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Authority Site Overhaul Case Study #2 – Monetization Strategies

October 14, 2015 by Wired Investors in Authority Site Overhaul Case Study, Improving ROI, Investing Concepts

If you haven’t been following along with the case study, here are all posts in order:

The First Post of the Case Study (Due Diligence and Validation)

The Second Post of the Case Study (Monetization Strategies)

The Third Post of the Case Study (Creating a Content Creation Framework)

The Fourth Post of the Case Study (How to Validate a Product)

The Fifth Post of the Case Study (Site Structure, Internal Linking and Ad Positioning)

The Sixth Post of the Case Study (Contributor Accounts)

The Seventh Post of the Case Study (Social Media Optimization)

The Eighth Post of the Case Study (Why Content Marketing is Tough)

(Password for all posts is NoHatDigital)

As we wrote about last week when we went over the valuation, we essentially have 2 businesses in one.  The first is the Kindle Library, which currently has about 85% of the revenue.  We are still new to this area (though George does have a Kindle book that makes $500/mo), so we are only putting about 15% of our effort here.  This includes:

1. Perrin will be relaunching the books.
2. We will be creating lead magnets from within the books.
3. If we see a decent increase from the above, we would consider writing more books.

That being said, the majority of our effort will be put into LearnU.org itself, which has plenty of potential.

As mentioned in the post on NichePursuits, we can approach this in two different ways:

Note: This post is a little math heavy. We tried to stay true to how we would normally analyze this kind of business, and in this case that means thinking mathematically about our investment. If there’s anything that’s unclear, feel free to ask questions in the comments and we’ll try and answer them.

The Monetization Overhaul Approach

The Monetization Overhaul is all about turning this site into an actual business.

Normally, we only think that product creation/lead gen route makes sense when a project meets the following criteria:

1. The niche monetizes off of 1 of Hayden’s 3 preferred business models.
2. The site’s existing traffic can move into a funnel that can produce at least 10k/mo in additional revenue (this could represent 1000 leads/mo at a $10 lead value, 500 leads/mo at a $20 lead value, etc.).   That means the flip value increase could be potentially 250k.
3. The potential visitor values need to be at least 3x the amount earned off of Adsense/Amazon.

The reason we’d want the funnel to earn so much is that it’s considerably more effort – instead of the 150 hours we’d put in over 3 months for the Pareto Portfolio (the section below this), it would be more like 900 hours total (over 6-9 months).  If these changes added 1000 leads/mo and resulted in $10 lead values, it could potentially add 250k to the asset value of the business ($10000 x 25 times monthly earnings).

However, there’s also considerably more risk.  If any of your conversion predictions fall through, you could make a lot less money, or even end up with a funnel that produces less income than Adsense/Amazon. That’s why the upside needs to be high for the overhaul to be worth doing.

To balance this there are also other benefits in owning a product.

Ace in the Hole?

As mentioned in the NichePursuits post, we plan to validate an idea first, and one of those ideas is to recycle an existing product that Hayden has, and therefore cut our time spent down by 75%.  This would make it a strategic buy, and potentially very high ROI.  The idea we plan on validating is teaching college students the basics of online entrepreneurship.

An Existing Product and Funnel

Hayden has a couple of products and funnels in this niche, and although the email values would be lower for college students, we still think the annual lead value would be in the $20 range.  

It May not Make Sense to Overhaul Right Now

The issue with going down the monetization overhaul approach right now is that the site just doesn’t get enough targeted traffic (and the traffic it does get is kind of scattershot). We mentioned we were interested in pursuing this strategy if the funnel could bring in $10K a month in revenue – while we’re willing to lower this to something like $2500/mo since Hayden already has plenty of excellent entrepreneurship course material lying around, at current traffic rates, the math doesn’t necessarily make sense for us.

Here’s where the SEARCH traffic is at right now:

4K sessions/mo – and the traffic lacks focus right now – we get traffic on a number of different landing pages that target different types of visitors – so only 2% of visitors opt-in. If we manage to sell a $97 course on entrepreneurship to 10% of the list (over an extended period) – that’s about $776 a month.

4K x 2% → 80 leads x 10% → 8 buyers x $97 = $776

At the bare minimum, we’d need the site to be getting at least 15K visitors a month from college-related search traffic – that would get us to $3K a month – that’s probably the amount that would make it worth our while to dedicate the amount of time that’s needed to put together a high quality course.

15K x 2% → 300 leads x 10% → 30 buyers x $97 = $2910

While we would like to demonstrate the effectiveness of product creation as a way to boost monetization, we’re also treating LearnU as an investment, and the traffic that it has right now doesn’t really justify us taking the product creation route… yet. We do have plans to pursue product creation, but only after we’ve built up LearnU’s traffic to a point where it makes sense.

That being said, we did put some time into testing out monetization ideas with the existing audience. We did manage to validate that the generic college audience is interested in learning more entrepreneurship. Also, it was surprising to us, but it turns out that entrepreneurship actually tested better than study hacking. We’ll give you the nitty gritty details on how we validated our two ideas in next week’s post.

So – since we’re probably not going to pursue the product creation/full monetization overhaul at this moment in time, we’re left with…

The Pareto Portfolio

This is the 80/20 approach, worrying only about the high ROI low-hanging-fruit, and forgetting the rest.  Then doing it again with another site.  It’s perfect for people with more of an SEO/niche site background.  The work consists of:

• Adding more long-tail SEO content will be a strong and fast play for this site.  Monetized through Amazon and Adsense, I’d expect to get a 500% annual return on new content (which I’d pay about $20 per article for).  Note that LearnU would cover any uncompetitive keyword and become even more generic than it is now.  It would likely get into career-related keywords as they tend to be strong earners.
• Normally we’d also link to it from our contributor accounts and other sites in my portfolio, which should help the overall link profile considerably.  The more you grow your Pareto portfolio, the stronger each site will be.  As it is a public case study, we will not link from our own sites as we don’t want to risk our portfolios, however we’ll still use external contributor accounts.
• It’s also a strong candidate for viral posts, which would also help rankings considerably (I believe that non-SEO traffic is now a massive ranking factor, and it will continue to grow).  We’d create viral articles, and do some paid promotion with facebook, aiming to at least break even on the promotion.  Long-term this will result in better rankings and natural links.
• It could also use a rehaul on it’s internal optimization (new content is indexed well, but it’s archiving system means Googlebots needs to dig deep to find older content).
• Finally monetization could be improved by focusing on the 80/20 as well.  We can play with the Adsense blocks (only the 1 at the top is good, sidebar will be removed and we’ll add the other 2 within content as well).  
• Then we can focus on the posts that rank, and sprinkle in stronger Amazon links and tables, remove the massive images above the Adsense blocks and call to actions to the Ebooks (since they’re clearly not working).

With this model, we’d only do work for the next 3 months.   We would set out to publish about 90 articles during this time – a mix between long-tail KW research based content, link-building articles, and viral articles (probably about 70:15:15).  Because we are potentially still interested in the Monetization Overhaul approach, we’d pay special attention to college related keywords (in order to hit the 15k visits/mo).

Over the next 3 months we’d budget about $500 for FB promotion, and about $1800 for the 90 articles ($20/each).  Within a year I’d expect the site to be earning about $1000/mo – and to be flippable for 30k (at a 30x multiple, due to its email list, social media presence and growth curve). That’s excluding the value of the kindle library altogether.

That would represent, $5300 that we invested on the site-side of this project (if you consider the site itself is valued at $3000), a profit of $24,700, at an annual return of 466% (not including the cumulative earnings of the site month to month).   In this scenario, we could choose to keep the kindle library (or sell it together or separately).

In terms of time, we have an advantage as we already have the above systems setup with VAs running them.  We will share these systems with you over the next 3 months.

Because of that, we would likely only need to spend about 150 hours between us for the entire project.  This time would mainly be spent on quality control of the aforementioned system, on-page optimization of existing content and keyword research.  

All of the above would normally be outsourced to an apprentice at $20/hr, but due to the public nature of the project we’d do it ourselves.  If our numbers hold up, we will receive an hourly wage of $165 (total profit of $24,700 divided by the 150 total # of hours spent) and the process could be repeated as we could just apply it to more and more sites in various niches.

Again, keep in mind that the process of keyword research and editing of articles can be outsourced fairly easily for about $20 per article (bringing the annual ROI of adding new content down to about 250% but allowing for a more passive approach if you are so inclined).

Takeaways

1. We actually managed to validate the idea of teaching entrepreneurship to college students – but there is one issue that’s holding us back
2. For us to pursue a monetization overhaul, which would involve the creation of a product, the numbers need to add up – and at the moment, they don’t – there’s too little traffic to the site and the traffic that it does get is unfocused
3. For the time being, we’ll be using Pareto Portfolio SEO-based content creation techniques with an eye towards ranking for college-related keywords so that down the line it might make sense to pursue the Monetization Overhaul
4. We’ll revisit the potential for the overhaul when the site is getting around 15k of college-related search traffic per month, which would hopefully end up earnings the site $3K a month

Stay tuned for next week’s update – we brought in an expert to validate our two product ideas, and he’ll give you a step-by-step explanation of exactly what he did to validate the college entrepreneurship idea.