Starting A Website For Profit - Proper Planning Produces Profit

Posted on June 21, 2008 - Filed Under Business

Too many sites are started without a real concept for what success will be. “A full-time income” isn’t an answer. We need real numbers. What dollar number does your site need to do in order to be a success? From there, we can work backwards and make sure we make our decisions based on this goal.

Let’s say success for the site we’re launching is $40k per year PROFIT. Our site’s not going to take vacations or weekends off, so when we divide out by 365 days in the year, we can see that our site needs to make $109.59 per day in profit. (In case you’re curious, if you want to pull down a million in a year, you need to average $2739.73 per day.)

Knowing what we need to earn per day will help us to make smart decisions to start (monetization options, traffic generation, etc.)

So, how can we profit $110 per day? The first way is by making sure we can keep our costs down. We know for a fact that we’ll have the following costs for our website:

Our Costs:
Domain registration: $6.95 per year
Web Hosting: roughly $6.95 per month / $83.40 per year

We’re also potentially going to have advertising costs, maybe some software costs, transactional costs if we’re selling something online. But to start, we’re shelling out about $14 to register a domain and get hosting.

Limiting our costs is essential - don’t buy more hosting than you need right off the bat. Shared hosting accounts are sufficient until you start to see lots of traffic, and they’re very cost-effective, especially if you use a coupon code or web hosting rebate

Using one of these money savers means we’ve bought ourselves some time to get this thing making money, or we can use that money to start some advertising for our site. If we do it right, that money can stretch pretty far in terms of traffic generated.

So right now, we have a little money in our pocket, and an idea of how much cash we need our site to make. Now, we have to actually figure out what type of site to make so that we can pull down the required amount of money.

Monetization Approaches
As we did before (when we found that $110 per day yields $40,000 per year) we’re going to run the numbers backwards to see what monetization approaches make sense:

Advertising-based (CPC)
Cost-per-click networks, like Google’s AdSense should be estimated at a conservative 1-2% click-through-rate. Your mileage may vary, based on blending techniques and the type of site you run, but this approximation should serve well for making sure you don’t overestimate your earnings potential. Combining the click-through rate with an approximate earnings-per-click will let us determine the total amount of traffic we need to drive to our site.

To do this, we’ll use the tool at: https://adwords.google.com/select/TrafficEstimatorSandbox, where we type in a keyword and see what the cost an advertiser must pay to rank for the term (this is the price on the search network). I generally divide the number by 3 or 4 to find a content network equivalent that I feel safe about. Some niches will require a higher divisor, as the search competition is much more lucratively priced than the content network. We’ll assume we’re in a pretty average niche with a 60 cent payout.

$110 divided by .6 (60 cents) equals 183, which is the total number of daily clicks we need to produce in order to make $110 per day. Given a 1-2% CTR, we divide 183 by .01 or .02 to reveal that we will need between 9,150 and 18,300 pageviews per day to hit our goal. That’s probably about 3,000 - 6,000 visitors to our site per day. That may seem like a fairly daunting number - with good reason. Generating that type of traffic to a new website is a pretty substantial challenge, and our best bet in the CPC market to reaching $110 is to choose a niche that is more profitable than the average category and properly filter ads to weed out low-paying advertisers. If we can push that CPC payment to $1, we need only 110 clicks, which equals 5,500 to 11,000 page views (roughly 1,800-3,600 visitors).
Advertising-based (CPM)
CPM networks tend to work only with sites that have substantial traffic - this is an unlikely ad source for a newly started website.
Advertising-based (Direct Sale)
Direct sale of advertisements is another very popular model, but it runs akin to the CPM approach and requires an established traffic base to generate the dollars we require. If your site contains 10 advertising blocks, and you sell 2 or 3 shares of ad space per block (rotating ads evenly), you could sell each space for $110 (3 per space) to $165 (2 per space) per month, which would allow us to reach our goal. Filling 20-30 advertiser slots, however, is not easy without a strong traffic pattern.
Affiliate Marketing
Affiliate marketing represents potentially the easiest path to reach our goal, as the payouts can be much higher. If we have an offer that pays $50 per sale, we would need to close only 2 sales per day to reach our goal.

An additional option, which I will discuss in my next article in the “Starting a Website” series is direct product sales. This can be either where you create your own products or resell the products of another company.

As a quick pointer, the resource I rely on for the cost-savings approach mentioned above is web hosting rebates

About the Author:
Daniel Eperson has a wealth of experience in the technology field, having built commercial websites for profit since 1997. Presently he runs the interactive department of a Philadelphia-area advertising agency, where he oversees projects, designs and develops sites, and advises clients on technology partner decisions (web hosts, mail exchange servers, search engine optimization companies, etc.)

Tags: how to start a website, website planning, starting a website

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