Andy Sweet

Chris read my post from yesterday and sent me this reply:

I think you basically reflected what I said correctly. To take my own domain
portfolio as an example, I have about 350 domains, and in March of this year,
they generated about $67 in parked revenue. Now, one domain generated $31 of
that total, but let’s ignore that for now, and just say that the average annual
revenue for these domains is about $2.30. Just to make some back of the
envelope calculations, let’s say that we can multiply traffic by 20x through
minimal development that just targets the keywords in the domain name. However,
revenue will fall substantially, because CPMs on parked domains are
really high. Let’s be generous, and say that revenue falls to 60% of its
former level. That means that the average domain will now make $2.30 x 20 x .6
= $27.60. Net out the registration fee, and I could average $20 per year per
domain, or about $7,000 per year.

That’s the good news. Now the bad
news. If every domain takes me two hours to “develop”, I need 700 hours in the
first year to launch those domains. That means in the first year, I make $10 /
hour. I still need at least one inbound link to get listed in Google — add
some more time. Now, put on your white hat Google search engineer perspective
– should my 350 sites really rank? Do they genuinely help people? Do they
genuinely solve a problem? I doubt that a site developed in 2 hours (or even 20
hours) is going to be very useful to end users. Essentially you’re exploiting a
rule in the search engine algorithms that says “there’s a good chance that a
site whose domain name exactly matches a query is related to that query”. My
guess is that at some point very lightweight sites whose only strength is that
they take advantage of that algorithm hole will be downgraded in the results.
As more domainers try to figure out how to make money on their portfolio the
search engines will have to respond.

Now, take a different
approach: choose 1 domain out of those 350 that has a high query volume on
highly commercial terms with relatively light competition. Put those same 700
hours into building useful content and functionality, optimizing revenue
(through a combination of contextual ads and affiliate offers), and bringing the
site’s content to the attention of webmasters who have an interest in the site’s
topic. Now you have an excellent chance that you can generate substantially
more than $7k per year from that single site. And you’re also building a site
that the search engines will love, so that it gets more valuable year after
year.

All that said, I think it’s perfectly legitimate to quickly develop
a broad swath of sites. In theory, you should be able to develop / buy tools
that give you leverage across all those sites — user-generated-content tools,
for example. Or perhaps tools that integrate the site with Mechanical Turk so
that you can generate and release relatively high-quality content
inexpensively. By virtue of throwing a whole mess of sites against the wall,
you may find that a handful of them take off. You might be able to argue that
this approach is a more failsafe approach to finding high-volume commercial
niches with relatively low competition.

Thanks for the thought-provoking
post!
-Chris

Filed under: , , , ,