EF Staff

April 14, 2016

We often refer to the defensibility of a business as a “moat around the castle.” Our reasoning here is that a well-defended business (with an awfully large moat) will be more difficult for competitors to attack or copy.

In order to avoid being imitated by a competitor, website businesses need to do things that not just anyone with a computer and a basic knowledge of online business can do.

If a kid sitting in his parent’s basement can make an exact copy of your business, you need to put a little more thought into your defenses.

Broadly speaking, a site’s defensibility is based on the complexity of the operations required to make it profitable for the owner, combined with the relative prestige and earning power it has in its market niche.

By assessing the various factors that go into the relative imitability of different sites, we can map out a Spectrum of Defensibility.

In a recent podcast, Justin and Joe examined the Spectrum of Defensibility using a Game of Thrones (GoT) analogy, which illustrates five levels of website defensibility by referring to the literal defendability of various settlements and fortifications in George R.R. Martin’s popular fantasy franchise.

In GoT every settlement has a relative quotient of defensibility, which corresponds to its capacity to support (or become a liability to) the empire builders – queens, kings and upstart princes – who vie for ever more territory, prestige and power.

Similarly, the defensibility of your web businesses either contributes to or detracts from your ability to build on your existing investments and see increasing returns from the money, time and labour you’ve sunk into your online assets, which are like virtual villages, townships, forts and castles.

As your website becomes increasingly complex (the more products and/or services it offers, advertising it does, and consequent brand awareness it garners), it becomes more defensible as a powerful business fortress that makes money and potentially becomes the centrepiece – or Iron Throne – of your very own online business empire.

Let’s look at the relative value of each type of online business by exploring them in relation to the settlements and defensive structures of GoT.

The GoT Spectrum of Defensibility

The Small Village Business, or Craster’s Keep

Craster’s Keep is a small homestead just north of the Wall. It acts as an advanced lookout for the Night’s Watch against wildling and White Walker invasions. However, Craster is the only male inhabitant and defender of the small homestead, which is otherwise inhabited by a small group of women. For this reason, Craster’s Keep is not very defensible and – because of its position in the hostile country beyond the Wall – extremely vulnerable to attack from White Walkers, who are kept at bay by the regular offering of any male children born in the Keep.

Craster’s Keep is analogous to the small village business. It has some strategic value, but its position and lack of a garrison make it extremely vulnerable to attack and minimally defensible.

Because of how easy it is to copy and thereby displace in search rankings, the small village site is the least defensible online business. Typically between six and 24 months old, its revenue depends on simple ads. These sites typically have lower earnings, ranging from one hundred to a couple thousand dollars per month.

With typically only one or two keywords and basic content, these sites are not places that people are going to repeatedly return to. They are platforms for small niche ads, like those on Adsense and Amazon affiliate sites, which means they receive a minimum of traffic.

The bonuses of owning a site like this is how little time and skill it takes to run.

These factors make it possible to operate multiple sites simultaneously. They are also very flippable, as potential buyers who are looking for low time and skill requirements are plentiful and may be looking to buy your small village business.

However, as already mentioned, the downside to owning this type of site is its vulnerability to copycats and competition, which means traffic and resulting cash flow are erratic. It would take an enormous amount of work to develop a recognizable brand out of a site like this.

The Township Business, or Mole’s Town

A supporting township for the Night’s Watch garrisoned at Castle Black, Mole’s Town is inhabited by non-combatants, who provide goods and services to the Watch. It is not fortified and has no garrison of troops to speak of. Further, it is in close proximity to the Wall, which leaves it vulnerable to any successful breach of the Wall or other clandestine assault from beyond the Wall.

A township business is like Mole’s Town in its supporting role and utility, but also in its vulnerability to attack. The township could, however, eventually be built into a more defensible position.

Slightly more defensible than a small village site, the township site involves some light complex tasks in order to earn several hundred to a few thousand dollars each month.

It has a range of keywords associated with it, some of which may be geo-targeted (meaning words that are specific to a real-life town, city or region). These sites tend to focus more on market niches than specific products, which means that they don’t typically require the operator to act as a brand ambassador.

An example of this type of site is Pat Flynn’s securityguardtraininghq.com.

The benefit of owning sites like these is that there is room for growth. They can be expanded to support more products and bring in more revenue. Further, these sites don’t require a lot of specialized knowledge, which means they are also eminently sellable to buyers who are looking for a low-skill, low-time-commitment investment.

The drawback to these sites is that they are vulnerable to imitators, and are at a disadvantage when it comes to competing with branded companies. Though the site could be converted into a branded company, such an upgrade may require significant changes to the content, which adds more work.

The Fort Business, or Winterfell

The seat of the noble House Stark and later House Bolton, Winterfell is a large castle and capital of the North, one of the Seven Kingdoms. South of the Wall, Winterfell is nevertheless closer to the threat posed by the wildlings and White Walkers from beyond the wall than are those fortifications and settlements in the south of the country. As the fall of Winterfell to House Bolton demonstrates, the castle is not invulnerable to competing powers, whose eyes are set on building their empire at the expense of the Stark family.

As small fortress, a Winterfellesque site is defensible, but still has the potential to be sacked by stronger competitors, who copy its product or displace it in traffic and rankings. Fort businesses are typically one to three years old and bring in several hundred to several thousand dollars a month.

The fort business has multiple sources of traffic, and owners of these sites are typically striving to raise limited brand awareness by working with targeted keywords. A certain amount of serious labour is required to keep these sites up and running, as high-quality, complex content is essential to the business’ success.

Examples of these sites are foodtruckr.com and, at the higher end, cashflowpodcasting.com.

Because forts have some brand recognition, they have the potential to grow. However, the tasks involved likely make them too difficult for a newbie to run.

Buyers with established skills who want to build a business will see the fort as an opportunity. In the long term, a fort business can act as a job replacement website, as the knowledge and time that go into running it are recouped in a livable income.

Veteran buyers see the potential in forts and look for opportunities to turn these into citadel businesses. This approach allows you to skip the more fragile earlier phases and head right to the good stuff.

The risks of a fort site come in the demands that consistently producing high-quality content place on the operator. You’ll probably need to hire writers and other content creators. Further, a serious competitor – a similar site with lots of cash – can crush your business or buy you out.

The Citadel Business, or King’s Landing

King’s Landing is the capital of the Seven Kingdoms, the site of the Iron Throne, and the seat of the King of the Andals and the First Men. A populous city of political and military importance, it is also a hub of culture and commerce, which together necessitate extremely heavy and defensible fortifications.

In our online business analogy, the King’s Landing website has virtually no weak spots in its defences. Like an important fortified city, it’s been around for a long time and survived a number of attacks, which have taught successive lords how best to strengthen its networks of walls, redoubts and towers.

The difficulties involved in displacing this type of business from its place in the market make it highly defensible. It is a tall order to imitate what this site does and to do it well.

Often the citadel business involves the production and dropshipping of a customized product. For the operator, this can mean coordinating with multiple suppliers and sourcing products globally. However, these types of sites typically bring in thousands to tens of thousands of dollars monthly.

These businesses have a known brand name in their market niche. They have multiple traffic sources, which create plenty of returning traffic. However, these benefits are the result of advanced content marketing and careful brand management. Some of this management can be outsourced, but the owner will still want to remain involved.

The defensibility of these businesses depend on a person who has very specific knowledge of the market niche. It is this knowledge that allows him or her to provide a unique product.

Examples of citadel businesses are raveaid.com, minaal.com, and virtualstafffinder.com.

The upside to owning businesses like these is the sense of security that allows owners to watch and learn from competitors, in order to integrate new strategies and processes into their own model. These businesses provide a very comfortable wage, with full-time work and full-time income.

A downside to purchasing a business like this is the heavy learning curve, which requires the buyer to absorb large amounts of industry knowledge quickly, while building relationships with contractors and suppliers.

Experienced buyers may look for citadel businesses when they’re focused on smaller portfolios – typically one to three businesses at a time. What they miss in a diversified portfolio, they make up by turning citadel businesses into castles.

The Castle Business, or The Wall

Constructed through the use of both magic and man-power, the Wall is 700 feet tall and stretches 300 miles along the northern border of the Seven Kingdoms. Manned by the Night’s Watch – an erstwhile elite corps of sworn defenders, who are now drawn mostly from Westeros’ criminals and disgraced nobility – the Wall has its own professional army who defend it against the attacks of the wildlings and White Walkers.

The colossal scale of the Wall’s defenses are what makes it comparable to the online castle business.

These businesses are virtually impossible to recreate, which makes them the most defensible type of online business. The solo entrepreneur will not be able to build the castle on his or her own.

Generating tens to hundreds of thousands of dollars a month, these sites have clear channels for bringing traffic back to a diversified system that fulfills multiple customer needs. These sites have spent many years streamlining their process.

Castles have strong brand awareness, contain popular content, provide a holistic experience for customers, and are looked up to by other businesses in the market.

Examples of these sites are smartpassiveincome.com, zendesk.com, and moz.com.

These sites are so secure in their position that they actually welcome more competitors, as growing the industry means there is more customer interest in the marketplace. These factors of security and growth potential are the biggest upsides to owning a castle site.

For buyers, the major downside to purchasing a Castle is the expense. Such sites require teams of employees who follow processes that the buyer needs to quickly learn, while carrying out executive-level management duties. Also, because the site is so dominant in the market, it may be hampered by the limited room for further growth.

Factoring Defensibility into Your Decision to Buy

A lot of factors, many of them buyer-specific, will go into deciding what site you will buy.

Only one of these is defensibility. Ultimately, your skill set should determine where you buy and build. Just because something isn’t particularly defensible doesn’t mean you shouldn’t take it on.

Potential buyers often ask why, instead of buying a village or township, one should not simply set about building a highly defensible castle business? The answer is that resources and experience are needed to build a highly defensible castle. Before you can build the Wall, you’ll need to set up a base camp or village in order to collect the necessary resources.

Capturing the Iron Throne – building the ultimate empire – requires you to take over and build up as many settlements and fortifications as you can. You may start small with a few villages or a township, with a view to building your own castle, or you may capture the Wall’s Castle Black before heading south to take the citadel of King’s Landing. In other words, you scale your business up.

However, your definition of empire may not necessarily involve the building or capture of a castle. It may be that your individual skill set is geared towards managing multiple village or township sites, which are less defensible but easily resold and replaced.

Buyers should assess the advantages in terms of the cash and time commitments that come with the site they’re considering. It may be that a buyer is more suited to a fort than a citadel, or vice versa. Ultimately, matching the qualities of the asset to the owner is the key to making the right choice.

How defensible is your business? Where would you put it on the spectrum of Game Of Thrones defensibility?

Everyone knows Winter is coming… what are you doing to prepare against it? Comment below with how you make your businesses unique.

Spectrum of Online Business Defensibility

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