparison?

      • JoshuaG says:

        Ah, yea I kind of misunderstood what you were saying…

        So, I would agree it certainly is a “fair” comparison to make. But it also seems like a completely unnecessary one to make.

        I mean, look at this paragraph as an example:

        “our strategy is to follow those that have built up HUGE user numbers and then look to improve LTV for all of the users (niche sites) at once and at scale. Once we have the numbers, any changes we make will be multiplied because of the massive scale at which we operate. If we can squeeze an additional $3.00 out of each “user” or niche website per month, that’s a significant improvement when you have 500, 1,000, or 3,000 sites. ”

        Translation: “By finding one technique to optimize our sites we can apply that technique to all our sites and make more money”

        You don’t have to compare you sites to users in order to come to this conclusion.

        The 4 bullet points don’t really do anything to support the comparison either because once again you could say the same things WITHOUT making the comparison. And that’s not to mention that they some of them are simply not true!

        Take a look: “Less Risk – Having more sites/users creates a level of diversification that’s inherently less risky than having a small group of higher-paying sites/users.”

        Depends on what “risk” you are talking about, if its ROI then this simply isn’t true right? I mean, many small sites are just as likely to see a poor ROI as a few large ones.

        Or how about this bullet: “Better Data – Our sites/users cover so many different niches that we’re able to look at some interesting numbers across a wide range of categories.”

        Clearly you don’t have to compare your sites to users to come to this conclusion.

        Or maybe I’m missing something again ;)

        • jwcooke says:

          Joshua,

          Thank you for your (somewhat rightly) critical points. I took a minute to take a look at some of your posts on the WF as well as your WSO and thought them to be well thought out and interesting.

          I think you’re right in stating that there isn’t a need for the comparison to come to some of the conclusions I did…they stand true without the comparison. Due to the fact that I’m more familiar with the user and/or recurring customer model, it took a comparison like this to help ME better understand my approach and I thought some of the similarities were interesting, that’s all.

          To answer a couple of your points specifically:

          Risk – Having users (or sites) that are across a wide spectrum of diverse niches keep you from falling into cyclical or seasonal revenue cycles. As our sites are across such a wide range it helps to stable out our revenue growth, which lets us better forecast and plan out a new approach. (I can see an argument that tying the majority of revenue to both Google traffic AND Google AdSense is not necessarily safe, but the diversity helps all the same)

          Better Data – As I stated in the first paragraph, I think your point here holds true…but I would mention that having a ton of users gives you access to sifting through information you wouldn’t have without a ton of users (sites). The comparison isn’t critical to this point, but I was specifically thinking about all of the valuable information that can be pulled from having such a HUGE data set like Facebook has. If we had a better way (we don’t yet) of sorting the data from all of our sites and those we’ll build in the future, there would be additional value there, aside from any actual revenue earned from the advertisers.

          Let me know if that makes sense. Basically, I’m granting that the comparison didn’t have to be made, but explaining why I did it. I’m also extending my explanation regarding the “Risk” and “Better Data” points I made in the post.

          • JoshuaG says:

            Yea, I see where you’re coming from. It is a sort of an interesting/fun comparison to make and certainly coming from your user based background, it would help to bring some insight to a new business model. I’m sure those with similar backgrounds could also benefit.

            Btw, I really like your blog keep posting!

  4. Rahul says:

    Well you will adding few thousands dollars per month. If user is read fill and complete CPA offers.

    I know the peoples/organization who have 3.5k, 500, 1.5k, 2.5k domains etc. After researching some those websites.

    Suppose
    3500 * $10 domain renewal = $35,000 +
    $10 * 3500 (who is security) = $35000
    $1500 for hosting = $ $71,500 cost involved. I am sure those websites will be making $20k * 12 = $2 40,000 per month or much more.

    profit = 240000-71,500= $1,25,500 I am sure these calculation is much lesser. Also, these domains will be worth of $70-$500 each.

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