David Fiske Affiliate Marketing & Web Development

Kirsty recently wrote an article about the effectiveness of different sizes of websites.

Here's my take on whether size matters.
 
What's your aim from affiliate marketing? Is it simply to make stacks of cash? Is it to sell your site in the future? Is it both?

Regardless of whether you want to sell the site, you should still follow the principles used when valuing a site. You'll see why shortly.

Factors taken into consideration when valuing a site include:

1. The annual profit (turnover less costs)
2. The amount of email subscribers
3. The number of RSS subscribers
4. The amount of traffic your website gets

Let's work through these.

Profit

If you make £10,000 in commissions a year from one website, that's not necessarily profit. If you have spent £300 on a web host, £500 on directory links and another £200 on AdWords, you've made a profit of £9,000. Remember that if affiliate marketing is your day job, you'll have to take a wage so technically this is a cost.

Sales vary wildly depending upon which sector you are working in. If you run an insurance website, conversion rates may be lower than if you worked in (for example) a fashion sector where your visitors may experience impulse buying. I don't wake up and think "oo, I fancy some life insurance today". Perhaps you do?!

Costs vary too. If you are running an insurance website, you are competing with the likes of Money Supermarket. All good and well but the chances are your cost of sales will be high so your overall profit may be lower. having said that, look at this scenario:

Bill runs an insurance website and gets £100 a lead. He generates 10 leads a month. He spends on average £10 for each sale. So, Bill makes £1,000 in sales, it costs him £100 to get those so his profit here is £900.

Wendy runs a website about a specific pet basket. She gets 10% of every sale she generates. She generates 100 orders with an average basket of £100 each. It also costs her £1 to generate each sale. Each sale nets her £10 so total sales are £1,000 a month. Costs are £100 so profit is £900.

Who's better off? Bill is in a highly competitive market and runs a website that is very similar to Money Supermarket, in that it is a comparison site and covers several types of insurance produce. Wendy targets a small niche.

Who would you invest in so far? Bill with his 10 leads or Wendy with her 100 orders?

Email Subscribers

SEO is difficult. It's easy to do but difficult to do well. Even some of the larger companies get it wrong as Jason points out.

An easier way to target a market is to collect email addresses and send them occasional emails with details of new offers, etc. Too many emails and your subscriber base will shrink. Too few and your subscribers will become more loyal to other people as they'll forget who you are.

Bill has a stream of 100,000 unique visitors a month to his site. Out of this 100 people subscribe to his newsletter.

Wendy has a stream of 1,000 unique visitors a month and out of this, 100 subscribe.

Wendy has a higher conversion rate. 0.1% of Bill's visitors divulge their email address whereas 10% of Wendy's visitors do.

Now who would you invest in so far? Bill with his 10 leads and 0.1% email conversion rate or Wendy with her 100 orders and 10% newsletter subscriber rate?

RSS Subscribers

I think this isn't so important as it's less tangible. When you have 10 email addresses, you can see them. You can interact with them. When you have 10 RSS subscribers, you know nothing about them. You can't interact.

Bill runs an insurance blog and it has 100 RSS subscribers. Wendy doesn't have an RSS feed.

Would an RSS feed change your opinion of who to invest in?

Traffic

This has already been touched upon above but the point here is that if you can retain visitors via an email newsletter or RSS feed, they will come back. They may buy again from you. Your search rank is important to begin with to develop a stream, then you need to look at ways to get your visitors to come back time after time - fairly easy if you target a fairly large market but difficult in Wendy's case where her sole product she market's is a basket..

Valuations

These are Mickey Mouse valuations and simply for demonstration purposes.

Let's assume each unique visitor per year is worth £0.01, each email subscriber is worth £1.00 and each RSS subscriber worth £0.50. To this we will add the site's annual profit.

Bill has 1,200,000 uniques a year, 1200 email subscribers, 100 RSS subscribers and a profit of £10,800 a year. Therefore, his site can be valued as (£12,000+£1,200+£50+£10,800) or £24,050.

Wendy has 12,000 uniques a year, 1200 email subscribers, 0 RSS subscribers and a profit of £10,800 a year. Therefore, his site can be valued as (£120+£1,200+£0+£10,800) or £12,120.

Which site would you invest in and why?

Bill has a site that targets a generic market whereas Wendy target's an ultra small niche. Bill has a large number of visitors but a small number of conversions. Email subscribers are hard to come by though he does have an RSS feed. Wendy has much better conversions and whilst she doesn't have an RSS feed, that could be sorted fairly easily.

WHAT'S THE POINT OF THIS?

The point of this is to highlight what you are after. Me personally, I have started to go down the route of niche. I've been following Stu's advice and have created some very niche sites. They work in that they have covered their costs quickly but there's no value to them. Each one generates different amounts but no more than £5 a month on average. I would need 500 sites to generate £30,000 per annum. Maintaining 500 sites is a bit of a headache so I'm looking to create a monster of a site.

The key is that it has to be niche but not too niche that I run out of content! There's only s much to write about aluminium cans for instance, but there's loads more to write about recycling. I suppose the trick is to treat each page as a niche website in it's own right. Optimise it for particular keywords, make it user friendly and over and above all others, pre-sell so that the chances of getting a sale are great.

As for which site I would go for, I would probably have to go for Wendy's. I have a feeling pet baskets may be more interesting than insurance, plus the conversion rates are good. I would look at expanding the site and adding RSS feeds and other sticky content. I would perhaps look at growing the site to encompass all things that relate to pets (baskets collars, etc.) - looking to promote impulse buy products.