Can You Scale Your Business Model? | DomainInvesting.com
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Can You Scale Your Business Model?

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ScaleWhen I was at AIG, one of the most frequent questions, aside from “what’s the projected ROI on that program?” was “can you scale the program?” If we could do a small test that was successful, it would only be great if we could scale up and have the same success on a greater level. It just wasn’t worth the time and effort doing a particular program if the potential revenue was limited.

I’ve asked the same question about my domain investments, and that is why I have chosen to focus on development. While domain sales is still fairly lucrative, I don’t think it is still considerably scalable to a degree where it will drive constant growing revenue at a multiple of what it is now. I still believe I can do what I do to generate revenue for the foreseeable future, but I don’t think it’s feasible to greatly scale this business model at this point in time.

With domain development, I believe I can scale. On Burbank.com, Lowell.com and Newburyport.com, I can either keep them as tourism-heavy websites with information about the city, or I can follow Shaun Pilfold’s model on Kelowna.com and become the source of information for my respective cities. Yes, it costs money to scale and I am not ready to make the financial and time commitment yet with my sites, but it is possible to scale in that manner.

Likewise, my mini site building strategy is also scalable. Perhaps it’s not easily scalable if I continue to build them on my own because of the time constraints, but there are great development companies that focus on mini site-type websites like AEIOU.com, WannaDevelop.com, and MiniSites.com that offer a variety of services. Building mini sites is scalable, and the more you build, the better the deals you can make with all of the mini site and development companies.

A couple of dollars a day per mini site doesn’t generate a lot of revenue if I were to look at each site individually, but if I have 100 mini sites that make $2.00 a day, that’s over $50k per year, with very little maintenance. Some websites will make less than $2.00 and some will make significantly more, but you get the picture. If you build websites on strong keyword domain names, you are generally going to drive revenue while adding value to your domain names.

The point of this is that you need to determine if what you are doing is scalable and sustainable. Experiment with different things like I am doing and make sure you can scale if it works.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (17)

    Chris Robbins

    I mostly agree. In fact, I just got done listening to a great podcast on Ed’s site Ozdomainer.com where he interviewed Edwin Hayward a big investor in the .co.uk market. In it they talked a lot about developing and minisites and brought up the concept of having 100-200 minisites making 3-5 dollars a day. Ed & Edwin’s opinion (something I’m inclined to agree with) was that for the average investor that’s a lot like balancing 200 dishes–eventually they will come crashing down. Instead, one should take that minisite that is making 5 dollars a day and focus on that turning $5 into $50, etc. That is probably better, cheaper, more manageable for the average domainer. I encourage folks to go over and listen to it when they get a chance.

    July 14th, 2009 at 3:22 pm

    Peter Davis

    “A couple of dollars a day per mini site doesn’t generate a lot of revenue if I were to look at each site individually, but if I have 100 mini sites that make $2.00 a day, that’s over $50k per year, with very little maintenance. Some websites will make less than $2.00 and some will make significantly more, but you get the picture. If you build websites on strong keyword domain names, you are generally going to drive revenue while adding value to your domain names.”

    I think your conclusion there is wrong Elliot. First, I don’t think adding a couple bucks revenue a day is going to add value to a strong domain. The typical buyer of websites that earn small dollars is at the most going to pay you 3x revenue. Now, if you’re talking about a domain that would sell for a couple hundred at the most, then yea, but it’s not going to help your “strong” domains, the ones you get real money for.

    Second, it’s a whole lot harder to build 100 websites that earn a couple bucks a day that it might sound. I would really recommend anyone to put their efforts into a smaller number of properties, and do a high quality job, as spreading yourself too thin usually ends up in a compromise with quality. IMO, it’s more difficult to make 100 lower quality sites do two bucks a day than to make one great site do two hundred a day.

    JMHO. :)

    July 14th, 2009 at 3:26 pm

    Elliot

    @Peter
    You brought up a good point. It is time consuming to develop 100 mini sites, but I’ve already done several on my own in the last few weeks, and over time I will probably have more than 100. I am not building them on $100k domain names, but rather on names that would sell for between $0 – $15,000. If/when I do decide to scale more quickly, I will use a mini-site developer who can do it for me much more cost effectively.

    I am not sure where you came up with 3x revenue for the sale of these sites. If anyone is willing to sell a generic domain name + website that requires no maintenance and has 6 months worth of stats, with consistent and growing revenue, I am willing to pay a lot more than 3x. I don’t ever buy on revenue multiples (more on that tomorrow) but I will pay well for generic domain names + websites that have shown consistent revenue. :-)

    Instead of selling a good domain name in a down market, you can hang on to it because its earning more revenue than your cash would earn in the bank, allowing you to wait out the economic situation.

    July 14th, 2009 at 3:40 pm

    Shiphouse

    A little bit off topic as it is more of a valuation question but do multiples differ in the domain industry when evaluating the purchase of a single domain name v. a domain portfolio?

    Assuming you used a multiple of 3x earnings less expenses of ~21K (assuming $199/site AEIOU development, and registration fees, also keep in mind you would get a lower rate than $199 due to size of order) you would clear $129K. If you have the names that could generate the daily income, this does not sound like a bad scenario considering you have to do virtually no work.

    Also looking at it from an initial investment standpoint you would be making over 6x your initial outlay

    July 14th, 2009 at 4:27 pm

      Elliot

      @Shiphouse

      I don’t generally buy domain names (well, I’ve never bought a domain name) based on a revenue multiple. I buy pure generics – at least I think so anyway. From my experience, a pure generic that is earning good money will never be priced at a revenue multiple because generally domainers do not monetize optimally, and pricing at a revenue multiple would leave a lot of money on the table.

      Also, there is more to making $2/day (hypothetical number) than just building a mini site. Some websites in competitive verticals will never rank unless a whole lot of money is spent link building and marketing, and without ranking well, there isn’t much of a point to building a mini site over parking.

      July 14th, 2009 at 4:30 pm

    Robbie

    I now have over 140 minisites online and earnings vary.

    Some site earn 0.10 per day others $25-40 per day there is no right or wrong way it depends on the name, content and ads that are served on them.

    As for buying a minisite based on mulitple revenue – I dont know many people willing to pay 3x or what ever on adsense sites etc.

    But if you own a type-in name earning cash parked people will pay well – Im currently paying upto 10 year earnings on some names that have proven stats and type-in traffic.

    I think minisites are great but hardcore development is key if you want to make big bucks and I think you are doing all the right stuff with Lowell, Burbank etc Elliot.

    Regards,

    Rob

    July 14th, 2009 at 4:57 pm

    Chris Brooks

    Hi Elliot,

    I think the debate you’re illustrating on your blog is a very common one among developers: are you better off having a couple of great sites or a bunch of middlng sites? For me, I think the wiser strategy is focusing on a few great sites, for the following reasons:

    1. The toughest part of building organic traffic is getting high-quality editorially chosen inbound links. For me, that takes a _lot_ of work, and although you can use the same techniques on different sites, I wouldn’t say that white hat approaches scale past a couple of sites.
    2. Beyond in-bound links and useful content you need to be able to run tests that help you increase your revenue per user. At low levels of traffic, it’s really hard to learn anything conclusive about the effect of different ad formats, layout, and offers on your site. On the other hand, if you have substantial traffic, you can test strategies and get results quickly.

    Also, just as one data point, the 3 mini sites that I had built by one of the mini-site companies you mentioned make far less than $2 / day, despite the fact that I paid the company an additional $200 / month for 4 months beyond the initial launch to develop more content and inbound links.

    On the other hand, different niches are simply different, and you may be able to build in niches that are more profitable than mine.

    Thanks,
    Chris

    July 14th, 2009 at 5:08 pm

    George Pickering

    The biggest challenge is building a large domain portfolio of mini sites is content. As Eliot demonstrated, the other evening -it does take some time getting content to build a mini-site. Multiply this time X 200 and then throw in maintenance to make sure the content is fresh to attract search engine attention.

    IMHO if you can base your site’s content off user generated content then you can scale your network. Facebook could build thousands of sites around their groups, posts, etc. Same with YouTube.

    July 14th, 2009 at 5:54 pm

    owen frager

    E: You can stand on any corner in NY panhandling and make $2 in 5 minutes. Stand on 100 corners in one day for 5 minutes each and you can make $50K a year NET with no expenses. Where is the excitement in minisites?

    I urge everyone to listen to the aforementioned podcast with Edwin Hayward- he gets it so right and makes the arguments against it in a way that is really compelling. Don’t waste your time.

    The difference with Elliot he has has a template and infrastructure he can scale up to with directory models. For others when you pay the bill you have stale content.

    July 14th, 2009 at 5:59 pm

    Elliot

    @Owen

    You’re right, but I am just sharing what I am doing in my business. Of course it’s not the right plan for everyone, but it will hopefully give people ideas and the opportunity to evaluate for their own interests.

    I haven’t listed to the poscast yet, but Edwin is one of the smarter guys in the domain industry and has a considerable amount of experience.

    July 14th, 2009 at 6:10 pm

    jeff

    if the sites generate a cash flow roi im thrilled…i see some interesting findings on mini sites and

    1. if a parked name isnt generating a name , zero roi
    2. if a 8 dollar domain name can generate 1.00 a day, thats 365 dollars. thats like 45 times x the investment…are you seeing this in the stock market or other things?

    i love mini sites, people mention how its not a business model is full of shit imo… yes i would rather have a full blown site, but that will come.. pick a niche area and learn things.

    congrats robbie! heard good things in your progress…

    in the meantime, cash flow here i come and learning…

    the more info you reveal, the more people will try to slame each other… in the meantime, will continue to role out mini sites and generate that cash flow..

    July 14th, 2009 at 7:43 pm

    Anthony David

    Well, seems Lowell and Burbank is more than just a minisite by the look of it. Its a developed site. How much unique content is in there I dont know. If its all unique (regardless if they use the same template) that will count as two unique developed sites. Rather than have 100, just having ten developed sites would be a good goal. And then from ten to twenty.

    Those suggesting just make one great site are wrong. We have some decent sites such as freightforum.com that can earn well most days, but then there are some days, or even a whole week, where the earnings are terrible. So “dont put all your eggs in one basket” are you just might starve to death.

    Elliot do you have a twitter account, mine is @Winterwind_Web

    Cheers and keep up the good work.

    Anthony

    July 14th, 2009 at 11:12 pm

    Anthony

    Ok, I see now… I agree those two sites are nicely developed.

    Im not sure how easy it is for a mini-site to earn steady $2 per day though, I think with Google adsense its not very likely. Perhaps Robbie can elaborate more on his method.

    July 14th, 2009 at 11:30 pm

    Shaun Pilfold

    Elliot, I think your post illistrates an important concept… there is no ONE way to be successful in this business. I have always said that there is a hundred ways up the mountain; just make sure you are on the damn mountain.

    As you mentioned (thanks 😉 that we have jumped head long into the “local news” business with http://www.kelowna.com, but I’m certainly not saying that is for everyone in the Geo space… it just seemed like the way to go for us. There are many, mnay proven successes in the Geo space that went the tourism model.

    Bottom line; lots of ways to make it in this business, but the first step is to actually try something and see what happens.

    PS. I’m personally not a fan of the mini-site thing, but I do like the simple math of $2 a day times X number of sites…

    July 15th, 2009 at 12:05 am

    Rob

    @ Anthony or anyone else that has any questions feel free to send me an email robbie(@)mycreditscore.us – Im more than happy to help or explain – anything I can do to help the community.

    Regards,

    Rob

    July 15th, 2009 at 5:12 am

    Anthony

    Hey Shaun,

    Woot woot for kelowna.com!! I lived in kelowna for two years when I was a kid, saw the Ogopogo on the fish finder once 😛 Im a Surrey native though. Your site opens sickeningly fast and Im opening from Shanghai 😛

    Rob, I will get in touch with you soon.

    July 15th, 2009 at 8:21 am

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