Tuesday, April 26, 2005

Question - Why did HowStuffWorks have to become a business?

In this post I mentioned that HowStuffWorks had to become a business at some point. And the question was asked, "Why did HowStuffWorks have to become a business?"

It's very interesting how this happens, and it has happened to a lot of people. When you start your web site, you typically begin on some kind of $15/month virtual hosting account (more on these accounts next week). If your site starts to take off in terms of traffic, then you soon find that you outgrow an account like that. You need a dedicated server and a lot more bandwidth.

At that point, you are looking at something on the order of $300 to $500 per month to keep your site running. That's $6,000 per year. The great thing about simple programs like Google AdSense is that they make it easy to generate revenue, but at the time HowStuffWorks was going through its initial growth spurts, programs like that were not available.

Then your traffic grows some more, and then it grows again. You eventually end up with a configuration that has dozens of server boxes and you are consuming several terabytes of network bandwidth each month. You need people to help configure the servers and keep them running, and you have to pay them. You want to expand your content faster so you hire more writers (the IpodLounge example demonstrates that nicely -- as his traffic grew, he hired more writers). And so on. In many (but not all) cases, your web site becomes a business whether you like it or not if it really takes off.

This is, of course, a great problem to have. When that time comes for you, I would make one recommendation -- don't skimp on the hardware. Have your site hosted at a large, reputable company and make sure that you have enough redundant hardware to handle server failures and large spikes in traffic. If you don't, you will end up seeing your site go down on a regular basis.

Over the last several months, for example, Fark.com has been having hardware problems. You'll see messages like, "We're still on temporary hardware on our database server, so performance is...", or you will go to the site and it won't be there. It is very common to see Slashdot link to a cool site, and an hour later the cool site goes down because it cannot handle the load. That kind of stuff is very frustrating to your visitors, and it also cuts into revenue and exposure. As your site grows, plan ahead and invest wisely in your hardware infrastructure so that you avoid these problems completely.

[If you ever find yourself in one of these happy i've-got-way-too-much-traffic situations, write to me]

Sunday, April 24, 2005

Case study - YarnHarlot.com

What we have here is an amazing web success story. Do NOT ignore this post - read it carefully because there is a lot to learn.

There was an article yesterday in the paper about a knitting book. This article (written by Marcy Smith Rice of the N&O) is not something I would normally read, because I have no interest in knitting. But here is the amazing paragraph from the article that got my attention:
    [Stephanie] Pearl-McPhee spun the book, a riff on "Meditations for Women Who Do Too Much," from her Web site, The Yarn Harlot (www.yarnharlot.com). The little — really, it's just 4 by 6 inches — book was released the first week of April. By April 15, it was in its third printing; that's a new printing every week, so far. We called her rep at Storey Publishing, to find out just how many books that is. Turns out it's 60,000 copies in print. It's ranked about 700 on Amazon, but that doesn't hint at the number of copies sold at LYS (Local Yarn Shops).
To put this in perspective, 60,000 copies in three weeks means that this book is amazingly successful - Read this to see what 60,000 books means in terms of cash. So, what we have here is a amazingly successful book that spun out from a remarkably simple blog. Here are some things to notice about YarnHarlot.com:
  • It is simply text and images. There is no magic here in terms of technology. The magic is in what the author has to say.
  • Stephanie updates her blog roughly once a day.
  • The blog is tuned to a very, very specific niche -- so specific that yarnharlot.com is not even thinking about being ranked in Alexa when I look it up today.
  • Stephanie's audience is fanatical -- look at how many comments some of her posts get! [HINT TO MY READERS -- People who read blogs are supposed to post comments! If you are reading this, you should post a comment when you get done...]
When Stephanie spun a book out of her site, that little niche audience went out and bought the book in droves.

The point being, you do not have to create a blog that appeals to everyone -- if you can excite a niche, you can succeed.

Here are two choice quotes from Stephanie in the article:
  • "I neglect housework rather fiercely," she says. "That helps, it frees up a lot of time. I'm going to clean up when the kids leave."

  • "The world is full of hopelessly crushed great writers," she says. "I think I was at the right place at the right time doing the right things and I got really lucky."
There's that luck thing again. Go read this page for a description of luck.

Marcy also mentions this:
    All this from a knitter who just over a year ago was just a knitter —well, and also a mother, raising three daughters (ages 11,13 and 16), and a writer of freelance articles and a birth doula. (She's given up some of the doula work while she's on tour. "You really need to be home and available when you're helping with birth," she said.) She began by posting letters to The KnitList (www.knitlist.com), and other posters encouraged her to start a blog.
Take a look at Yarnharlot.com. Ask yourself this question: Is there something that you enjoy, and that you are passionate about, that you can talk about on the web? If so, you might consider creating a web site or a blog. There is no guarantee that you will be as successful as Stephanie, but the success of the yarn harlot shows that it is possible.

Saturday, April 23, 2005

Lesson #3 - How much money can you make with a web site?

There are two reasons why you would spend the time that it takes to create a web site:
  1. You enjoy it. For example, you might enjoy bicycling as a hobby and you enjoy writing about it to spread the word.

  2. You have read How to make a million dollars and you are thinking about starting a web site as a business -- specifically to generate revenue.
When I started HowStuffWorks, it began strictly as a hobby. I worked on HowStuffWorks because I enjoyed it. Eventually the site had so many visitors that it had to become a business. So, sometimes, you end up moving from #1 to #2 whether you like it or not.

In Lesson #2 - the different types of web sites, you learned that there are different kinds of web sites and they generate revenue in different ways. For example:
  • Retail web sites generate revenue from sales

  • Content web sites generate revenue from advertising

  • Dating and porn web sites generate revenue from subscriptions

  • Transactional web sites like Ebay generate revenue from each transaction.

  • And so on...
Let's start by looking at content web sites that make their money off of advertising revenue. How much money can a simple content web site make?

Right now, if you look in the right sidebar of WebKEW, there is a single sidebar ad being provided by Google. This is called a Google AdSense ad, and these ads are incredibly easy to set up and use. How much money can a single sidebar ad like that generate?

I have a friend with a small web site that uses AdSense. On his site he has placed a Google sidebar ad like this. Google provides statistics for his site on a daily basis. Looking at his site's performance between April 1, 2005 and April 21, 2005, here is what we find:
  • On average, his site displays 3,100 sidebar ads per day. We know, by looking at the log file statistics on his site, that he receives about 1,000 unique visitors a day. So each visitor looks at about 3.1 pages each, and that means roughly 3,100 ad impressions per day are displayed on his web site.

  • On average, those 3,100 ad impressions per day generate 60 clicks. With Google AdSense, you get paid only when someone clicks.

  • On average, each one of those clicks generates 15 cents.

  • So, on average, his site is making $9.00 per day.
Another common way to talk about the revenue of his site would be to say that, "He is getting a $2.90 average CPM." CPM translates into "Cost Per Thousand", when the M is the roman numeral for thousand. That means that, for every 1,000 ad impressions he displays, he is receiving $2.90 on average. Between April 1 and April 21 he displayed a total of almost 67,000 ad impressions. So:
    67,000 / 1000 x $2.90 = $194
In a typical month, he normally receives about $270 from Google.

Your mileage will vary depending on the type of visitors that your site attracts, but those results are fairly typical. A Google AdSense ad tends to generate between $2 and $3 CPM on average. Here are some scenarios:
  • If your site has 1,000 visitors a day and they read 3 pages per visit, you get 3,000 page impressions a day and make about $270 per month.

  • If your site has 1,000 visitors a day and they read 5 pages per visit, you get 5,000 page impressions a day and make about $435 per month.

  • If your site has 10,000 visitors a day and they read 5 pages per visit, you get 50,000 page impressions a day and make about $4,350 per month.

  • If your site has 100,000 visitors a day and they read 5 pages per visit, you get 500,000 page impressions a day and make about $43,500 per month.

  • And so on
Typically a site will put several ads on a page. For example, there might be a banner ad at the top, a sidebar ad along the side and another ad at the bottom. You cannot simply multiply by three to calculate the revenue -- banner ads tend not to perform as well as sidebar ads, ads at the bottom of the page tend to perform not as well as ads at the top, multiple ads on a page tend to dilute the click rate of other ads on the page, and so on. But let's imagine that you put three Google AdSense ads on your pages and you get a total of $5 CPM as a result.

If you can build a site like About.com with an Alexa Rank of 100 or so, you can see that there is a lot of money to be made. 15 million visitors come per month. They read 5 pages each. You make $375,000 per month just off of those 3 ads. You are making 2.5 cents every time someone comes to visit. By adding other features to your pages, like Google search boxes, small affiliate ads, pop-under ads, etc., you can push the revenue-per-visitor number up towards 5 cents per visitor on a large site.

Here is a funny side note that is interesting. Wikipedia.org is a very large web site. It has about 8 million pages and an Alexa Rank of about 100, meaning that it gets about 10 million visitors a month. Right now, Wikipedia has zero ads on the site. If they were to put ads on their pages, and if the average visitor reads 5 pages, it would mean that Wikipedia could be making somewhere between $250,000 and $500,000 per month, or $3 to $6 million per year. Pretty amazing.

What about a retail site? In this case, calculating revenue ahead of time can be trickier because revenue per visit can be all over the map. But here is a way to think about it. Let's say that you put up your retail site and attract some visitors. You find that, for every thousand visitors who come to the site, two of them on average make a purchase. You also find that, on average, you make $5 profit from a purchase. So you are making $10 per 1,000 visitors. In other words, the amount of money you make tends to be not that different from the money made on a content web site. You might make between $1 and $20 per one thousand visitors. It depends on what you sell, how much profit you make on each sale, etc. Of course, there can be niches where far more than two people per thousand make a purchase. I know of sites where the number is more like 10 or 20. If you can create such a site, then you are in very good shape.

One thing that you learn from this discussion is that revenue all comes down to visitors. The more people who visit your site, the more money you can make. We will start discussing how to attract visitors in Lesson #4.

Friday, April 22, 2005

Lesson #2 - The different types of web sites

The question was asked yesterday, "I read your post on celebrity blogs - Can a normal person make any money on a blog?" Another way to phrase the question would be to ask, "Is it possible to create a blog that gets any kind of traffic?" The answer to this question depends on a lot of different factors, one of the most important of which is resonance. We will begin discussing resonance next week.

For now, let's open this question up a little and ask, "What types of web sites are possible?" A blog is one kind of Web site, but there are many others. If you understand all of the different types of web sites that are possible, it can be much easier to choose the best type for your site.

Let's walk through some of the most common types of web sites that you see as you are surfing the web:
  • Content web sites - Content sites contain some sort of content library. Good examples include: About.com, HowStuffWorks.com and CNN.com. All of these sites have thousands or millions of pages of content in their libraries. About.com has about 10 million pages, CNN has about 4 million and HowStuffWorks has about 100,000. These obviously are huge sites that were not created overnight. On a smaller scale, there are a zillion small content sites that people have created. James Dulley, for example, has a newspaper column and sends people to his content site at Dulley.com. It has about 900 pages.

    Content sites can be either daily or evergreen. A site like CNN.com is a primarily a daily news site -- it gets a lot of its traffic from repeat visitors who come to the CNN home page every day for news. A site like About.com, on the other hand, contains millions of pages of evergreen content. Most of About.com's traffic comes from search engines.

    Content web sites tend to make their revenue from advertising. Some (especially content sites that specialize in porn) use a subscription approach instead, but it is far less common.

  • Retail sites - Amazon.com is the biggest fish in this space, but millions of people have created little internet stores that they use to sell every imaginable product. There are places like Yahoo stores that make it very easy to set up a store. See, for example, FridgeFilters.com or Trains4Tots.com (there is a nice little trains4tots success story here).

    Most retail sites generate their revenue through sales -- people buy things, and the site makes a profit from each purchase.

  • Blogs - Millions of people have set up blogs on every imaginable topic (See How Blogs Work for an introduction to blogs). An article like this can introduce you to dozens of different blogs. Basically a blog is a place where a person, normally an individual, posts topics on a daily or weekly basis. It can be personal topics that your friends and family might enjoy (in which case the audience is going to be tiny, obviously), or it can be focused on a hobby, or it can talk about great restaurants in your city -- just about anything is fair game for a blog. WebKEW is being done as a blog for reasons we'll discuss over the next several weeks.

    Most people who create blogs generate revenue either: 1) directly by putting ads on their blog (lots more about this in the coming weeks), or 2) indirectly by generating traffic and then funneling that traffic into a retail site or other business site.

  • Hyperblogs - there are a number of very large web sites that are blog-like, but they have transcended blog status and gone stratospheric. Three good examples are DrudgeReport.com, Fark.com and Slashdot.org. These sites tend to post new items many times a day, and the audience often plays a big part in the posts. If you look at them and think about it, you realize that all three of these are very simple sites -- just lists of links published daily. Go look up the traffic for those three sites in Alexa and see just how popular a site can become.

    Hyperblogs can be considered to be daily-visit content sites (like CNN). Because of that, most hyperblogs make their money off of advertising.

  • Brochure sites - Brochure sites describe a business, a person, a place, etc. in much the same way that a paper brochure would. The goal usually is to provide information for customers or potential customers. Brochure sites are often small -- ten to twenty pages. This site for a Houston dentist is a classic example of a brochure site.

    The revenue from a brochure site normally comes indirectly. The brochure encourages visitors to use the business being described in the brochure, and when people use the business the business makes money.

  • Forum sites - Forum sites are large communities of people who interact with each other in forums. A site like Yehoodi.com is a primarily a forum site. It has thousands of members talking to each other in the forums.

    Most forum sites that generate revenue do so through ads. Some forum sites are set up for things like customer support and generate no revenue.

  • Database sites - Database sites generate their content using big databases. Any search engine is a database site. Other good examples would be Mapquest.com and Weather.com. All of the maps and weather reports are generated out of gigantic databases. Ebay.com is a database site that generates transactional revenue. Most dating sites are database sites that get their revenue from subscriptions. And so on. Anytime you see a web site that generates its content in response to specific user requests (e.g. - Weather.com shows you the weather for an area after you enter a zip code, Google.com shows you listings after you enter a search string, etc.), it is a database site.

    Creating a database site usually requires some technical expertise in database design/management and web software development. If you have the expertise, a database site can be relatively easy to create (depending on the scope of the project).

    Database sites that deliver content, like Mapquest.com and Weather.com, make their money through advertising. Transactional sites like Ebay.com generate revenue from each transaction. Dating sites make money through subscription fees. In other words, revenue models are all over the map for database sites.
These different types of sites can intermingle. For example, you might create a site that is an evergreen content site, with a blog on the home page and a forum area for discussion. In that case, one of the three components is likely to produce the bulk of your traffic/revenue, with the others playing more minor roles.

Which type of site is the easiest to set up? A blog is normally the easiest. There are a number of sites like Blogger that make it trivial to create a blog. You can set up your own blog in about five minutes, and have your first post live on the Internet within ten. Plus, places like Blogger are completely free.

A brochure site is the next easiest. There are many places on the Web that will let you create a simple brochure site.

After that, probably a small custom content site is the easiest. We will talk about this approach in the weeks to come, and you will find that it can be very easy to set up forums, email addresses, etc. with your own content web site.

As you are going through Alexa looking at the top 500 sites, and as you are thinking about your own site ideas, keep these different kinds of sites in mind. Ask yourself: which type of site would be the best fit for the material that you want to publish? What types of tools and techniques are similar sites using?

Thursday, April 21, 2005

Thinking big

This is a nice article on "thinking big." The example it uses has to do with small web design firms, but the principles discussed in the article can be applied to just about any small business -- it is a general call-to-action for business owners:

Wednesday, April 20, 2005

Lesson #1a - Calibrating Alexa

[This is a follow-up to Lesson #1 - Using Alexa]

The question was asked, "If you know that a web site has a rank of 1,000 on Alexa, what does that mean in terms of real traffic? How many visitors a month is that?"

The way you figure that out is by calibrating alexa. Many sites will publish or announce their "unique monthly visitors", and by finding several announcements like that you can determine, roughly, what the Alexa rank means.

The easiest way to do this is to go to Google news and type in a search phrase like, "unique monthly visitors" or "monthly unique visitors" (with or without quotes) and see what you get. When I try it tonight, here is one of the stories that pops up:

NYTimes.com March traffic up 17 percent

The article states that in March 2005, NYTimes.com got 15 million unique visitors in March and 551 million page views (36 pages per visitor, which is excellent - typical is more like 10 for a "typical" content site). Now you look at Alexa and see that NYTimes.com's rank is hovering between 100 and 120 in March 2005. So what that tells you is that sites with ranks around 100 will have roughly 15 million visitors a month.

Here is another article and it says that USAToday.com has 9.6 million unique visitors in March of 2005. The rank on Alexa is floating between 200 and 300. So sites with ranks around 250 have about 10 million visitors.

Here is another article that says that ComputerWorld.com has more than 1 million unique visitors per month. It's rank on Alexa fluctuates between 5,000 and 10,000, so a web site with a rank of 7,500 or so gets about 1 million visitors.

If you do this enough, you build up a profile and you can roughly say that:
  • Rank 1 is 120 million people or so per month
  • Rank 100 is 15 million people or so per month
  • Rank 250 is 10 million people or so per month
  • Rank 1,000 is 5 million people or so per month
  • Rank 10,000 is 1 million people or so per month
  • Rank 50,000 is 200,000 people or so per month
And so on.

Your question at this point might be, "How many visitors do I need to start making any money with a Web site?" Here are some ranges:
  • Even at a very low level of something like 25 visitors a day (less than a thousand unique monthly visitors), you may have enough traffic to recover your hosting costs -- maybe $25/month.
  • If you work up to something in the range of 10,000 visitors per month, then you can imagine making a few hundred dollars a month fairly easily.
  • To make "more than a thousand dollars per month" with a web site, you are shooting for a staring point of 50,000 or so unique monthly visitors reading 10 pages or so per visitor. At that level, you will find your site bouncing consistently into and out of the top 100,000 web sites on Alexa.
  • At the 100,000 to 200,000 visitors per month level, you can start to imagine supporting a person full time with a Web site.
The obvious next question is, "OK, so how do I get 100,000 visitors per month to visit my web site?" We will spend a great deal of time talking about this topic at WebKEW in the coming weeks and months.

Tuesday, April 19, 2005

10 year history of internet advertising

If you are interested in seeing how web advertising has changed over the past 10 years, or if you would like to better understand what the state of the web advertising world is today, then this is a good report to read:

The decade in online advertising

See also:

How Web Advertising Works

This article (written perhaps 3 years ago) is now a bit dated in terms of ad rates (they've gone up since the article was written), but still provides a nice overview.

Celebrity bloggers

An amusing article discussing how different celebrities use their blogs:

Blah, blah, blog!

Lesson #1 - Using Alexa

This blog is going to include "formal lessons", like this one about Alexa, combined with news-of-the-day links that demonstrate different people/companies trying out different ideas. There will also be links to other sites that offer valuable information about the Web.

In Lesson #1, let's talk about Alexa. Alexa is a great way to understand what people care about on the web. From our perspective, Alexa is extremely valuable because it ranks web sites and gives an estimate of their traffic.

In other words, you can use Alexa to learn which sites are popular on the Web.

So, for example, let's say that you like the XYZ web site and you would like to create something similar to it. How do you know, ahead of time, if the XYZ site is popular or not? You use Alexa.

For example, let's say that you are a fan of Slashdot.org. How do you find out how popular Slashdot is? You go to Alexa, type in "Slashdot.org", look at the "traffic rankings" for Slashdot, and you end up at a page like this. You see a nice little graph showing Slashdot's rank, which today looks to be averaging about 1,500 (there are actual numeric indicators down below the graph). What this rank graph tells you is that, out of all the web sites in the world, Slashdot is about the 1,500th most popular.

Alexa gives you two other pieces of traffic information about Slashdot: Reach per million users and Page views per user. This page describes what they mean.

If you poke around, you will find that Alexa offers some other useful pieces of information about Slashdot. For example, on this page you can find other sites that Slashdot visitors also visit (and then you can go look up the Alexa stats on those), as well as an entry point to a list of thousands of sites that link to Slashdot.

How does Alexa create these statistics? Alexa has a browser toolbar that people use, and every time a toolbar user visits a site, the toolbar sends the URL back to Alexa. Alexa aggregates all of the data to create its traffic estimates. It turns out that Alexa's rankings tend to be extremely accurate, especially for the top 10,000 sites.

If you want to learn more about the Web, I would recommend that you do four things with Alexa:
  1. Every time you visit a site that catches your eye (either because you like it or dislike it), go to Alexa and see what its rank is.

  2. Look at Alexa's categorized lists of sites and find categories that relate to the kind of site that you want to create. In other words, if you want to create a site like Slashdot, used the categorized lists to find sites similar to Slashdot. Then look at those as well to get other ideas.

  3. Look at every one of the sites listed in Alexa's "Top 500 Sites" list. You will be amazed at some of these sites -- you may have visited them before and never realized how popular they are. There will be others that you have never heard of and you will think, "how did I miss this?" (in other words, you will learn about large, well-hidden subcultures in America.)

  4. Every week, come back to Alexa and look at the "Movers and Shakers" list. Then go research why a site is moving up.
Here is an example of a mover and shaker this week: pontiac.com. Looking at the Alexa traffic graph, you can see that the site has gone from an average rank of around 10,000-20,000 up to a spike around rank 1,000. That is a tremendous move.

So you go to Google news, type in "Pontiac.com web site" as the search string and you find this page which says, "The Pontiac Solstice, a two-door roadster soon to be assembled in Newport, was splashed across more than 12 million television screens Thursday night as the key product on this week's episode of 'The Apprentice.'" It also says, "Visits to the Web site www. pontiac.com increased 900 percent between 9 p.m. Thursday, when the show started, and 1 p.m. Friday. More than 200,000 individuals visited the site." That doesn't do us much good because most of us do not have the ability to run multi-million dollar ad campaigns, but it still teaches you something. Looking at the Movers and Shakers regularly can teach you a lot.

[Question for you to think about - why does a web site like Pontiac.com from a major company like GM have a typical traffic rank around 10,000 or so? Especially when you consider that Slashdot.org has a rank of 1,500. I mean, everyone has heard of Pontiac, and relatively few people in the general public have heard of Slashdot. And why is the Hummer.com site ranked even lower than Pontiac when Hummer seems to have a lot more buzz? What causes two sites to have such different rank? These and many other secrets will be revealed to you by reading WebKEW in the coming weeks and months.]

Monday, April 18, 2005

Web ideas

On Marshall Brain's Blog I have been keeping a chain of little web ideas that caught my eye over the last couple of months. Start here and page through the list.

Perhaps the most noteworthy of the bunch is the article on IPodLounge.com. The article points out that, "In recent months, iPodlounge has grown from a niche website into a professional publishing operation with big plans. Riding the wave of iPod popularity, the site is a daily read for an ever-growing army of fans. Unique visitors have doubled to 2 million a month, and about 1,000 new members are joining its online forums every month." The article aslo notes:
    The site was started in late 2001 by Dennis Lloyd, a web designer form Irvine, California, just a couple of weeks after Apple Computer launched the iPod. Shortly after starting the site, Lloyd became unemployed.

    "I turned it into a full-time job because I got laid off," said Lloyd. "I was just sitting at home collecting unemployment. I had this site, so I started working on it every day."

    Supporting himself with contract work, Lloyd attracted his first advertiser in spring 2002 -- Digital Lifestyle Outfitters, then known as EverythingiPod.com. By mid-2003, he had enough ads to support himself, and in 2004 ads were bringing in enough revenue to expand the site and hire two full-time employees.
This is an example of the kind of thing a single person can accomplish on the web with a little luck and hard work. Read the whole article and you will see what I mean.

Go take a look at IPodLounge. It is a good URL, the site is very nice from a design standpoint, the content is deep. Over the course of two years the rank has grown steadily. There is a lot to be learned here.

Sunday, April 17, 2005

Welcome to WebKEW!

After I published How to make a million dollars, I started getting a lot of email. People are asking great questions, especially about the Web and creating new Web sites. I thought it would be interesting to create a blog to answer questions and talk about different techniques that people are using on the web to make money. So here we are. The idea behind WebKEW is to collect together ideas, techniques, case studies, stories, etc. that will help you learn how to create successful web sites.

If you are interested in starting a business and making a million dollars, the Web is certainly one place to do it. And it is a relatively straightforward and inexpensive place. With the Web you can work from home in off hours. Depending on what you are trying to create, startup costs can be very low. You can try ideas on the web quickly and at relatively low cost until you find something that works.

WebKEW Table of Contents (updated weekly)I hope that the ideas presented here help you to create highly profitable Web sites. If you have suggestions, links or feedback, please see the contact information available at MarshallBrain.com.


Marshall Brain