AFP 21: Scaling Vs Diversification Based On Market Conditions

Justin:
Welcome to Episode 21 of the AdSense Flippers podcast. I’m your host Justin Cooke and I’m here with Hot Money Magnotti. What’s going on Joe?

Joe:
Lucky number 21!

Justin:
We’ve got a fantastic episode lined up today. We’re going to be talking about scaling versus diversification under different market conditions. So, when do you scale? When do you diversify? When is it the best for you to pivot? These are things we’re going to be talking about today. But first we’ve got some updates, some news and information. First thing is we’ve been neglecting our Australian iTunes reviews buddy.

Joe:
Good day mate.

Justin:
I called out on that and I just want to go over them really quickly. We’ve got JunkJunk says, “Justin Joe keep it real and interesting.” “AdSense Flippers Podcast awesome!” from Jayco. I’ve got Stevo saying that, “AdSense Flippers podcast is a must.” James Clark, “First class business podcast.” Amanda says, “One mistake to avoid at all cause, is not listening to the AdSense Flippers Podcast.” “The bosses of AdSense!” – from Peter. We’ve got Ralph saying, “Sceptical at first but convinced along the way.” Awesome men! That’s great to hear. I’m glad we convinced you or, I don’t know, the show convinced you, whatever it is.

Joe:
Yeah. Thanks from down under. I appreciate that and I’ve never been to Australia but I’d like to go.

Justin:
What’s the bad word you call someone in Australia? Let’s say…

Joe:
Bogan!

Justin:
Bogans! Yeah. That’s what we call our buddies here. So whenever they’re giving us some crap, we call them Bogans.

Joe:
Hopefully none of our fans are bogans.

Justin:
The next thing we want to talk about is nichesitegold.com. So here’s the thing. We get a lot of questions via email about, “Should I target this niche? Is this a good keyword?” and they don’t really understand like how we pick the keywords that we think we can get ranked on the first page. So the idea is we’re going to do a weekly newsletter where we breakdown the exact keywords that we’ve done, keyword research for them and we give examples of why we think this keyword will be able to get ranked, why this one would not and we’re going to do that as a free weekly newsletter. Now, the plan is, for monetization, what we’re going to do is we’re going to offer those URLs available for sale. The second thing is we do come across some keywords that are really high search volume like good for authority site, but we don’t use those. Still, it’s silly for us to not pick them up, right?

Joe:
Yeah. It’s rare. But we do fine than once and a while.

Justin:
Yeah. So when we come across those, what I was thinking is in this newsletter, we can just have a list of potential authority site domains with great keyword, great searches every month and people are going pick those up from us if they want as a part of the newsletter, either way they don’t have to, the information will be free but they will be available. It’s an extra way for us to make some side money, right?

Joe:
Yeah. So, go to nichesitegold.com, sign up for the newsletter and it’ll be interesting to see how this plays out.

Justin:
Sweet boss! We got a trip coming up this weekend men. What are we doing?

Joe:
We’re going over to Cebu check out Start-up weekend. So Start-up weekend is something that was started in the United States where people will get together and create an entire company over just a weekend, all the way from idea to coding, design, getting the site set up as much as they can crammed into a 72 hour period.

Justin:
Yeah. If you were at all in the Philippines and you like to attend this event, it’s May 11th through May13th, starts Friday night at 5:30. It will be in Cebu City. We’d love to see you there. Go to Cebu.startupweekend.org and you can check out all the information. We love to see you and we’re going to be there doing interviews with other entrepreneurs that are there and then kind of like meet and greet. And we’re going to do a dinner I think Sunday night. So it will be really cool.

Joe:
Yeah. We won’t actually be participating in the event because we’ll be busy interviewing people but our great intern will be.

Justin:
John, the intern has been knocking out of business this weekend.

Joe:
Yeah. It should be interesting.

Justin:
Yeah, men! It’ll be fun. So, I’m really excited about that. We’re going to have some fun. Hopefully maybe we can do like a podcast recording while we’re there. It’ll be awesome.

Joe:
Yeah. I’m hoping to do some like fun by the beach, by the ocean kind of podcast where people can hear some of the ocean breeze in the background.

Justin:
Yeah buddy. Here’s the cool thing about it too. We’re bringing an entourage, right? And we’ve got a whole like video crew that’s coming out with us. That’s kind of fun men.

Joe:
Yeah.

Justin:
It’ll be exciting.

Joe:
So, we’re still building some niche sites and selling them. But we’re working on lots of other stuff to come over in the next couple of months.

Justin:
I know. Well, we’ve been knocking out the content recently, especially in April which is really exciting. It’s fun because I have the assistant kind of helps with the post and stuff. And then on the back-end, we’ve been doing some development work which is really exciting, kind of interesting for us, kind of a new arena but I’m really excited to see some of the things that come out of this.

Joe:
Yeah. That kind of leads into the subject this week of diversification and scaling, I mean, we’re trying to do both but talk to us a little bit about that.

Justin:
Well, let’s get right into the heart of this week’s episode.

****The Adsense Flippers Podcast****

Justin:
So we’re talking about market conditions and scaling and diversification today. This is great because it’s something that we’re struggling with right now like, “Do we scale the niche sites? Do we diversify into other product lines? Do we do both at the same time?” It’s definitely the question in the niche site market right now lots of people are wondering, “Do I build on niche sites, authority sites? Do I do affiliates? What should I do right now with some kind of sketchy market conditions, right?

Joe:
Yeah. I mean, we’re far from experts but we’ve had pretty good success establishing long-term goals that are not market dependent.

Justin:
And that’s one of the keys I think is you need to look at your long-term vision and see what you want to accomplish that isn’t going to change based on the search engine’s weekly or monthly updates, right?

Joe:
Right.

Justin:
You need to have goals that are beyond that and I think we’ve done that so far. But we’re going to talk about that a bit today. Basically, we’re going to go over 5 parts. First we’re going to talk about determining whether the market is in feast or famine mode. We’re going to talk about if it’s a negative market, a mixed market, growth scenarios and then we’re going to get a little insight into the niche site market and our strategy as it sits right now, so first part determining whether it’s feast or famine.

Joe:
This is tough, I mean, the biggest thing is don’t believe the overhyped blog rehashing and hysteria that’s out there, I mean, this is so true right now. I understand we’re in a period of flux with what Google’s doing and all the updates, Panda, Penguin, Zebra which is probably going to be the next update. But I just think that you have to take a minute, take a breath, don’t react too quickly, don’t believe everything you read, don’t believe the hype.

Justin:
Yeah. I mean, if you talk to like a bunch of long-term SEOs, right? And they go, “Yeah. We’ve seen this all before, people start freaking out because of this, that or the other. And the sky is always falling in SEO.” And that’s just the nature of the beast. I would say there’s been a lot of like incidents recently that have people in quite a buzz on the blogs and Twitter and that kind of thing. But really, the best thing to do, I agree, is to relax. You see a lot of people too they mention like personal examples, right? Or they’ll give a case study of one, right? This happened to my one site, my one site took a hit, therefore Google is just flawed, Google is just screwed up, right? Or they use like limited data that’s not really statistically significant. They happen in this niche on 3 of my sites but that doesn’t make it true across the board. And a lot of times, people don’t really know why they took a hit or even why they gain, right? They blame their, benefit if their site goes up on the rankings, they say, “I did this and here’s how I did it and here’s why I was successful.” And if they screw up it’s, “Google screwed me” right?

Joe:
Yeah. You don’t know all the factors involved when you hear these things on the internet. So that’s one of the biggest things to remember. When you do see changes in the marketplace, I would say you need to look internally rather than externally, look at your own data, look what’s happening to your site, what’s happening to you and try to take an objective approach to that. Don’t let the hysteria influence you.

Justin:
Yeah. One of the worst things, I’ve done this on forums too, we’re like people say, “The sky is falling.” And then I kind of hop in and say, “Okay. Well, here’s what’s happening with us.” We haven’t found that to be the case and it really kind of just irritates people because they almost want to believe that it’s true because they’re telling it to you, right? If they saw it happen in one or two examples, I backed off with that a bit but yeah looking at our own internal data has been much more helpful than reading what happened to one person’s site in one instance.

Joe:
Yeah. The other thing is humans look for patterns and things. It’s just the nature of the beast.

Justin:
We apply patterns that aren’t actually there, right?

Joe:
Yeah.

Justin:
That’s our problem.

Joe:
Right! And if you look, if you listen to someone else’s pattern, to someone else’s model and you try to apply that pattern to your own data, you might see something that’s not really there. So, just try to look at your own data and analyze that for what it’s worth.

Justin:
If you don’t have that much or anything, you don’t have that much to go on, you really don’t have much to worry about either.

Joe:
Right!

Justin:
Because we’re talking about things that aren’t affecting you, then stick to your plan, in most cases. Here’s one of the other things too. You have to determine whether or not it’s even worth checking, right? Because sometimes the work is required to get data that’s statistically significant is just not worth, you’re not going to find out. Here’s the problem. If I’m researching something and I want to find out what the changes are, why I went positive or negative, plenty of times, I’m not actually going to find the piece that made the difference, right? So, there’s lost there where it’s not worth it. So you have to determine all the work that you’re going to put in and if you come up with nothing – was it even worth it or should you have built something else? Do you know what I mean?

Joe:
I think this is so true, especially for us right now. We could hire a professor, some statistical genius somewhere to find out exactly how much our average site makes per month. Now we go on and on about the mathematical deviations and all these formulas we could create or you just pump out sites and sell those sites and know what we know from the data that we have and I think that’s probably a better approach.

Justin:
We did this not that long ago for our income report that we just put out. I tried to do some research to find out why some sites were dropping in the rankings, why some sites were gaining in the rankings and I couldn’t see anything that tied them all together or a particular reason for it and I spent hours doing this research and ultimately in the blog post I put, “Yeah, I don’t know.” I really don’t know. I can’t say, right? So, you may do a bunch of research and have nothing that comes of it, nothing fruitful, right?

Joe:
Right!

Justin:
And is that worth it or could I have spent those hours better by building out something new?

Joe:
Now, we should put the caveat in that. You got to be careful what you build, right? If you’re building on something that’s completely unsure, you could be hurting yourself more than you’re helping. So, for instance, with links right now, until things settle down with Google, I probably wouldn’t build a whole business around link building.

Justin:
Yeah. I might not set out to build out a blog network right now with the flux that link building’s in. So, you might be better to spend your hours or your time building something. But if you’re building something that’s on sand, that’s probably not such a great idea, so in part 2 let’s about a disaster scenario, right? The best thing to do is generally to pivot. Now, what you can do is you can use internal data to verify the disaster hit and try to sit tight through the fallout. I compare this to a tornado coming through your town. It’s blowing the house away parts of the barn are missing, right? You need to verify what’s broken, what’s okay, what’s gone.

Joe:
Right! A real world example would be like what happened to Spencer, right? He had his AdSense account banned.

Justin:
So he knows the right way, internally he knows. That’s gone, ship has sailed.

Joe:
He did but he waited and checked everything, verified it, he filed his appeal before he started like overreacting or writing blog post or doing any…

Justin:
The way to make sure his traffic was still there, right? So, the tornado came through, lost his AdSense account. Did not lose his rankings or traffic, right? He took an assessment of the situation first.

Joe:
Yes.

Justin:
That’s the first step.

Joe:
And that’s extremely important because now you know which you have to work with at least that you can move to the next step which is picking up the pieces, right? And so, what did he do? He redirected some of his resources to low risk investment, right? He said, “I still have these sites. I know I can put some sort of monetization on them that won’t be good as AdSense but at least I’ll get something back.”

Justin:
Yeah. It’s a low return too not always a low risk, it’s low return. So, you’re going to put that money back into something or you’re going to put those resources back into something that aren’t going to earn you a ton but are going to earn you something just to say, “Okay. We’re keeping the boat afloat.”

Joe:
Yeah. In our case scenario, I would say if we had some sort of that disaster, we’ve already talked about this before, but one of the things we could do is redirect resources into an outsourcing project or to a customer that would pay us for our time that kind of thing. So, we always try to teach ourselves these new projects that could be potentially scaled, right?

Justin:
So, after we’ve diverted our resources and we have some income coming on those low risks, low margin business, now Joe and I are going to go to work, right? We’re kind of force into this situation where, “Holy Crap! Let’s test out some new stuff.” It’s exciting but it’s a little crazy too, right?

Joe:
Yeah. We have to make sure that it’s going to work, not only for us but for our agents. And the only way we can do that is by testing it out directly ourselves.

Justin:
After we’ve done a couple each, I picked two or three projects, you picked two or three projects and we found a winner, maybe it’s mine, maybe it’s 2 of yours, whatever, right? We sit down, go over it and determine which one’s the winner. Which one’s the one that has the highest probability of making us a good amount of money and then we roll with it. Now, what we would do is divert a portion of our resources to this new higher risk, higher potential project, not everything, we’d still keep some of it on the low risk stuff.

Joe:
Yeah. I think one of the keys to remember here too is that you want to do a multitude of projects. When you’re in this kind of disaster scenario, immediately switch resources over to something low risk that can get you some income after you verify that things are happening. But then try to use a shotgun approach and say, “I’m going to try a bunch of different things and see which one works the best.”

Justin:
Okay. So that’s a disaster scenario. But what do you do when the market is mixed, right? And the best answer to that is diversify and scale. You’re stuck doing both, right? This is basically where we think we’re at right now where some of our sites are having problems, some of our sites are doing better, it just kind of depends and we’re making money. It’s profitable but we’d like to get another game. So we’re going to continue scaling our niche site creation and we’re going to start expanding through other venues, right?

Joe:
Yeah. But that said we don’t want to suck our resources out of our core business for these side projects, right?

Justin:
Yeah. Yeah. Yeah. Diverting resources into something that’s profitable is silly.

Joe:
Yeah. I don’t want to look at the bottom line and say, “Hey, we made money on that last month, how come we’re losing money now because all of a sudden our revenue drops significantly because we didn’t create enough sites.”

Justin:
But you don’t want to have all your eggs in one basket. You don’t want to be solely devoted to one thing, right, that could turn on you. So that’s why you check out other projects and start getting involved in those. Now, when you’re in a mixed scenario, it requires a higher level of self-motivation. If it’s a disaster, things are going terrible. You don’t have to be self-motivated. It’s self-preservation that kicks in, right? It’s like, “Okay. Let’s keep the business afloat. I got to eat next month.” that kind of thing. But when it’s a mixed scenario you tend to go, “Okay. Well, we don’t have to do anything right now. We don’t have to expand our revenue streams.” But it’s a really good idea too.

Joe:
Yeah. You have to push yourself for sure.

Justin:
The good thing though is you can also put a higher requirement on the success of those side projects. So disaster mode, we said shotgun approach, go after a bunch of different things, go after the ones that, pick a winner. In mixed scenario, you don’t have to. You can go after the ones that really have some higher value and not just, “Oh my God, let’s try 2 or 3 things each and go with the winner.” We can really kind of take our time and pick out the winners, right?

Joe:
Yeah. I would say though, not only can you be picky, you need to be picky.

Justin:
Yep.

Joe:
You need to make sure that there’s a high return on these side projects. You don’t want to find projects that are just kind of, “They irk it out and they make a little money.” You’re looking for a good high margin side projects that your time is really worth investing in.

Justin:
Yeah. That’s just the reason we’re in right now. We’ve got a core business, right? Which is niche sites, scaling them, selling them, earning with them and everything else is a side project for us outside of that for AdSense Flippers. But we’re looking for the ones that have the highest rate of return, highest potential and are closely related to our core, right? Things that will help us in our business now but that are able to stand on their own as well. So let’s get in to part 4. What do we do if the market’s fantastic? We’re in a growth market. Things are going really well. What do you do Joe?

Joe:
Well, we thought we’ve been in this situation before but we scaled the shit out of it.

Justin:
Yeah men! Knock it out of the park. Drive that truck home men. Make some money, right? We were in this situation last summer where we said, “Oh my God, let’s scale the shit out of it” right? This is before any of this panda things happened or Penguin or anything like that. We said, “Let’s drive this puppy home.”

Joe:
August 2011.

Justin:
Yeah. Yeah. Yeah. And then we had some sites tanked, we start having problems, right? It’s still profitable but we lost some margin.

Joe:
Yeah. I would say these situations are relatively rare. They usually revolve around high margin businesses.

Justin:
And that’s where we were when we start off, our margin were much, much higher, right? And they’ve since slipped, right? Our margins aren’t as high as they were before, because that’s why I think we’ve fallen into kind of a mixed scenario. The other thing is these things aren’t likely the last, right? What happens is you have such high margin on creating the sites, on selling them that you’re going to have a ton of competition that comes in either way whether we we’re talking about it or not. Now, if I was talking about it, definitely brings more people in. But again, that’s part of our marketing strategy, right? We’re happy to do that. We think it’s good for the business overall because people are going to develop new sites and new processes and that kind of thing.

Joe:
Yeah. And because these situations are so rare, you shouldn’t necessarily believe that you’re in one of them just because the numbers are reflecting that. And therefore, I would say, make sure our projects are paying for themselves. Don’t over invest and come out of the pocket and say, “I’m just going to scale the shit out of it because I think I’m in one of those high margin markets where that’s all I need to do.”

Justin:
Well, you can at start but you don’t want to continuously do that, right? You need to pull money out of that growth market as well. And that’s one of the things we argued about when we’re getting started, right? We said, “Look, this is high growth we should continue.” And you said, “I don’t want to just dump my own money into it. What if there’s a problem later on.” So that’s why we need to start selling sites and that’s kind of how we got in to that business. So we’re not spending out of our own pocket, continuously dumping in to the business.

Joe:
Yeah. The object of a company is to make profit and you’ve got to do that once and a while.

Justin:
Alright! So, let’s get in to the last part, part 5. We’re talking a little bit about the future of niche sites and kind of internet marketing, where it stands now, what we’re doing. The first thing we want to do is diversify, right Joe? We’re doing that now.

Joe:
Yeah. We’re selling AdSense for coffee mugs and toilet paper, right?

Justin:
Yeah. We’re definitely diversifying ourselves through our Cafe Press. We’re selling a ton of coffee mugs. I think we should really get into the ceramics market. That’s a really good business, long-term stability there buddy.

Joe:
Yeah. T-shirts and curtains and all kinds of stuff, no, all kidding aside, we will have a Café Press store up soon but yeah you do need to diversify, we need to diversify right now and I think we’re starting to do that.

Justin:
Yeah. We’re getting into that now. Here’s the thing. Niche sites are never going to go away. So there’ll always be niches. You may have to do things differently. You may have to do your link building differently .Your content may have to be written differently. But niche sites are always going to be there. But we’re continuing to take a mixed approach, right? So we’re building out other legs, other revenue streams. We’re going to be expanding and changing our niche sites. We’re going to continually have to do that, right?

Joe:
Yeah. And you should do that too to your listener. Expect that you’re always going to have to continually adapt, especially if you’re in SEO market, I mean, things are always changing. The ground is always shaky. So, if you’re just going to do one thing and put your head down and try to wear through it, that’s not going to work.

Justin:
Honestly, if they’re going to freak out over a few Google changes and algorithm change, you probably shouldn’t be in business for yourself because there’s a ton of things to freak out about. People say, “Oh my God, you shouldn’t be relying on Google because they run your business.” Well, if we’re in the product business, right? Let’s say we don’t rely on Google traffic. What if my supplier screws me? What if the products are defective? What if I get sued because a kid chokes on the toy that he puts in his mouth? There’s all kinds of worries always in business. So, whether it’s Google or something else, you’re always going to be, there’s something to freak out about every single day.

Joe:
That’s definitely true. I have to deal with that with the way I approach things. But I realize that to calm myself down and there is always tomorrow.

Justin:
Well, here’s the thing. I think you have to treat it like a business, right? Not like a short-term money grab or like a money tree or something, you have to treat it like a business. So, some of these things are going great, some of these things are not going great, we need to continuously adjust and adapt.

Joe:
Yeah. I see some of these people that are involved in SEO and especially niche sites and they treat it like it’s just like a license to print money.

Justin:
Yeah.

Joe:
And that is just a bad analogy like, when I think of, a guy printing money in his basement, that’s like a criminal, a criminal does that.

Justin:
Yeah. Trying to scam the search engines or try to, feel like they’re getting away with something. Really, if you’re building a long-term sustainable business, you need to go along with the searches you’re looking for. Now, Google’s not God, they don’t get to tell you what’s right or moral or anything. But if you want to be in their search engine, you have to play by their rules and you want to try to anticipate where they’re going. Now, here’s a problem with us, here’s one of our dilemmas, I’d love to hear about this in the comments on the blog but, the best and easiest thing for us to do is to build tools and applications around what we’re doing now, right? Internet marketing, niche sites, keyword research, but it’s tied at least indirectly to the success of the core business. So, any of the legs or revenue streams that we build, aren’t those always tied to the core business? So, Corvette Bar comes up with his blog product. Isn’t that tied to his blogging? The Spencer comes out with a Long Tail Pro. Isn’t that tied to his niche site business? How do you separate the two?

Joe:
Yeah. I think you just have to create a completely new business Justin. I’m not saying that you’d have to get away from the marketing because you could cross promote, right? But you have to build a whole new brand if that’s what you wanted to tie it to.

Justin:
You shouldn’t do it the words outside of your niche. We shouldn’t get in to like mortgages, right? That would be so different that there’s no relation between the two.

Joe:
Well, you could but that would have to be a completely separate business entity and it would take a herculean effort just to start and maintain that going. So I would say it would be better to stick with what you know and what’s going for you at that time.

Justin:
But try to separate the two where one is not totally dependent on the other, right?

Joe:
Right!

Justin:
Really, that’s kind of where we’re heading now where we do have other legs and revenue streams but that target is slightly broader audience that may not be only people creating niche AdSense sites which I think will help to diversify our business and give us different legs that stand on their own. You know what I mean?

Joe:
Yep.

Justin:
Alright! Let’s get right into the tips, tricks and our plans for the future.

****The Adsense Flippers Podcast Continues****

Justin:
Alright! So buddy, you got a ninja marketing tip for us. What are you using?

Joe:
Well, we’ve talked about the two projects that we have in development right now and one of the tools that I’m using in order to develop the UI and kind of show you the thoughts that I had and make sure we’re on the same page is something called mockingbird, mockingbird.com. It allows you to make wireframes very easily even if you’re not so technically inclined, it’s drag and drop interface you can make like dropdowns and text fills and all those kind of stuff. So that you can show how you want a UI to look and feel to a developer.

Justin:
That’s cool men. I saw the little mockingbird hat already, it looked pretty good. We have a little bit of work to do but it’s something, right?

Joe:
Right!

Justin:
We got it started. That’s good. The next thing we’re going to talk about is make sure that you pick long-term goals that aren’t likely to be affected by short-term industry changes. And this is key, so some of our long-term goals for the business, specifically around the tools that we’re building right now, are going to be there no matter what. No matter what happens, Penguin, Zebras you mentioned the next black and white feel animal, it’s not going to be affected by anything like that, right? You’re always going to have to do keyword research. You’re always going to have to have something you build your niche site on. So I think our tools are going to be extremely useful moving forward. It’s not going to change.

Joe:
Yeah. The thing I love about long-term goals is it gives you a stability, right? It gives you a platform to say, “Okay. Change is happening. People are saying its disaster. But if I’m focused on my goals, it keeps me on the straightened arrow. I don’t get shiny objects syndrome and go from thing to thing and get very distracted.”

Justin:
Yeah. They talk about this in that lifestyle business podcast which we’d always do what you absolutely shed. But they talk about like the 6 month goals versus the 3 to 5 year longer term business goals and if you’re on the 6 month plan, if you subscribe to that, you’re going to be bouncing around, right? 6 months later I’m going to be doing something different. 6 months later I’m going to be doing something different. You should have 3, 4, 5 year goals that you’re targeting because that keeps you on track, right?

Alright! Well, that’s it for AdSense Flippers episode 21. Thanks for being with us. Make sure to check us out on Twitter @AdSense Flippers. We love to see you there.

Joe:
Bye-bye now everybody.