Comparing Niche Websites To The Acquisition Of Users
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.