Have you ever wondered how websites make money? You’ve come to the right place!
Although there is a a lot of sophisticated technology behind websites, usually mysterious to the layman, the principles of how websites do business are pretty easy to understand. There are many kinds of websites, from personal to socially conscious to corporate – and everything in between.
Kinds of Websites
Some sites simply provide information, while others provide information with the intent of leading toward a business relationship. These are often referred to as “authority” websites – the information is presented in such a way that the site owner is demonstrated to be an authority on the subject matter. Usually, there is a “call to action” – either to initiate a business relationship directly on the site or to contact the site owner for more information. This site falls into that latter category. Our call to action would be for you to contact us, so we can tell you more about the options for investing in websites.
But the vast majority of commercial sites, those that should interest you as an investment, are “affiliate” websites. They would usually either be an authority site or a shopping site, but the common thread is that their call to action is for the visitor to click on a link. This is not unlike your local newspaper, radio station or television network. All those are “publishers” in one way or the other, and the same is true with websites. Companies who wish to advertise their services are willing to pay site owners for sales made to customers referred by the site. Some even pay if a user actually just clicks on a link and lands on the advertiser’s page.
Take a look at our travel website, The Savvy Traveler. You will see that we have written a lot of content about our experiences while living in Europe and our travels since then. People come to the site to learn our perspectives on different locations, and some of them decide to book a hotel or a tour while there. When they do, we get a small percentage of the sale from the advertiser, in this case a provider of a tour or a hotel brand or similar. There is no cost to the purchaser – the product or service is the same price either way, but we get paid for our time and efforts when visitors use our links.
A good affiliate website can be a gold mine if it is properly run. Who wouldn’t want a successful business that does not need a warehouse, requires no shipping, billing or even customer follow-up. These websites do need relationships with good companies who want them to publish their links and continuing optimization to assure they are highly visible to the search engines. Usually they are based on some kind of theme to target a particular market. What’s even better is when there are two or more sites, all targeting the same market but selling complementary products. This builds synergy and increases the viability of each of the sites.
Statistically speaking, if your site is properly constructed and your products are well known, you can get a feel for what your earnings should be based on how much traffic comes to the site.
Here are three terms that are the keys to the internet business:
- Impressions – The number of times visitors view a page where an ad is placed
- Click-throughs – The percentage of visitors who will click on the ad
- Conversions – The percentage of actual sales made from the click-throughs
Here’s a real world example: You are walking down the street and see a shop. You see an ad in the window about something of interest. Do you go in, or do you walk on? If you go in, you look at the product and make a decision based on what you see. If you like the product and the price is right, you buy. Now think about that process and try to assign percentages to the times you go in vs. walk by and to the times you buy vs. walk away.
In the internet world, where there are millions of websites, these statistics can be derived pretty easily. Your website is that shop, and the ads on your site are the window sign. Can you see why they would need to be placed in a location where they will be seen? They should also be attractive and represent products interesting to your audience.
There are no absolutes, but in the internet world, statistics tell us that a well designed site with good ad placement should generate from about 0.5% to 1% clicks per impression. Conversions happen once your visitor reaches your advertiser’s site (a good reason to choose well!). Sometimes you get paid just on the click, but more often the visitor has to buy (convert) in order for you to be paid. According to the online advertising website, Wordstream, the average conversion rate is only about 2.35%. But the top 25 sites convert 5.31%, and the top 10 convert 11.45%! That’s a big difference, so you can see how important it is to align yourself with the best possible vendors for your market. And, you might also be looking for some pay for click advertisers, such as TripAdvisor.
In summary, a good website is targeted at a viable market, well constructed so that it is friendly to the search engines, presents products that are of interest to their market and chooses vendors with the highest possible conversion rates. Lots to consider, but if you buy a good website, the returns can be really good. And if you have the right partner, the process can be very simple. We’ve partnered with the Income Store for our site acquisitions, and we have been very happy with the results. They only buy sites that meet and exceed their strict standards in all the above areas, and they have an excellent team of experts who help assure the site continues to grow and improve over the years.
Hopefully you now have at least an overview of the website business and an appreciation of the role revenue generating websites play. If so, you probably realize the importance of finding the best possible partner to help you maximize your return on investment. We can help with that. Questions are welcomed –feel free to get in touch!