With all of this talk about blogging, today’s pick for the epicness of the week was an easy one.
Has your site been penalized? Are you looking to build up your site again? This article shows you how you can do this.
My favorite piece of this article is:
“And it really all boils down to this: creating value for the web. If you can do that on a consistent basis then you’ll rise in the rankings, get the exposure you deserve and succeed in your online business!”
Are you ready to build your site up again?Comment: 1 Read More
I think that Rob has a great question that doesn’t comes with a short answer (he was obviously not satisfied with my previous answers 😉 ). I feel Rob deserves a better answer as he was right; it was too short.
I think the beginning of the answer should start by another question:
This is the heart of the question. Do you have the basic requirements to make money? For the geeky readers, you’ll understand this D&D reference. Remember when you were creating your character and you rolled the dice to know his attributes? If you wanted to become a Wizard a minimum of intelligence and wisdom was required. It was the same thing if you wanted to become a thief; you had to have a high number for dexterity. In the real world, it’s pretty much the same thing; did you roll a high score for the “making money” ability?
I don’t want to brag but I know I got a high score on my sheet for this one (and I got a shitty score at “paying down debts” ability, lol!). Making money seems simple for some people and darned complicated for others. It’s not solely related to hard work or pure talent. It’s not only a combination of these two requirements. You actually need what it takes to make money in addition to both qualities.
Let me try to explain what I mean by using the blogging world. I’m not the guy who makes the most on the internet but I know enough to give you good insight of what is required if you want to make money in this field. I could also have used my job as another example but nobody wants to hear about how to make money working in finance… we all know how they make their money anyways 😉
Pretty much anybody could call himself a blogger. When you think about it, as long as you have a web platform and write on a regular or even semi-occasional basis; you have reached the *noble* status of being a blogger. For all I know, my 7 year old is probably about to become a blogger shortly! But is this enough to make money blogging? Ah! I’m not quite sure, how about you?
According to a Wise Bread non-scientific survey, half of the PF bloggers are earning less than $1,000 per month. I can tell you that now that the private advertiser money is drying up, that probably 75% of the Wise Bread 1000 is earning less than $1,000 per month. Since most bloggers will work at least 15 hours a week on their blog, this leaves them with less than a $16.67 in hourly wages. I guess that the difference between blogging and flipping burgers at MickeyDs is narrowing. But nobody likes flipping burgers so I guess that blogging for the same hourly wage (or even less) could become insulting.
In my opinion, you have two types of bloggers:
#1 People who are passionate about writing and want to connect with other people.
#2 People who are passionate about writing, want to connect with other people and see the business side of blogging.
When I use the word “business”, I’m not referring directly to a business model as we have. I’m referring to the money side of blogging. Most bloggers who make money are considered to be more self-employed than entrepreneurs. But they did get the business side of blogging.
People from the first category have something to say at first and find the blogging platform interesting to spread their story. At one point though, their enthusiasm fades away. Rob was right when he said that there are tons of great content on dead blogs. It is true that several blogs look promising but suddenly stop posting new content.
In small part, bloggers stop because they have written what they wanted to write and the inspiration is not there anymore. It’s obviously hard to write five days a week on a continuous basis. For the most part, former bloggers will tell you that they stopped because they burned out or because they lacked motivation/inspiration. But inspiration is not really the problem; the problem comes along with the other tasks attached to your blog. When you are tired, you will obviously have less great ideas and the motivation will start to fade away.
The posting schedule might be one of the very first reasons why a blogger would stop blogging. Personally, I think that the 5 days a week schedule is ridiculously demanding and I would not recommend it to anyone. It forces you to publish stuff that has already been published 100 times before you. The “10 tips to drop your heating bills” or “How I budget my way out of $10K in debts” has been written so many times that it doesn’t feel as appealing anymore. Plus, since you feel the urge to respect your posting schedule, you will publish shorter articles (400-500 words) with little to no added value in the content. How many times have you gotten to a blog or even a newspaper site and thought “man… I’ve read that same story so many times… boring!”. The problem is that it’s so easy to blog these days that you have to be very original and unique to make people come to your blog on an ongoing basis. Unfortunately, it’s almost impossible to achieve this task writing every day!
Then, unless you are a phenomenal writer, nobody will ever find your site if all you do is write on it. You need several other skills to promote your site and get found by readers and Google. These things don’t happen overnight and require a lot of sacrifices.
Some bloggers don’t like that part of blogging,
others are not good at it,
Some are working very hard, but they are heading in the wrong direction,
Some don’t even know what is required to do to have a successful blog,
Some do everything right but can’t monetize and eventually burn out.
These are all the just reasons why people fail at keeping their blog which has great content alive for more than 18 months. I’ve noticed that the year and half milestone is determinant in the life a blogger. I don’t know why but it seems that 12 months is not enough to burn out and two years is just too much work if you are about to quit.
Money is definitely a huge motivator. The purist will tell me that nobody is motivated by money forever, that’s true. However, there is nothing like making $300 out of nowhere because you are running a blog. We all wish that $300 could be deposited every single day of our lifes. This is a great reason to keep going. I agree that money is not enough to keep a blog alive for 4, 7, 10 years. But with money comes benefits.
Benefits such as a VA doing stuff you don’t want to,
Benefits such as having regular expenses paid by your blog (such as an internet connection or a brand new laptop!)
Benefits such as going to Denver for a weekend 😉
These benefits are usually what keeps the motivation very high. If you can cross the path of mediocrity and become a successful blogger, your whole life will change for the best… Mind you, it’s the case for any business. It’s not blogging that makes your life easy… it’s being your own boss and generating money from your own means! So, what exactly do you need to make money blogging? Here’s a list of things that work for us. It may not be complete or perfect, it may not fit for everybody, but this is how we have succeeded so far. I guess I’m not too far from the truth but it’s up to you to tell me!
This is obviously not my cup of tea. As you know, my partner does all the techy stuff behind our blogs. But this is a huge part of our business. Your technical skills don’t have to be incredible but you need to be able to formulate your demands and find the right people to do it for you. Technical skills will help you to arrange your design and make it more appealing. But it’s not only good for getting readers, it’s also good to monetize your site! Here are a few things you need to know how to do:
#1 Manage your ads (use the Who See Ads Plugin). You need to be able to control who sees what on your site in order to maximize your profits on your blog. We also use Pretty Link to simplify links and keep track of all links on our sites. This is how you can track what works aa well as what doesn’t. Your site has limited space, you need to optimize it and find the balance between a good looking site (to keep your readers) and an optimized site (to make money with it).
#2 Ensure the fastest and most reliable sites (we use Liquid Web as our main server and Blue Host as our second server). This has a tremendous impact on your SEO (Google considers your site speed and up time) and on your readers’ experience. Given that most people don’t exceed 30 seconds on a page to decide if they like it or not, don’t waste 10 seconds to load your site! We run our sites on three different servers to maximize the security and traffic.
#3 Manage mailing lists (We use Aweber for all our mailing lists). You can create a mailing list form to help fit your theme and attract more readers. Mailing lists is one of the only way to generate continuous traffic to your site without Google. This is a huge advantage and definitely makes your site more sustainable. We chose Aweber because it comes with several features that improve your knowledge of your readers. You can do split tests (same email with different titles), study your opening, clicking and conversion rates and can create follow-up messages. This is a gold mine!
#4 Transfer websites (We use Escrow for security of both parties). You might not need this skill right upfront but acquiring websites is often one of the fastest ways to make money blogging. This is why it’s important to understand the mechanics behind transferring a website while transferring the money at the same time.
#5 Install / Manage a theme. This is pretty basic if you want a blog: don’t start with Blogger and use a WordPress theme instead. My partner is not a fan of Thesis because he says that it’s more limited. However, it seems easier to manage if you have limited technical skills (I’m blessed, I have a genius for a partner!). If you can’t manage your own theme, you will have problems eventually. At first, we all think that our design is perfect for our readers. Then, we notice that it’s not exactly what we need and want to change a few things here and there. This is when it becomes complicated!
#6 Understand the security of your site. I can’t write much about this topic as this is definitely something my partner takes care of from A to Z. However, I just know that when your site is hacked, it’s bad for business ;-). Google blocks your site, traffic goes down to bust and so does your income. Protecting your site and understanding how to repair damage caused by hackers is very important if you grow into a big blog. We have been attacked a few times over the past 6 years and it’s never fun!
The marketing skills are what we usually call “Search Engine Optimization (SEO)”, branding and connecting with other bloggers. Basically, each time that you are working to improve your traffic, you are using your marketing skills. If technical skills are the base of your blog, marketing will be used to make your blog a real one; a place where you write and where your get read!
If you want to connect with other bloggers, there are tons of ways you can achieve it:
– Comment on their blog
– Mention their blog on yours
– Write controversial articles/comments to get noticed (be careful with this!)
– Start group projects
– Participate in forums
You know all this stuff, right? You have read this over and over, so I won’t continue. However, one thing I can tell you is that the most effective marketing strategy I’ve seen with other bloggers was to truly and selflessly help other bloggers with their own projects. I spend a good amount of time with other bloggers behind the scenes. This is where I’ve made my biggest connections, but most importantly, this is where I’ve made true friends. Over the past 6 years I have done the following:
– Fund projects that I believe in
– Use our technical skills (not mine! Ah!) to build excel spread sheets and other stuff for bloggers
– Help bloggers to improve their monetization strategy (shoot me an email, it’s free!)
– Help bloggers to sell or put their blogs upfor sale (when I don’t buy them! Lol!)
– Help bloggers by accepting guest posts or mention their site or specific projects
– Hire bloggers for several tasks I have
These are all the free things I’ve done but that have helped me connect with other bloggers. When you do it honestly and don’t have anything in the back of your mind (it’s not like I was doing this as a “planned” marketing strategy), this is when you get the most benefits.
The other thing you must ask yourself when working on the marketing aspect of your blog is what you want your readers do when they get to your site. Here are a few examples of what you can have them do:
– Click on Adsense so you can make money (but you lose a potential loyal reader)
– Subscribe to your newsletter (and acquire a reader for a good time)
– Comment on your article (call out people on something, ask for their opinion)
– Buy your product (another great way to tie in your reader + make money!)
– Buy an affiliate product
– Visit more than 1 page of your site (with a START HERE section or ABOUT page)
– Subscribe to your RSS, follow you on twitter, etc.
– Read your best articles ever
You can’t obviously expect your readers to do all of this the very first time they come to your site. This is why you need to prioritize what you want. The first thing I want on TFB is to gain readership. This is why my RSS, twitter and newsletter box are all above the fold. I don’t want to distract my readers with anything else. They have the choice to either read the post on their left or take an action to follow me on their right. No ads, no products, nothing else.
On some other sites, such as my Paramedic Classes niche site. My goal is to make money from Adsense and affiliate products. This is why I have a built-in Adsense block and affiliate product on the right. The goal is completely different.
Determining what you want is very hard. This is also part of your branding process. Over time, I’ve changed branding of several sites. I guess it evolves with time. But if you can stick with the same branding for a long time, you will get huge benefits out of it. I truly believe that branding is bigger than SEO but you need to be outstanding. And this is not easy to do!
I’ve mentioned it before; you can’t just slave yourself to write the same stuff that has been written already. You have to be creative, you have to evolve and come up with new ideas. You don’t have to reinvent the wheel but you need to find your own direction.
What I have learned over time is to never shut down a crazy idea. At least, not in the first five minutes. Let it grow in your mind and try to define it so it can be achieved in the real world. TFB was born from one of these crazy ideas. 6 years ago, nobody was talking about making money with a PF blog. At first, my partner really wondered what the point of calling my blog “The Financial Blogger” was. He used to make money out of sport sites with CPM (ads paid per impression, not click or conversion). Back in the day, the most effective way to make money out of a website was to generate a high volume of pages viewed and post as many CPM ads you can. TFB was very far from his previous business model!
But I was convinced that I could make money with a finance blog because there is always money when you talk about finance. Eventually, there would be a market for this. We are right in the middle of it today and I have a whole network benefiting from this trend. You can’t just have a blog about personal finance today. It’s too common. Unless you are the most amazing writer on earth, you won’t have your blog fly. You need to find an angle, to find a twist to make it appealing, interesting, fresh. Here are a few examples of creative people:
ViperChill is writing humongous posts with thousands and thousands of words
Mr. Money Mustache has some kind of very unique voice with radical points of view (such as not owning a car)
Money Crashers has built an online pf blog empire similar to ours.
This is what I call creativity!
Aahhh… but how can you do everything a blog requires to be successful, having a life (possibly including a family!) and a job? It doesn’t seem realistic, does it? This is where time management comes into play. If you want to succeed blogging you have two options:
#1 work over 60 hours per week total (day job + blogging)
#2 Make the Pareto Principle your rule #1 in life
This is basically what my book, The Rat Race: One Year From Now; Will You Still be a Rat? is about. In this book, I’m talking about how I manage my time and control my life to get out of the rat race.
In other words; how you can have a kick ass career, kick ass family and a kick ass online empire!
It’s all related to time management and prioritizing. I never let my family down, I’m always up and early to work and manage a dozen websites with my partner (did I mention that I work out 4 times a week + 1h30 of soccer? Hehehe!). I’m not better than you, I just have a 6th sense for time management and optimization. I share my secrets in that book ;-).
If you want to become successful at blogging, you have no other choice but to become highly productive in your life in general. If not, doing all these tasks will kill you within a year. Then, you will push a little more for another 6 months and will hit the 18 month blogging wall ;-). This is about the time where you will be looking to sell but realize that you haven’t built a site big enough to get a high multiple for your revenues.
People have an awkward relationship with money. For most people, making money is bad. Some others don’t really know what to do with their wallet. If you want to build a real sideline out of your blog, you need to look at your web property with an investor’s pair of eyes. You need to know how you can make money and how you can even make more.
Negotiation skills are optional but always a good addition if you want to buy & sell properties. I’m not the best negotiator in town but I’m very good at calculating. This is how I manage to generated profits from our blogs. By calculating all the time!
And if you don’t, well… you just hit the wall ‘cause making money blogging is no different than making money in *real* life!
Here’s the most important point of this *long* article: each sub-section of this post can be applied to any kind of business or job. This was just a very detailed answer to tell you what is required to make money, period. If you don’t have what it takes, then you would rather get paid by a blog owner than writing your own blog. You would rather get paid by your employer than starting your own business. You would rather exchange a part of these requirements for a lower paycheck and maybe a lot less headaches too!
Technical Skills: if you want to succeed, you have to be good technically in something. If you are not a good technician, it will be hard to set the base of your project. Regardless if it’s online, a manufacturing process or a service; you need a solid base to start with. This comes along with strong technical skills required to your field.
Marketing Skills: Here again, if you fail at promoting your blog, your product, your service, you won’t get very far. You see an awesome invention sleeping in a garage and awesome consultant working for a firm to pay the bill because these guys are not good at selling/promoting their ideas. If you can’t get the word out, forget about what you are offering, it’s worth nothing…
Creativity: Competition is everywhere. It’s truer these days with the internet and all the big players in each field. It’s hard everywhere and you will find big competitors everywhere too. Your only option is to be smarter/cooler/more creative than the other players on the field. If you make it, you will be successful.
Time Management: If you can’t manage your time properly, you will be a deadbeat dad, a poor employee and a very bad entrepreneur. Time is fair with everybody; we all have 24 hours in our day. It’s up to you to do what matters. People keep wasting their time and wonder why others are successful. Just write down what you do in a day and you will figure out what is wrong with your schedule.
Financial Skills: You can’t make the wheel of capitalism turn if you don’t have money. It’s important to understand where the money comes and where the money goes. But most importantly, it’s important to do as much as you can with each dollar you spend.
I want to come back to Rob’s question regarding why someone would rather get paid per post instead of building a passive income machine. I think that after reading this article, the answer is quite simple: because these writers are good at writing but not good at making money. Most of the time, they lack of a few general requirements to make money and they will have to work for someone else until they acquire those skills. Some do, some don’t. This is why we have employees and employers. There is nothing bad with being an employee. It’s just a different reality, but you save yourself a lot of trouble too!
I’ve seen several individuals only seeing the tip of the iceberg when it comes down to the work and skills required but they see the whole iceberg of money to be made. As you can see, it’s much harder than it seems to make money by your own means. But the rules apply to all fields. If you don’t have all the requirements, getting a partner is probably the clever thing to do. I didn’t have all the requirements and this is the reason why I’ve partnered-up.
Now tell me, do you have what it takes to make money? What’s missing? How can you get it?
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“Most people who claim they want to be excellent end up instead replying to e-mails and reading online marketing blogs.” – Cal Newport
Is “follow your passions” merely a slogan that we need to stop throwing out? Is it time to stop blindly chasing your passions?
Everyone tells you that you need to do what you’re passionate about. We should all just be passionate about passion itself. There’s no time for anything else but passion.
I’ve been looking into the reasoning here and the logic behind “follow your passions” type advice for the last few years.
I recently started reading the Study Hacks blog again. I’ve also probably consumed every piece of literature out there on unconventional career advice, from The $100 Startup to the classic 4-Hour Workweek. I wanted to gather my thoughts in an article.
Why should you NOT follow your passions?
This catchphrase doesn’t mean anything. It’s not real advice. It’s an easy way out of giving real advice or any productive help.
Nelson of Financial Uproar said it best over drinks (I was drinking, he wasn’t) last weekend at the Canadian Personal Finance Blogger Conference:
“Too many people are selling a dream. Nobody talks about putting your nose to the grindstone.”
That makes perfect sense and it ties into my next point…
It’s very noble to want to change the world or do something that matters. We all want to change the world and be passionate. However, the reality is that you still have to make real money at some point.
I recently wrote about why freelancing trumps blogging for long-term happiness and money. I’ve started to really hate passive income and online marketing advice about making money. I believe in making real money and getting paid what you’re worth.
What should you do instead of following your passions blindly? What makes more sense to try?
I’ve realized that it makes much more sense to develop a real skill that equals results.
I don’t want to talk myself all of the time so I’ll use my friend Justin has an example. He loves to play the guitar and he enjoys teaching this skill to others.
Over the years Justin has developed his skills so well that he can charge higher rates than other guitar instructors. He found something that he was good at and developed this skill over time.
If you don’t add value or help someone with something, you won’t make any money. Instead of worrying about what countries you want to travel to, I believe your main focus should be the value that you share with others.
To go on with my example from earlier, my friend Justin has done everything possible to become the best at what he does. He has invested a small fortune into new equipment and training.
I used to love reading marketing blogs and content on how-to make money. Then I realized that this was time wasted. Now I focus on my writing and targeting folks in their early-to-mid-20s.
If you become the best at what you do, you can charge higher rates and make more money.
This then leads to the next brilliant point…
If you don’t make any money from your ideas, then you just have a hobby. That’s fun and all, but a hobby won’t pay the bills.
Instead of worrying about passions, I suggest that you find a way to make some money. If you can’t think of even one way to make money, then you need to do something else.
You can quit eventually. Just not right now.
I don’t get why everyone wants to quit their jobs right away. You can check out my quick guide to quitting if you want to leave your job in the near future. There’s no need to quit right now.
You can classify me as someone that blogs for money since I blog and I make money. I’d like to consider myself someone that just got good at making money and keeping it. I enjoy making money and writing about it. Blogging for money is extremely tough and not worth it most of the time.
What’s the point of all of this? I just wanted to steer away from the typical advice that we all find online about following your passions and all of that fun stuff.
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“Man is so made that he can only find relaxation from one kind of labor by taking up another.” — Anatole France
It is no secret that I was able to build my online company through several blog acquisitions. In fact, this is how TFB got out of the blogosphere and found its niche. What I like best about this field is that most people ignore how it works and it’s always fun to talk about something that most people don’t know! It makes it “exotic” Hahaha!
We bought our first blog back in 2009 and have since made several purchases. While our business revenues kept growing we hadn’t looked at our ROI. We were happy to see that we were generating more than the previous owners with lower expenses. But we didn’t calculate where we were at in terms of profitability. The business has been growing quickly for the past 4 years and my interest was more into growing the biz than cashing out the dough!
Only recently, I thought of looking back into my archives to see how the return on our major purchases was. I wanted to know if we were making a lot of money or were simply growing our gross revenues without looking at expenses. In other words; how much did I make on my investment? Is buying a site a better idea than the stock market or real estate?
Some people like Dividend Ninja thinks that dividend stocks can do as well, I have to disagree…
I’m an investment guy so I surely like to make gains with my money. What I did since 2009 was create an excel spreadsheet for each site we own in order to track down revenues month per month. We do that for our major properties only so it makes roughly 8 excel spreadsheet to update on a monthly basis. We were then able to track each type of income and expenses. This is what the spreadsheet look like:
As you can see, this is far from being complicated but it gives you a clear idea of:
– How much you make per month
– How much you spend per month
– What are your higher income sources (% included in the last column)
For the past three years, my main concern was to make profit on a monthly basis and I didn’t pay much attention to the real investment return. To be honest, I would have paid more attention if the profit per site was minimal but it wasn’t the case. This is why I let it go for a while and concentrated on growth. Now that the company is more “mature” we can consider its ROI more closely!
Properties that were bought 3 years ago were obviously our best deals. Back then, it was quite easy to pay 18 to 24 months revenue, even for major sites. We made small purchases with lower multiples but what matters most is when you shell out over $10,000 on a site; you want to make sure you’ll get your money back! Our most lucrative deal shows a 67% investment return during the first year and an average of 74% average returned since we bought it.
Our latest purchases were made between 30 and 48 months worth of income. You can guess that we didn’t make a 74% return on them ;-). Prior to making an offer, we were using a different valuation model on our end to make sure the blog was worth the investment. It’s one thing to pay the “right value” for a property, but it has to fit into the profitability model you have built.
Our goal with a site is to make a 25% NETreturn on our investment per year. We don’t aim at getting all our money back within months; we aim for a sustainable business model. Therefore, if we pay $10,000 for a site, we need to make sure we will make $2,500 net per year with it. This means that we are ready to pay slightly under 48 months of gross income since we have to calculate our expenses too. Note, this is the price we are willing to pay only for major properties (which include specific characteristics). For smaller blogs (under 25,000 visitors per month), we would never apply such multiples to determine its value. The goal with major properties is to build a sustainable business model. I want to see these blogs and this company profitable for the next 50 years. This is why I’m not after a quick deal!
Technically, a 25% investment return is hardly obtained from the stock market so we figured it is a good way to analyze if it’s worth it to buy it or not. Since it’s based on estimates, we also figured that if we are wrong and we make 15% instead of 25%, we are still in a decent position. Obviously the goal is to be very conservative in our calculations so we can generate net returns over 25%.
The hard part is to assess how much a site could make once it has been transferred into our hands. We don’t share these thoughts with the blog owner so it’s even harder to work with only a few metrics to make sure we can optimize the site. The goal here is to find a blog that makes $500/month for example but that we know that we can make $750/$1,000 per month with optimization. Therefore, we can pay for the site based on a $500/month valuation and shift it to a 5 figure earning blog within months.
We always share our valuation model with a potential seller so he can understand how we evaluate his site. The valuation model we share is the one with the actual metrics. We will consider the past 12 months of income and the sources of income to use a proper multiplier. Then, we are willing to add a premium depending on other metrics:
Brand / Size of the Blog (monthly visitors, sources of traffic)
Size of Community (RSS readers, newsletter subscribers, number of comments per posts)
Any additional features (extra articles, excel spreadsheets, ebooks, etc)
So we usually start with a 24 month multiple and add a premium for bigger sites based on the above mentioned metrics. I like to explain our thinking regarding the calculations to the potential seller because it avoids uncertainty and confusion for both parties. There is also usually less negotiation since we already mentioned the strengths and weaknesses of the site in our offer. But this is the part the seller sees, on the other hand, we made other kinds of calculations to see if the investment is worth it or not…
This is why we always ask to see the top 10 pages viewed along with the top 10 keywords the site ranks for. This will give you a great indication of the income potential. Our first money maker on a new site will always be Adsense. This is an easy way to start making money quickly with a new site. You simply plug in the code and wait for the clicks. What I like about Adsense is that it is relatively sustainable. A site making $200/month in Adsense will most likely continue to earn this figure for several months as long as you continue to update the site with quality content.
Most of the time, the previous blogger didn’t pay much attention to optimizing his advertising space. We can quickly see if we can add more and how much we can make when we compare it to our own network. The fact that we cover several sub topics of personal finance helps us evaluate what is a good click through rate andCPC(cost per click). Based on the number of pages viewed, we can calculate how many ad impressions we will get along with theCTRandCPC. Over the past three years, this technique has proven successful and the calculations quite accurate. This is how we know if we can increase the current Adsense income.
Then, we go through the top most visited pages of the site and look for potential affiliates. We then estimate how much we can make from affiliate programs for these pages. It’s important to optimize these 10 pages as they usually represent 80% or more of your traffic and most probably will generate greater than 80% of your income. It’s harder to assess potential affiliate income when compared to Adsense. We are currently working on this model to become more accurate in our calculations. We usually use very conservative numbers (such as a conversion rate under 0.5%) as affiliate marketing is something that is quite hard to master. I wish I could pull out $500/month per site from affiliates but this is far from being the truth!
The last step we do is to prepare a growth plan for the site. If we can’t find many ways to improve the site with major changes, chances are that we won’t make an offer. Many big companies buy financial blogs thinking they simply have to continue what has been done by the previous owner and rack up the money. This is a huge mistake. First, you are not the previous owner so chances are that you won’t be able to replicate exactly the same strategy without your readers realizing it. Second, the internet changes so fast that if you simply think of jumping on the train and taking a ride, you will get kicked out pretty fast!
Our growth plan will include several metrics:
– Potential synergy with our existing network (readership swap, link building, etc)
– Reader acquisition models (contests, newsletters, RSS, comments, etc)
– Community projects (how can we use the force of the existing community to grow the site)
– Potential direction in terms of writing, topics, design
– Maximization of the existing content
Based on these “secret” assumptions, we’ll gain a good idea of how much we can make per month with a site on a sustainable model. After that, we need to assess the cost to make sure we make 25% net return :-D. As long as we pay under this value, we consider that we are making a good investment. But before clicking on “send”, we have to calculate our costs…
Besides the price of the blog itself, there are a few other costs to consider. You have the transaction and operational costs. We don’t count the transaction cost in our valuation model since they are minimal and they are a one shot expense. In the transaction cost you will find:
– Money conversion (we sometimes have to convert CAD to USD or USD to CAD to make our purchase)
– Security / Money Transfer fees (we usually use a site called Escrow to make sure the money is held by a third party during the transfer)
– Server costs (we don’t have server costs anymore since we park all our purchase on a VPS over at Liquid Web. This is the most reliable server we have ever had and was able to get traffic spikes up to 20,000 visitors in a single day without crashing. If you are getting serious about hosting, Liquid Web is definitely a server you want to consider).
The most important costs to calculate are the operational costs. These are the costs incurred to run the blog after the transaction. The calculations of these costs are very important considering that it will affect the net profit directly. Depending on the specificity of the topic, a writer can cost between $20 and $50 per article. If you need someone to blog about insurance or investments for example, the rate you will have to pay your writer is higher. The second question we have to answer is how many articles will we need to post per week? This depends on the actual posting schedule and our ability to write on a site at the same time. The model I find the most profitable and effective in term of traffic and pleasing our readership is two to three times per week. We don’t consider writing more articles because A) people don’t have time to read 20 blogs each day and B) I would rather have longer and higher quality articles on my blogs than 500 word quick reads that don’t lead anywhere. I would rather have fewer, more engaged readers due to the length of my articles.
Once we found a good writer and the site is hosted on Liquid Web, we are pretty much set to know how much the site will cost. We usually don’t use much money to promote the site or to do link building. These expenses are usually reserved for smaller blogs or niche sites where we need to boost rankings. Major website properties don’t need “marketing” expenses as they are already filled with high quality back links. This is another reason why we are looking to buy these types of sites; because we already know the traffic is there!
As many of you know, we used to make a lot of money with private advertisers. This is how some sites were paid off within 12 to 18 months. But the game has changed a lot since then and we don’t work with many private advertisers anymore.
Surprisingly, it was not too hard to shift a monetization model on a blog. Blogs that were purchased in the past two years are still making their 25% return even without private advertisers! This is due to a lot of Adsense Optimization and affiliate funnels.
Our newest additions are currently generating 30% net where more than 80% of our income is coming from Adsense and affiliate funnels. It’s interesting to see that slowly leaving the private advertising world is not really hurting our business. We actually increased our traffic at the same time and are moving forward with a more sustainable model.
I’ve made the investment return calculations on our some of our investments. Since we own several properties, I’ve picked one of our oldest acquisitions, one that has been around for about 2 years and one amongst our most recent acquisitions as we made a few moves during the panda updates (during the past 18 months).
Site #1: Earned 28% on the first year, 18% on the second (the 10% difference is related to the cut in private advertisers). However, the 18% is currently growing and the income sources are 100% sustainable now!
Site #2: Earned 68% on the first year, 71% on the second year and currently showing 82% return for this year. Email funnels and adsense optimization combined with the fact that we didn’t pay a high multiple for the site makes this one very interesting!
Site #3: Earned 30% on the first year which is pretty good since it was bought during the panda updates and it didn’t affected our valuation model.
Yeah… I know you want the name of each site… but I want to keep a few things secret. If not, there is no fun! Hahaha! Investment returns are net of cost but not net of taxes. Since everything is blended into one financial statement, I can’t really consider the tax generated by each site.
Am I still in the buying blog business?
The answer is yes and no ;-). I’m still in the business as I will never turn down a good opportunity (you know my affection towards leveraging, right?). But we are currently concentrating on paying down our corporate debts in order to enjoy some dividends from the company later on. This is why we have become a lot pickier in our choices. At the point we are at now, we would probably not consider a site generating less than 50,000 visitors per month. We already have web properties that we are working on improving traffic and would rather work on optimizing income than traffic for future properties. Since there are not that many sites seeing such high volume, I don’t expect to buy any sites for the next twelve months. We had to wait 9 months or so to make our latest purchase and I haven’t see anything else interesting since then. What I like is that we currently have a huge team of VAs and writers ready to take on any other project. This is the advantage of having a high cost structure I guess; we can grow instantly without affecting our personal lives!
My next move will be more towards the creation of a few sites that I have in mind. I’m already working very hard on my latest project; Dividend Stock Analysis which is part of Sunil’s Authority Site Challenge. I will also use some of our resources to build a few more niche sites around a specific topics (more to come on that later). Since I’m launching my second dividend investing eBook today (what?? You didn’t know? Check out Dividend Growth: Freedom to Passive Income Kindle Book announcement on The Dividend Guy Blog now!), I have a lot of work to promote and work on the book ranking. I’m actually preparing a nice piece on the publication of a book for you. The Kindle version is actually the first part of a bigger plan….mwhahahaha!
At FinCon12, Ramit Sethi from I Will Teach You To be Rich said something funny: “the blogging real estate market seems to slow down and buying/selling blog is not on a good trend right now”. I don’t know where he got his info but I can tell that it’s far from being the truth in my case. I think that big companies making huge purchases such as Consumerism Commentary or Get Rich Slowly are probably eating their sox right now. The reason is simple; they have tons of money to spend on sites but no plan to make them run! Therefore, they now realize that they are pumping cash into the site and the investment return is not there. They probably hired people that don’t run blogs to make the acquisition. It’s like hiring someone without a driving license to purchase cars for the resale business… They may be very good at what the usually do but the blogging business, as any other business is very different and specific. Personally, I’m more like Sam @ Financial Samurai; I’m very bullish about the PF blogging for the upcoming years!
So my question to you is simple; do you still think that stock investing is still better than blog investments?Comments: 30 Read More
I must admit that it was a really easy decision this week.
How 5 Top Bloggers Made The Financial Jump To Self Employment @ The College Investor.
You need to read this post. That’s all I have to say.Comments: 2 Read More
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