Internet Entrepreneurs Blog

Every entrepreneur needs a few good sources of new ideas and one of the websites we use is Springwise.com. At Springwise you’ll find dispatches on the latest ideas from around the world to stoke your imagination and creativity. The authors do a good job letting you in on new business ideas before they’re mainstream which often means huge growth potential for new entrants (imitation is the best flattery after all ) I subscribe to the weekly email newsletter but you can also get daily updates from the blog-style website.

Springwise has a sister website called Trendwatching that distills the overarching trends that connect many of the latest business ideas into a meme-rich monthly digest. I have to say I prefer Springwise since it leaves room for my own trend interpretations but Trendwatching is definitely a nice way to make sure you don’t miss the next big thing.

Last week I wrote about finding websites for sale and if you’re in the market, it’s important to understand the value of what you’re buying (or selling). Fortunately there are some online tools out there to give you an idea of a website’s value.

Most website valuation calculators use a combination of factors to evaluate a website’s worth: Google pagerank, daily visits, pageviews, domain length (shorter is better), # of backlinks, Alexa ranking, Quantcast ranking, etc. It often seems the more factors these sites take into account, the better the estimate. Still, these sites generally miss the mark since they fail to take into consideration factors they can’t measure (like e-commerce sales, subscriptions, email list size, etc.). One site we looked at gave Google an estimated value of $1.5B whereas Wall Street tends to value the site at $150B (100X greater!). Oddly, the same calculator said Yahoo! was worth $2.6B and one of our sites only $136 (we usually earn more than that on ads in a single day). Of the sites we tested one of the better ones was cubestat.com but your results may vary.

Still, perhaps the most reliable way to value any company (internet or not) is to use the cash flows the business generates to calculate the net present value (NPV). If the website earned (profit, not revenue) $10,000 last year and is growing 5% per year you can get a good estimate of the value of those cash flows over the next 5 years (roughly $40,000 at a 12% discount rate). No need for new math here just because we’re talking Internet businesses - good old NPV works just fine.

All of this is to say it’s important to do as much due dilligence as possible before buying ANY business, online or offline. Dig into the financials and you can come up with a good estimate for the value of any website!

We’re always on the lookout for website acquisitions that could fit the Review App model and there are a couple sites we use to find websites for sale. Buying a website can give entrepreneurs a huge jumpstart in building an online business but it’s important to first consider what you need. Some sites for sale offer a large registered user base while others offers may boast significant pageviews. Still others may offer large amounts of original content or design. Again, just keep in mind what your business needs most from an acquisition.

Sitepoint.com has listings for hundreds of ‘for sale’ websites but it’s often difficult to separate the scams from the legitimate opportunities. I recommend sticking with the Premium Web Sites for Sale category if you’re serious about getting started - and keep in mind you usually get what you pay for. eBay also lists websites for sale but the quality of the listings seems to be far lower than those on Sitepoint. Sitepoint offers more verification services as well so you know you’re dealing with legitimate sellers - check to see if your seller has been ‘Site Access Verified’ and ‘Telephone Verified’ before bidding.

Buying a website can be a risky transaction so be sure to do as much due diligence as possible. Also consider how you’ll raise the value of the site - improved marketing to grow pageviews, placing more display ads on the site, etc. The real estate market may be in the tank these days but flipping websites can be a lucrative side business if you know what to look for!

If you’re a webmaster who makes a living (or a part time living) through your website, imagine this for a moment: what if Google disappeared? How would it affect your business? As an MBA student at Duke we learned in business strategy classes that over-reliance on a single supplier or partner can be a risky proposition but on the internet in 2008, do we have much of a choice?

Don’t get me wrong, Google is great and I firmly believe the company tries to make good on its promise to “do no evil.” But consider this: What if Google stopped the AdSense program due to ongoing problems with click fraud - how would you monetize your website? Or what if Google started charging the market rate for Google Analytics - say $100 a month? Could you afford to keep using the service?

Even more frightening, consider the power the Google search engine has to direct traffic and customers to your website. We had a bit of a scare with one of our sites just last month when our traffic dropped from around 6,000 visits per day to just over 1,000. Sure enough many of our important keywords had dropped from page 1 to page 7 or worse. If things had stayed that way our business would have been ruined for sure - luckily everything was back to normal after about a day and a half.

E-commerce operators use Google’s Base service to upload products for Google’s product comparison shopping engine; companies and individuals rely on Gmail for critical email communications; Google’s AdWords program drives paid search traffic to millions of websites (though since this is such a money maker for Google I doubt we’ll see this go away any time soon).

The point of all this is to say it’s important to diversify your online partners and suppliers to maximize your business’s flexibility and ability to weather competitive threats. For us this has meant diversifying our ad placement beyond AdSense by partnering with vertical ad networks and shifting paid advertisements to Facebook and other platforms. Google still provides the bulk of our traffic and customers and we love all the free tools they provide - but it’s important to be cautious when relying on such a powerful market leader (as many eBay sellers can attest).

On the web, more than most other places, appearances really do matter. My friend Joe likes to say that in most cases websites “give the appearance of a successful business” even when very little business is being done. Just because a site has a shopping cart doesn’t mean anyone’s buying but you’d never know that unless you were the webmaster behind the curtain.

Unless you’re a natural at graphic design and layout, it’s generally best to find someone to help you give your website a professional appearance. Admittedly we hadn’t taken this approach ourselves until recently and I still prefer to build out new sites on my own before hiring a web designer. Once a site has proven itself to be viable and capable of returning a design investment I’m more than willing to take the plunge.

This site was designed by the guys at 45royale and obviously it rocks. The design is professional but not because it’s overly designed; rather it’s clean, easy to use, and consistent. Exhibit Instinct designed our site at Unity3.com and was able to give the e-commerce site a lifestyle look and feel that has suppliers knocking down our door to get placement (just remember what I said about the appearance of business though ). We’re in the process of giving our other sites a professional facelift and we’ll certainly keep you posted on the results in terms of increases in visits, conversions, pageviews, etc.

Business Pundit posted an entertaining trip down memory lane covering 25 of the most spectacular internet failures over the last 10 years. This is certainly a good read if you’re feeling discouraged about your own internet business - at least you can say you didn’t blow through millions of dollars to get where you are today

My favorite failed internet startup on the list has to be the first one - GovWorks.com. For those who may not be familiar with the story, GovWorks was featured in a documentary titled Startup.com which gave an unprecedented inside look into the rise and fall of a real internet company in the late 1990s. This is perhaps my favorite documentary of all time and despite the sobering nature of this cautionary tale I somehow come away from watching it each time with a genuine sense of hope and excitement.

If you have some time today, read through the list and see what you can learn from these catastrophic internet failures. If nothing else it might make you feel good about your own struggle

Has anyone else noticed this lately: Whenever I click the bookmark for my Yahoo! Finance stock portfolio I am taken to the Yahoo! homepage instead of the correct page. This only happens the first time I click it; if I click the bookmark again, it usually goes to the correct page. I would understand if I were logged out of my account somehow but the link doesn’t redirect me to a login page. In fact, once I’m at the Yahoo! homepage I can clearly see I’m still logged in with links to my (unused) Yahoo! email inbox.

This certainly isn’t the first time I’ve noticed Yahoo! providing a poor user experience for the sake of profits and pageviews. If you’ve been following this blog for the past few years you’ll remember our complaint about the Yahoo! domains cancellation form. For more than 6 months the form, linked from our Yahoo! domains control panel, displayed a message saying the cancellation form was temporarily down for technical reasons. Inconvenient for customers who wished to cancel their domain renewals, a little too convenient for Yahoo! who continued to collect the $$ on domains that were automatically renewed.

Could this latest scheme be a ploy to inflate Yahoo! homepage pageviews by redirecting traffic from more popular Yahoo! products like Yahoo Finance? Reminds me of the trouble Apple got into recently by bundling the Safari for Windows download with iTunes updates. Forcing your customers to try out your other products is not only frustrating, it’s bad business.

In keeping with the data ranch metaphor, it’s important to remember that you can’t grow your website without doing a little seeding, feeding, and weeding. Today I’ll talk about the importance of seeding your data ranch and how it is critical to kick-starting any online endeavor.

The first mistake many website creators make is expecting contributors to show up just because a website exists. Set up a forum with an appropriate subject heading and people will just flock, right? Wrong. Without content your potential members will be gone before they even arrive.

For some it may be tempting to “seed” their new website with questions to stimulate conversation among passers-by but I’m here to tell you from my experience this doesn’t work. In fact the ratio of useful information to “seed questions” should be at least 5 to 1 in the early days of your ranch and even more if you want to grow quickly. We’ve all seen websites that have extensive FAQ sections but the key here is that all those questions have answers!

Once you’ve seeded your data ranch with useful information about your subject it’s important to leave the door open to additional information and feedback from your users. This means turning comments on in your blog software, enabling user reviews, and giving members maximum control over forum posts. In fact I recommend allowing anonymous submissions early on to encourage content growth

I recently found a little trick to save some money with my Google Adwords campaign. Supposedly Google dynamically bids on ads to get you the lowest cost per click based on your max CPC for each keyword but I wasn’t sure if this was the case.

Most of my campaigns were meeting their daily budgets so I figured instead of raising my daily budget I would try lowering my max CPC to get more clicks for the same budget. In one case I was paying an average of $0.07 per click (max bid: $0.10) on a $10 daily budget so I tried lowering my max bid to $0.07. Sure enough, over the next week my average CPC went down to $0.06 and I was STILL maxing my daily budget. Another week, another penny and today I’m down to $0.03 average CPC for a $10 daily budget. I’ve effectively increased the number of clicks I receive each day by 133% and I’m not spending a penny more!

Some might argue there are downsides to this approach since my ad positions undoubtedly fell after I lowered my bids but from what I’ve seen, the quality of the leads I receive is virtually unchanged. Take a look at your campaigns and look for those campaigns that regularly meet their daily budgets and try reducing your bid - you may be able to squeeze more clicks out of the same budget!

An interesting phenomenon has been brewing ever since MySpace started getting popular. Affinity group social networks are popping up EVERYWHERE and not just as an addition to already popular niche communities. I first started noticing this with websites billing themselves as “Christian MySpaces.” There are litterally dozens of these with memberships from 30K down to just a few dozen. The most disturbing thing is all these sites are apparently using the same “social networking” software (not sure which one, there must be a free/cheap one out there because EVERYONE is using the same one). I suppose the idea for many of these webmasters was that MySpace was a scary place for Christian teens and there needed to be a safer environment for blogging, meeting people, etc. But is there really a need for 2 dozen different ones?

Another group I’m certainly familiar with is the outdoors/action sports online community. One site, ActionProfiles, has created a sort of action-sports social network but with an interesting twist. Beyond simple athlete profiles and chatting, sponsors use the site to find athletes to represent their brands. Great concept but in reality most of the “athletes” on the site are 12 to 14 year old kids who think they’re the next Tony Hawk and are entitled to full sponsorship deals. Nevermind that most can’t even land a clean ollie yet, it’s all about the lifestyle.

How about creating mini-MySpaces based on ethnicity? Already being done by Community Connect and doubtless others. Is there really a need for more MySpaces, isn’t the point of the original to be a place where you can find everyone you know? Am I supposed to keep a profile on different sites for each of my interests? I’m looking forward to the MySpace bubble bursting, it already feels like it’s been going on for too long.

You can see my MySpace profile at myspace.com/singletracks