Revenue Plan, 6 of 10

#6. Revenue Plan

Make MONEY the metric you use to gauge the success of your site. Most first-time webmasters have a dream of creating a site that gets tons of visitors and becomes very popular. By doing this they are associating site traffic as the definition of success. This has shown itself a common habit on the internet because the traffic to other sites can easily be estimated using tools such as Alexa, but the amount of profits a site makes is private information and is usually not known. So, out of the 2 metrics – traffic and profits – people have chosen the one that is more visible instead of more accurate.

One of your biggest decisions is to what extent you want to try to make money from your site. As a starting point, look at the costs associated with your site and what impact your revenue plan will have on your site’s visitors. This is a personal decision that seems to be polarizing the webmaster community. One camp says that most content and services on the internet are free and it would be self-defeating to try to charge visitors for access to a site. It sometimes gets to a point where web users ‘are offended’ by non-obtrusive banner advertising. The other camp says that your web site is a business and you have the right – some would even say the obligation – to optimize the site’s profits.

Considered analysis says online businesses are no different than Bricks-&-Mortar businesses. Start-up websites are no different than large websites. They all need to make money. As far as charging your visitors for access to a content site, this is usually only for sites that have content that has a high, tangible, or objective value (quality research papers, inside reports, academic resources, White Papers).

Advertising is a different story. Since most content is free, having a few non-flashing banners shouldn’t offend your visitors. The number of visitors who are so turned off that they LEAVE is low. Don’t feel pressured to keep ads off or put ads on your site.

Some people say money isn’t everything. This is easy to say when you have a site that doesn’t get much traffic. In this case you can update it whenever you feel like it. But when your site grows bigger, there will be issues that require you to invest more time into your site. First, people will expect more content. Some visitors consider it a waste of their time to a read a site that isn’t updated. Second, you’ll have to deal with operational issues like comment spam, additional hosting costs, outsourcing content production and more. So after the site grows these webmasters are faced with questions they didn’t think they would need to answer, such as: Is it worth my time to constantly create fresh content when I’m not making money? Why should I invest so much time into a site when there is no tangible benefit?

Revenue Models

Donation – Donations typically will not bring in much money. Getting the money can sometimes be a pain in the ass too because Paypal sometimes freezes some accounts if they think someone is engaging in fraudulent operations, like a fake charity. The effect that soliciting donations has on your site’s visitors can vary. Some vistors may be annoyed that you are asking them to give you money. They look at the costs of the site as your responsibility and they don’t want to hear about it. Other times, especially if you have a tight knit community, many people will be willing and happy to help you out. If you choose this route then the best way to go about it would be to explain to your visitors about the financial cost and time and energy invested by you into the site. Without you telling them, your visitors will probably not realize how many resources it takes to run the site. These days, people assume all web sites are set up and operating cheaply.

Subscriptions – Subscription-based sites can bring in a lot of revenue. Two things to remember are that you really need to have some great content which people are willing to pay for, and you would benefit with a robust backend system to help with payments. By this I mean that only having PayPal would restrict your prospects. This is especially true if you want a professional look to your site. You will want to set up merchant accounts that take credit cards and this will cost money. Also look into AlertPay and PayDot.com
Another major consideration when charging for subscription access to a content site is that search engines will not index the content; therefore you can’t benefit from SEO (search engine optimization) for that content. This alone has potential to make a subscription model questionable. The lack of SEO, and therefore the lack of awareness of the site, would cause you to have to embark on a pay-per-click campaign as a marketing plan which could cost a lot of money. When considering the negative affects of a subscription model on your SEO you should look at how much content would be hidden. A best case scenario would be to have a lot of content available free to all visitors (and search engines) while having a premium section for additional content.

Advertising – Advertising can be a great way to bring money to a site. The basic model is to set up your site so that nothing is expected financially from your visitors, while your advertisers only pay you after you accomplish certain goals (sales, impressions, click-throughs). This creates a low-pressure environment for you, opposed to a subscription-based model where you are taking money from customers and you have a fiduciary responsibility to deliver results that are expected. This can lead to alot of stress.
One of your tasks when using the advertising model is to find a balance between maximizing the number of ads and minimizing the visitors’ annoyance. This mainly has to do with the number and location of ads. For illustration, a leaderboard ad pushes all the content below it further down the page, making people scroll more. Flashing banners get in the way of people trying to read text. And those mandatory full-screen “skip this ad” ads annoy everyone.

Product – In this instance you sell a product and, almost always, have to charge for it. The business model for these e-commerce sites is very closely related to the Brics & Mortar model as you have to worry about your gross margins and typically need to spend a lot of money on advertising. Affiliate – Affiliate marketing most closely resembles the advertising model where your visitors are not overtly pressured by a sales pitch to buy anything yet you still have the potential to make a lot of money. The only difference is that instead of making a fixed amount per unit of traffic your profits will vary as your sales vary.

A Side Note About Subscription Model Pricing

Another consideration about charging your visitors is whether to price your services low or charge a higher premium price. One point to consider is that with a higher price you will have higher profits margins. This is because the additional revenue that comes from price increases falls right to the bottom line because there is no additional cost associated with the extra revenue. This means it is all profit. Whereas if you increase sales by increasing the number of units you sell then you’ll have to pay the cost associated with all those extra units you sold, including fulfillment costs.

Another consideration is that with a higher price and lower customer count you will have fewer customer service issues to deal with. This means fewer e-mails to answer, fewer emails to send out (if you send out a newsletter for example), a smaller database which can come in handy if you do technology upgrades.

Yet another consideration when using a subscription-based model is that it is very hard for businesses to raise prices and not annoy customers. By charging a higher price you can go a lot longer without having to raise prices. It also leaves you the opportunity to lower the price if you set it too high. If this happens you can turn this situation into a good marketing campaign by telling everyone you are slashing prices or having a sale.

Action Plan: Look at your Ideal Client, put yourself in his/her shoes, and decide WHICH Revenue Model will serve him/her best. Write up a revenue plan projecting IDEAL DESIRED INCOME, Revenue Model, Projected REAL Income, Actual Real Income and Projected Dates.