Multiple Streams of Revenue for Your Website
Web Marketing Today, Issue 52, January 1, 1999
You've seen the cluttered check-out stand at the corner convenience store. Next to the register are a cardboard display of air fresheners and a glass jar of beef jerky. Someone told the proprietor that air freshener is a big seller, so he plopped it on his counter next to the beef jerky until clutter described it better than neatness. Did it affect his bottom line? Probably not.
If you're a site owner you've had the same temptation -- and you're not alone. Many sites have begun to develop multiple streams of income. Yahoo! began as a directory, and gradually developed a means of advertising to those who were searching the Web. Then it began to diversify, so today you can find Yahoo! investment information, white pages, online store hosting, e-mail accounts, and links to a shopping network. Lycos, Alta Vista, Excite, HotBot, and Infoseek and many other would-be portals are doing the same. Amazon.com began by selling books, then CDs, then videos and gifts, and now we expect to see it selling a wide variety of products.
The genius of the Internet is networking -- seamlessly connecting computers and the people who tap their keyboards. Why should it surprise us that this network spawns a plethora of joint ventures, agreements, and partnerships?
The question, of course, is how it will work in the long run. Can small businesses on the Web follow these leaders? What are the advantages and the dangers?
Sources of Income
The promise of multiple streams of income sounds good. These are the possibilities: referrals, advertising, product sales, leads for traditional follow-up, entertainment, and information.1. Referral income from companies to whom you refer potential customers. Affiliate or associate programs work in this manner. They pay per click-through, per-action, or as a percentage of any sales that result from the referral. Income can vary from 5 cents to $1.00 per click-through, or from 5% to 20% of sales.
2. Advertising income. The more traffic a site gets, the more interested advertisers are in siphoning off some of that traffic to their own sites. Banner advertising can pay a site owner from $5 to $75 CPM (per thousand "page views," or "impressions," as ad men like to call them). Newsletter sponsorships become a possibility as the list grows.
3. Sales income from product sales transacted on a site can be lucrative. The profitability depends a lot on the mark-up and shipping method. If you have a high mark-up of 60% and do the shipping yourself, you can make some money with a steady flow of traffic. More often website sales have a mark-up is 25% to 40%, with the manufacturer drop-shipping the product, which makes the margin substantially thinner. Another example is a fee or percentage earned from hosting an auction on which sales transactions are made.
4. Leads for traditional follow-up is the purpose for which many businesses began sites. The site generates e-mail leads that are then nurtured through telephone, fax, mail, and person-to-person meetings. A number of businesses have seen a substantial percentage of their new business come from Web-initiated contacts.
5. Entertainment income is possible on sites offer enticing online entertainment. Subscriptions can vary from $5 per month up.
6. Information sales income. A few sites offer compelling content and research databases that people are willing to pay for. The Wall Street Journal (http://www.wsj.com) and Web Commerce Today (http://wilsonweb.com/wct/) are examples here. Typical subscriptions range from $25 to several hundred for industry newsletters.
If you can develop several of these income streams simultaneously, won't the resulting river be bigger? Perhaps.
Affiliate Programs
The most serious downside of developing multiple streams of income is loss of focus. A website needs a very clear focus, a purpose, a reason for being. If it tries to do everything, it does nothing well. One of the current temptations comes from affiliate programs. You can earn money by referring buyers of CDs, books, clothing, and about anything else imaginable. (See examples at http://www.refer-it.com)How do you decide what to promote on your site? First of all, determine your site's main purpose. We recently stated the Wilson Internet Services mission statement on our first page: "We provide key information about doing business on the Net." That is our focus. If a product or advertisement or article falls within that purpose statement, then it belongs on our site. If not, we reject it.
Of course, we've experimented with a number of affiliate programs. During December, for example, we featured on every page of our site BottomDollar, a popular shopping agent that does comparison pricing on a wide variety of consumer products. We thought we'd cash in on Christmas sales. Wrong. The whole project was a bust for us in terms both revenue and focus. Purchasing consumer products has little to do with providing information about doing business on the Web. Oops.
We replaced this with a list of books on Web marketing, e-commerce, and Web strategies with links to reviews on our site as well as to the book at Amazon.com. This is much more closely related to our purpose, serves our visitors' needs, and seems to have been well-received.
Revenue Generation
The other danger of developing multiple streams of revenue is that you may be spending a great deal of time for little increase in revenue. The key to revenue generation on the Web is developing a high volume of targeted traffic. If you have that you can sell advertising, products, affiliate program offers, generate leads, and everything your visitors are interested in. Without much traffic, you site isn't a good candidate for branching out. What can you expect? I'll give you some hard numbers to give you an idea of what we've found on our site. Your experience may vary:- Bottom Dollar (http://www.bottomdollar.com/), consumer products shopping agent. We placed their search engine and categories on the right side of our pages during the month of December. About 90,000 page views resulted in revenue of about $11.47 for the month (which I probably will never be paid for, since it doesn't reach their minimum to cut a check). This amounted to 428 comparison searches (0.5% click-through rate), of which 124 clicked-through to the merchant's site (30% "conversion" rate), though I don't know how many made an actual purchase. We received excellent weekly reporting of click-throughs, however.
- Spree.com (http://www.spree.com?x=wis308) has several shops. We promoted sales of gourmet coffee and Palm Pilots through 100,000+ banner ad views on a couple of our sites. The revenue amounted to about $150 over several months. We received no regular reports of sales.
- Amazon.com (http://www.amazon.com/) has been our partner for marketing and e-commerce book sales. Last week we set up links to about 40 books on the right side of the pages in our site. About 20,000 page views of book links in one week resulted in 1,166 visitors to Amazon.com who purchased 69 books and netted us $127.87 in commissions. The amounts to a click-through rate (to one of about 40 links) of about 5.8% from my site, and a conversion rate (percentage of visitors to Amazon who made a purchase) of 5.9% (assuming each purchase consisted of a single book).
Advertising Revenue
Is it worthwhile setting up your site to carry banner ads? If you have a lot of traffic, probably so. Banner ad rates vary from $50+ (for very targeted sites) to $5 or $10 for more general sites. But advertisers are really only interested in advertising with you if you have targeted traffic that relates to their business. Let's see what the revenue might be. If you have 5,000 page views per week and can sell your banner ads for $20 CPM, you would receive $100 per week if you sold out all your space. The cost of CentralAd Pro 3.0J banner serving software (http://www.centralad.com) is $189 installed on your webserver. It is quite adequate for smaller sites, and tracks banner ad views, click-throughs, and click-through rates. You'll also be spending considerable time preparing your existing web pages to display banners, developing advertisers, placing banners, and invoicing advertisers. The more targeted your site, the higher a CPM rate you can command. Rates on our site vary from $45 to $55 CPM (http://www.wilsonweb.com/ads/) For more information on setting up your site for advertisements, see our article at http://www.wilsonweb.com/articles/bannerad-revenue.htmIf you have a regular e-mail newsletter, you may have already received inquiries about advertising. I recommend setting your advertising rates on a CPM (cost per thousand subscribers) basis, so as your circulation increases, the cost of an ad increases, too. Web Marketing Today rates are currently $40 CPM for an ad before the first article and $30 CPM for an ad after the first article. I specify ad size as 10 lines of up to 65-characters per line. We are also able to track click-through rates for our advertisers. Some newsletters take "classified" ads, too, and may charge a flat rate for a few lines. Experiment with this, and see what seems to work for your subscribers.
Product Sales
The Management Advantage (http://www.management-advantage.com/) has had a site since 1996. Owner Bill Truesdell is a consultant, expert witness, and author in the field of human resources management. When he began on the Web, his purpose was to promote his consulting business, and sell a book he had self-published. Last year we redesigned the site using Open Market ShopSite Manager store software (http://www.wilsonweb.com/smallshop/) that enables him to easily update his content web pages as well as his product offerings.Over the last couple of years the nature of his business has shifted towards publishing. Though he offers a traditional printed newsletter, now 50% of his books and related products are sold through his online store. Once product sales made up about 5% of his company's revenue; now product sales account for about 45%. Bill was wise to relate his product sales to his core business. Instead of being a distraction, his product sales helped focus his business even more.
Sell Everything, Sell Nothing
In our online store design business I sometimes talk to people who want to sell on the Web, but don't know exactly what to sell. "I can get a great deal on velvet shirts," the would-be merchant will tell me. "I also have a wonderful arrangement with a brand-name tool manufacturer." What will a visitor think of Sierra-East Enterprises if they have to choose between velvet shirts and adjustable wrenches? He'll wonder what kind of idiot is running this site, and refrain from buying even a wrench for an excellent price.Now if you can sell a whole line of tools, set it up on its own site and call it Sierra-East Tools. Have another domain name (on the same webserver space) pointing to Sierra-East Velvet and carry an entire line of velvet shirts, velvet dresses, velvet underwear. Just don't mix it with tools (unless you carry velvet wipe rags). If you're careful, you can use a single online store system to take orders from both sites, with a merchant credit card account in the name of Sierra-East Enterprises, and your customers won't mind. With this kind of set-up you can add product lines as you are able, by adding a domain name and a new subdirectory or two to your already existing webserver and online store software. Think of the possibilities: Sierra-East Herbal Delights, Sierra-East Fresh Trout.... Use your imagination. Just remember not to mix velvet with wrenches and you've got the message. It's a matter of integrity.
Preserving Your Integrity
The word "integrity" comes from the Latin root integer, meaning "entire." A site with integrity makes sense in the whole and in the parts, that is, the individual parts relate to the whole and do not conflict with it. It is important to make sure affiliate programs and ads on your site and in your newsletter are related to your core purposes. I recently turned down an ad for real estate investments and another for Viagra because they didn't directly relate to the purpose of Web Marketing Today. Advertisers will either complement or detract from your message -- screen them carefully.Developing multiple streams of revenue, when done wisely, can be rewarding. But make no mistake: it takes a lot of time. Ask yourself these questions: Is this worth the time and energy invested? Will add to my site's focus or splinter it? Is it likely to generate a significant amount of revenue? And, do I really want to sell beef jerky?
Read additional articles from Web Marketing Today, Issue 52, January 1, 1999
