Comparing the ROI of Online vs Offline Investments

I am sure I have made similar posts before, but I live in an 8 unit townhome, and just down the street they are hauling away part of a mountain to make room for another one of these. Each of the 8 units has a rent of $2100 a month, which comes to a total of $16,800 a month.

Their costs include digging up the mountain, hauling away the dirt, permits and licensing fees, property taxes, cleaning, land, raw building materials, construction, interest on a loan, etc. By the time they are done I am sure they will have spent at least $5,000,000 to create a small revenue stream. A website I started a year ago took about $50,000 to develop, and already makes more than that building will. The virtual real estate investment required no loans, and the ROI is over 100x greater. If I build a strong enough brand my income stream will grow much faster than inflation and be nearly as stable as the real estate, while owning a more liquid asset with lower fixed costs. If you are aggressive enough, you can scale an affiliate site to a billion dollars.

The best investments you can make are in your own education and projects. As time passes the web will be more like the offline world and that 100x greater ROI will start heading closer and closer to 1. The only ways to prevent that from happening are to

  • keep testing and learning

  • heavily reinvesting in growth and brand building
  • be willing to fail and move on to better markets
  • use technology to automate
  • build a following and create social relationships with like-minded people
  • leverage your current assets to optimize and promote future business

I hope they have fun tearing down the mountain. I am off to get a few more links. ;)

Less Writing, Higher Quality

Value Blogging is In

Brian Clark recently highlighted that while valuable blogs continue to gain traction, the bloggers who were only popular because they were early are seeing diminished traffic and are fading in relevancy.
It makes sense that many of the original bloggers would fade because blogging about oneself is narcissistic and highly irrelevant to most readers, while blogging about technology and the web is quite easy, and there are thousands of people doing it.

What Makes Content Valuable?

The difference between value and non-value content is how unique the content and thoughts are, and how actionable the content is. If everyone else reads the same channels you and I do then us posting about their information has little value. In an ironic twist, that is one likely reason this is a low value post.

The Importance of Formatting & Framing

Almost all content ideas are recycled. The key is to target your message to an audience and format your message in a way that gives you credit as being the thought leader who came up with it. Jakob Nielson continued his (well structured) rants against blogging with Write Articles, Not Blog Postings. He didn't have to call thin low value information blog posts, but he did to help target his message at bloggers and have them spread his message.

Information Pollution

From Jakob's article

Even if you're the world's top expert, your worst posting will be below average, which will negatively impact on your brand equity. If you do start a blog despite my advice, at least screen your postings: wait an hour or two, then reread your comments and avoid uploading any that are average or poor. (Even average content undermines your brand. Don't contribute to information pollution by posting material that isn't above the average of other people's writings.)

The best channels, the ones worth paying attention to, filter. They are valuable as much for what they DON'T publish as they are for what they do publish. If you have an ad supported business model then information pollution is an effective means to increase profit margins, but if you sell consulting and/or content a different approach is required:

Elite, expertise-driven sites are the exception to the rule. For these sites, you don't care about 90% of users, because they want a lower level of quality than you provide and they'll never pay for your services. People looking for the quick hit and free advice are not your customers. Let them eat cake; let them read Wikipedia.

The reason TropicalSEO is so good is that Andy only publishes every once in a while. If you publish everyday eventually you run out of stuff to say. Blogging is just like writing songs or books. Each writer only has so much in them before they have to take a break to gather their thoughts and find more material to write about.

Jakob also mentioned that by writing longer articles that you create content which is not only of greater value, but hard to duplicate. It is why my book is read more frequently than my best blog posts, and part of what makes writing 20 page articles fun and worthwhile .

Are New Bloggers Experts?

I think we are all experts at things we have experienced, but any field worth being in takes a while to become an expert. To become a publicly recognized expert you have to

  • garner attention and keep it

  • develop many social and business relationships
  • build a personal brand
  • have thick skin

The hard part about writing in depth stuff when you are new to a market is that if you are still learning there is little upside to trying to write beyond your knowledge level. When I did that people took time out of their day to email me reminding me of what a horrible human being I am. I still get some of that.

A better approach to getting traction for a new blog is to add an element of social interaction to it, leveraging the brand and reach of others. Awards, interviews, and contests work great. After you get a bit of attention make sure to follow that up with some higher value content to turn one time readers into subscribers. It is hard to imagine a blog market more saturated than SEO, and yet in 3 weeks Patrick Altoft built 10,000 links.

How to Lose Relevancy

One can talk about the current hot memes, like Squidoo spam is right now, but ultimately nobody cares to read 31,843 people blogging about Terry Semel stepping down. The only way to build a brand talking up memes is to be the person who started the meme, or have such influence that you can re-frame the meme and gain ownership of it.

Deleting Garbage

As content quality improves short me too posts end up costing more than what they are worth. I have known of people who deleted a year and a half of archives because it wasn't worth the link equity the content was wasting, when it could be spread across higher value content.

The threshold for usefulness will continue to increase as more content is available online in richer and more interactive formats.

When Garbage Content is an Effective Monetization Strategy

Internet marketing advice is rarely universally useful. Here are 3 cases where low value information pollution is an effective strategy:

  • If you are in a market full of garbage it is not hard to beat it by being slightly different and then bolting a bit of linkbait onto it. In many consumer finance markets just rewriting the affiliate feed is all you need to start getting traction.

  • If you have an older authoritative site and are not effectively monetizing it you can add a related offer sections.
  • If you are a blog or a media website that regularly publishes news you can backdate commercially oriented posts or publish special advertisement sections without adding noise to your main channel (blog, newsletter, RSS feed, homepage, etc).

How Likable is Your Niche? How Lovable is Your Brand?

In some dirty industries there are parallel markets/messages/ideas that have similar business models, but are loved and marketed as though they are pure and do nothing but improve the world. As long as your industry is viewed as being dirty it is hard to get much traction outside of it until your industry grows up, you get good at relating your industry to other industries, and/or wrap your brand around a market that is easier to like.

  • It is far easier to get links as a person talking about search than it is a person talking about SEO. Google is always in the press and largely controls the public perception of SEO. Ride their publicity.

  • It is far easier to get links as a person talking about personal finance than a person talking about payday loans. Be an expert in the broader field and then publish the offers that are profitable enough to subsidize the other content.
  • It is far easier to get links as a person talking about blogging than a person talking about the news. There is a sense of empathy toward other bloggers, there are tons of people doing it, and social activity is baked into the software.

If your field is hated consider riding other trends to help gain authority and spread your ideas. It is far easier to sell people what they want than to try to change their view of an entire industry.

Link Quality: Perception is Reality

A friend of mine recently submitted a sleazy site to a number of human edited directories and was surprised at how many accepted it...almost all of them.

A bigger surprise though was who rejected it. Yahoo took the $300 and accepted the submission. A directory that has been highlighted as a spot that sells links to anyone who has $10 and a URL rejected it.

Perception of quality and brand awareness (as signals for trust) often trump true quality, usefulness, and how strongly a link source discriminates.

Leveraging Your Search Knowledge to Market to Different Communities

The type of person who reads this blog and other blogs about search marketing knows far more than the average webmaster (or web user) about search. You can use that knowledge as a marketing advantage over the competition, by doing things like creating a custom topical search engine, or write about harnassing the power of Google to _____. Search is a big power on the web, and it relates to everyone publishing a site. Leverage Google's brand to push your own. If you story spreads great, if not then you site is at least a bit thicker and harder for people to compete with.

In almost every field you can make your content seem more linkable and more remarkable by talking about it as though it is a search play rather than a pure content website. Look how much press Mahalo got compared to the quality of the site and the quality of the concept.

The Evolution of a Profitable Site

The following is the three step process that I view as the best path for creating sustainable sites that are valuable, successful, and profitable.

Launching a New Website

When starting a new site a webmaster should be willing to do just about anything to build link equity, brand exposure, and an audience. This includes:

  • not monetizing too heavily off the start

  • buying a good domain name and site design (or as best you can afford)
  • paying attention to the marketplace
  • stroking the ego of important players in the market (via things like award programs, interviews, mentions, etc etc etc)
  • having a unique value proposition and something you stand for
  • create real value
  • buying a few key trusted links

This phase should include trying many different things...even if 90% of your ideas go nowhere you still do good if just a few of them spread. Test and learn, test and learn, etc etc etc. It is ok if some of your ideas in this stage are flat out bad...it shows that you are learning and it will make others more comfortable feeling they can also learn with you. People don't like to read someone who thinks they are perfect, especially if they are new to a market.

In this phase I usually do not care too much about monetization other than coming up with ideas that I know I can bolt on, unless the site is so niche that it is already immediately focused on the commercial aspect.

If you bought an old trusted site you can skip step 1 and head to step 2.

Monetize Your Site

As the site gets traction, the site can be back-filled with related higher profit content ideas. Don't place ads on your subscription channel in a distracting way. Instead, add other content sections to the site that are of high profit potential. Make a channel / feed of related deals, or create a static content portion of the site with related commercial offers. After you created enough content you can also repackage portions of it in an information product or sell a premium subscription service.

The site's internal link structure should also place more weight on the important high profit pages. As the site ages and gains high authority trusted links, the site's inbound link profile can back-fill that with obtaining some average to lower quality links with the desired anchor text for the most profitable sections of the site.

Here you can also look to launch (or at least think of) ideas that make you the authority on the profitable section of your site. What can you do in that niche to make people view you as the expert? Why would they cite you instead of competitors?

Solidify

If your site makes more than your living costs, but you feel is on shaky ground, it is time to reinvest earnings to create a real brand. If you don't have a great design and great domain name make sure to buy them. Make the site so strong that the competition can't clone you and has no choice but to buy you out. Create thick content that builds your brand even if it does not feel like it will be highly profitable in the short term. After you have enough easy to monetize content keep increasing the quality of your content and create something people would want to subscribe to and share with their friends.

As you keep building your brand and link equity you can also look to increase your income by doing any of the following

  • selling consulting or information products

  • adding parallel profitable content sections monetized via ads
  • going deeper with the commercial sections on your site (by adding more content in that section)
  • if you have enough distribution and market leverage, consider creating a marketplace or leverage your brand asset to move your site up the value chain

Website Sustainability: What Percent of Your Traffic Comes From Search Engines?

As an SEO one of our primary goals is to get more search traffic for targeted search terms. Search traffic is typically far more valuable than other traffic sources because it is so targeted. But non-search traffic is perhaps the single most reliable sign of quality. As Google controls a larger portion of the overall traffic flow across the web, they risk creating self fulfilling prophecies where low quality sites continue to rank only because they already rank.

If you were Google, and discovered that 98% of a site's traffic comes from Google.com might you want to give that site a bit less exposure? I would. Maybe those algorithms do not exist now, but eventually they could.

If you have a site that earns far beyond your living costs, and it is almost entirely reliant on search for income, then one of the best moves you can make for the sustainability of that site is to lower the percentage of traffic that comes from search by creating other traffic sources. The other traffic sources may not be as profitable on a CPM basis, but as you diversify you lower your risks. It doesn't matter how the algorithms shift if your site is strong in every signal of trust they could possibly measure.

Undeveloped .com Domain Name Prices vs SEO Service Prices vs Business Prices

It is easy to appreciate how under-priced some SEO services are when you look at what people are willing to pay for other traffic sources. $11 million in domains changed hands at the recent TRAFFIC conference, and $52 million more would have if the owners will willing to let them go! Once domains get properly developed their value quickly increases. Business.com was claimed to be overpriced in 1999 for 7.5 million, but now is up at auction for $300 million plus. Business.com is not much more than a thin arbitrage play, with a great name, great branding, and great marketing, all funded by the power of search.

To appreciate how much marketing and sales they do, consider that they only employ 6 editors to run the entire directory, while having around 100 employees. Without SEO/SEM that domain would not have the leverage needed to get syndication distribution partnerships, have strong revenues, custom ad deals with Google, or command such a high multiple.

I have spent $10,000+ buying a non-type-in domain name that someone paid $8 for. I have done it more than once in the last month. Why? Synergistic value in branding, associated perceived trust, and market differentiation...which are all important in a crowded marketplace.

Are domains overpriced? If you pay retail and don't have a plan for them, maybe. If you have a good plan and develop them (or buy below retail in a growing market) you should do well. As ad dollars continue to move online almost all markets are growing markets.

Sure a lot of people think you are at the mercy of Google as an SEO, but in certain markets people EXPECT to find certain sites. Google has to rely on showing some partners in their organic results to sell paid search ads against. If you look at Google's personalized homepage tabs they also offer a I'm Feeling Lucky button that adds the most popular items to that tab. If you create a tab for your keywords does Google push your feed? If you get the right name and market the hell out of it, I think your rankings, traffic, and business model are at least as defensible as type in traffic or just about any other business model.

As SEOs we tend to undervalue some of our assets because the work we do for clients is so valuable relative to the rates we charge. After a few hours of work you can offer most clients strategies that increase their non brand traffic by at least 10 to 20%. But when you hear that Business.com might get $350 million for something making $15 million a year, it makes it easy to want to heavily reinvest into creating a real brand of your own, instead of working on a group of smaller projects.

If you get a scalable business site up to $30,000 a month in free cash flow, then reinvest all of that into marketing and branding for a couple years, it is possible to build something that generates at least a few million a year and sells for at least 8 figures. At that point you can retire if you want to, but I will be 30 in a few years, so I need to start pushing harder. :)

[Video] Public Relations & Search Engine Optimization

Background on Public Relations

Along with branding, public relations is one of the few things that save you and I from commoditization. Every business (and business model) has flaws, hidden costs, value propositions, and has stories to express the delivery of value. PR aims to minimize the downsides of the flaws while making the upside look much larger than it is. Alternatively, public relations can also be used to diminish the upside of competitors while making their flaws look much larger than they are.

The Idea of a Fair Market

Is buying links fair? Is buying and holding domains fair? Is linking to a friend's site or your own new site fair? Is buying out competing sites fair? Is syndicating your spin through your own media outlets fair? Business does not care about the concept fair. It only cares about results.

The word fair is typically used to manipulate people. Markets are not fair. Humas have a bias toward that which they have an affinity to, and business is self-serving and inherently dirty.

PR aims to exploit the media and our inherent biases to create an affinity for a brand or product while viewing other brands or products lowly. Low kicks are allowed, though not recommended unless you thought through the potential consequences ahead of time.

Who Uses PR?

Why PR is so good for business

  • People and search engines have to trust something. Good public relations campaigns target the trusted parts of the web, by targeting either general authorities or related topical experts.

  • PR is hard to duplicate. Each story has a main storyteller. Another people retelling your story wont make the right people want to talk about them. Other SEO techniques, such as link buying, are much easier to duplicate and much easier to penalize.
  • Some of the best PR stories get to be told over and again by the main storyteller, surfacing that person as a topical expert whenever their field comes in focus of the media. Awareness builds relationships, which allows you to spread other stories.
  • Being trusted by one expert makes it easier to be trusted by others. The exposure builds an affinity to your brand and builds credibility.
  • Some things are popular only because they are popular. Good public relations stories can go viral and produce Justin TImberlake-like results. Using large seed sets makes it easier to ensure success, even if the story is not as viral as you would like.
  • Media exposure gives a sense of credibility. My landlord called me to tell me he read about me in the Wall Street Journal. It is much easier for him to view me as a topical expert after reading that article.

We Love You

Good public relations campaigns spread so well because they make the target want to share the story, by making them feel important, sharing their bias, and/or giving them some incentive to spread the story.

  • Salary.com created a story about how much work at home mothers should be paid, high-balling the numbers. Every year they re-release the same story and the media eats it up as though it is new.

  • All of the blog value calculators high-ball the value of the blogs to get people to want to talk about how great their blog is.
  • Even if you hate the concept of SEO it is hard to hate a version of it that is useful, free, and co-branded with Firefox.

Even if you fail to spread to spread these types of stories right away, you can still passively target the right audience using AdWords for less than 10 cents a click.

We Hate You

Many smaller companies make a name for themselves by stating how impure competing businesses are. Creating a common enemy makes it easy for people to identify with you.

The key is not to rant, rave or bash the enemy, but to provide an underlying theme that shows you’re all in it together against the enemy. When framed that way, you’re not a salesperson; rather, you’re a comrade who can lend a hand. Establishing a thematic enemy allows you to focus on providing solutions without coming across like you’re hard selling, and is a perfect technique for white papers, tutorials and blogging in general.

  • In some cases small market players can garner support when businesses attacks them. Once lawsuits are filed you never know how much support the competitor will get. When I was sued by Traffic Power my fight was for freedom of speech online and saving blog comments. It was an easy story to want to share, so people did. Within days of my blog post about it, the story was featured in the Wall Street Journal.

  • When we submitted a story about the fall in the value of the US Dollar to Netscape the story was titled How Bush Devalued the Dollar. They like political stuff on Netscape, so the story quickly shot to #1 on their homepage, stuck there all day, and sent over 15,000 visitors to our site.

Please Hate Us

Some public relations ideas play both sides of the coin - creating controversies then fixing problems they created. For example, PayPerPost went lowbrow with their marketing, offering unmarked editorial blog posts as a service, then came up with their Disclosure Policy site to correct the problem they created. They got press on the way down and the way up. They probably would have never received VC funding if they were not so lowbrow with their marketing.

Jason Calacanis

Love him or hate him, he is great at public relations. Most Weblogs Inc. content is at best average, yet he got a nice payout for it, and he used the PR machine again to launch Mahalo.

  • Weblogs Inc. worked because it got so much link equity from the media, which wanted to tell a story on blogging.

  • Jason maintained that all you needed to be successful was great content, but they had first mover advantage, paid low rates, and scraped by on profitability by selling spammy links.
  • Jason got a lot of press for Mahalo by claiming the death of SEO. Mahalo is a human compiled scraper & the URLs are seo friendly.
  • A week into creating Mahalo they already scraped trendy keywords off the Google hot terms list and now anyone can get paid a near livable wage building the manual scraper

Reputation Management

SEO can also be used to aid your public relations for your core branded terms. Reputation management works by helping favorable documents rank better, which suppresses the rankings of negative documents.

Can PR be Dirty?

Just like SEO, public relations can be used to push things that are good or things that are bad. Seth recently published my favorite marketing rant post ever. Here is a quote:

I believe that every criminal, no matter how heinous the crime, deserves an attorney. I don't believe that every product and every organization and every politician deserves world-class marketing or PR.

If you get asked to market something, you’re responsible. You’re responsible for the impacts, the costs, the side effects and the damage. You killed that kid. You poisoned that river. You led to that fight. If you can’t put your name on it, I hope you’ll walk away. If only 10% of us did that, imagine the changes. Imagine how proud you’d be of your work.

PR Watch highlights some of the misuse of and abuses by the public relations industry. They also publish videos to YouTube. I marketed some really dirty stuff when I was new to the web. As I learn more about the power of marketing, I am less willing to market things that only sound good when ignoring the hidden costs.

Content Strategies: Bulk Content vs Higher Quality Information

Rupert Murdock is trying to trade Yahoo MySpace for a 25% stake in the combined company. If Yahoo goes through with that, Rupert's $580 million MySpace investment will be worth about $10 billion. But should Yahoo do it?

Everyone Wants Dow Jones

Why Everyone Wants Dow Jones

The reporting at the WSJ may be better than other places, but even more importantly are the relationships that are in place and the perception that it is better. As many of the newspapers see their margins erode the top few will have more leverage over the market, because the smaller players will be forced to rely more on community created news (mostly noise or something Google could easily replicate) or syndicating news from companies like Dow Jones.

As content quality and relevancy algorithms improve and Google (or similar outfits) control more of the traffic supply the noise content will become less and less accessible (because traffic sources will rank the higher quality stuff to sell ads against and clone the low level stuff to keep hold of that traffic stream). The MySpace experience is not hard to clone.

Yahoo Does Not Need MySpace

Yahoo could grab MySpace and get a bunch of low value inventory in a spam filled network on the decline, or they could get the #1 financial newspaper for less. Yahoo already has a lot of traffic. They don't need another layer of noise. If they could innovate in the social space they ought to be able to do it with their current assets and traffic stream. As the web gets better at filtering signal vs noise, quality will beat out quantity nearly every time.

The Solidification of Markets

As offline players wake up to the online world the following is happening

  • search will get more relevant and become harder to manipulate (unless you already have significant offline influence or other assets you can leverage)

  • markets will get more efficient
  • all online verticals will get more competitive
  • markets will consolidate

How Does This Crap Relate to Me?

As markets evolve the threshold between signal and noise changes. Is your site the type of site that would be easy for Google to clone? Is your content the type of contet Google created the supplemental index for?

Look how bad some of the top ranked content is that still ranks because it is old and was considered high quality content years ago. Imagine how much harder it will be to crack into markets a couple years from now, when people are working so much harder to make higher quality citation worthy content today in so many formats.

The later you start the harder it gets. An hour of focused energy building citation worthy and brand building content today is worth 2 hours next year and 4 hours a year after that.

The effort spent building two parallel sites targeting the same keywords would be better spent creating one stronger brand. Markets are self reinforcing and exposure leads to more exposure.

To stay competitive independent webmasters will increasingly need to chose fewer high quality projects over a large quantity of cheaper lower quality information. Top trusted editorial channels have far more value than bottom feeding networks.

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