How many times have you heard that a “blog is not a business?” Most bloggers seem to start a site with some vague hope of monetizing in the future. A much better approach is to create a business and use the website to generate customers. A blog is a fantastic way to generate awareness, drive targeted search engine optimized traffic and build trust with your audience. There is no better example of blogging to grow a business than AdsenseFlippers.com. Justin Cooke and Joe Magnotti have quickly become the trusted source of quality content in niche marketing. They have done this by giving away all of their amazing content for free and sharing detailed income reports, all the while creating a profitable business selling the sites they create.
Even if you are not interested in building niche websites, AdsenseFlippers offers great insights into keyword research, search engine optimization, structured business processes and outsourcing, skills critical to any blogger or online business. Justin and Joe offer a fantastic introduction into niche site creation and life in the Philippines in this interview. Be sure to go to their site to download the free niche site ebook and subscribe to their podcast. You will not be disappointed.
Why did you choose to locate in the Philippines?
We’d both previously worked for a local search marketing company based in Southern California. We’d spent quite a bit of time building our own outsourcing company to offer services and, when the time came, Joe and I both left our positions at that company to be vendors, outsourcing ourselves! Joe left around August 2009 and I joined him in the Philippines in January, 2010. From there, we began working on our outsourcing company. We ended up losing that major client by the end of 2010 and were forced to scramble to find a way to replace that income so that we could keep our well-trained and loyal employees, which is how we came to start AdSenseFlippers.
I’d like to say we chose Davao City, Philippines because of it’s “typhoon free” status, their “ahead of the curve” position in the outsourcing industry, etc. I’d like to say that. The less interesting truth is that we’d worked with someone in Davao City with our previous Real Estate business and had an “in” that was helpful in setting our company up.
While Davao has a population of roughly 1.5M people, it still feels a bit sleepy compared to Manila or Cebu. The infrastructure isn’t as strong as the two other major cities and we tend to have more power outages than they do, but the costs are significantly less as well. The average agent is approximately 50% the salary of the same in Manila and 75% of the salary of an equivalent agent in Cebu.
What is your cost of living there?
If you plan to buy “international goods” (laptops, cell phones, etc.) you can expect to pay similar prices…more even and it’s often for an older model. The real benefits start kicking in when you take advantage of anything service related. A 1.5 hour massage will cost you $8 in a nice spa and $15 at the nicest place in town. Want a live-in maid? You’re looking at anywhere from $15 – $30 per week. (We have two that we call “house managers” that are at the upper end of the spectrum. They’re way more than just maids as they take care of EVERYTHING)
You start to think about things a little differently when everything is taken care of for you. We don’t do any food shopping, cooking, laundry, payment of bills, cleaning…nothing…everything’s taken care of. It saves us a ton of time and lets us focus on our business, our lives, etc. It’s not something we talk much about on our blog because of our focus, but it really is pretty fascinating…I don’t know how I could go back to “normal” living after this, honestly.
All of our bills are paid through the business (including “house” bills) and so the money we pay ourselves personally is truly ours. We rent a 2-story, 3-bedroom townhouse in one of the nicer subdivisions in Davao and it costs us approximately $600/month. The house is running around 20 hours a day, though, with employees and friends in and out all of the time…so our “extra” bills can be quite expensive. All-in, our costs are around $3,000/month to maintain our place including rent, electricity, food, maids, all bills, etc.
With everything taken care of by the business, we only personally spend around $1,500 – $3,000 per month each, depending on whether we’re taking trips more, going out more, etc. We’re far from minimalists, though, and like to go to the best restaurants in town, take out groups of people, etc. You can live on $1,500/month reasonably and $3,500-$4,000/month comfortably in the Philippines.
Please tell us about AdsenseFlippers?
We started AdSenseFlippers at the end of 2010. Our outsourcing company was in a rough spot, recently losing a major customer. Our thought was that we’d try out several different projects and see if we could at least cover the salaries of our agents until we could get them placed with new clients. We tried some work on Mechanical Turk and a couple other projects that didn’t work out.
We came across a project that seemed to fit our skill sets quite well that involved manual creation of niche websites monetized with AdSense. Our outsourcing company specialized in breaking down complicated work processes into smaller bits, building systems that improved efficiency, and then scaling…so this seemed like a natural fit if we could make it work. It didn’t at first. We spent close to $2,000 not even including our time and we only made around $33 that first month…ouch!
A few months later we were in for and had spent around $10K on the project until we finally started to turn the corner and make some money. We realized that by selling some of our niche sites off we were able to maximize cash flow and scale the process much quicker than we would have been able to otherwise. We started our blog in May, 2011 and by the end of 2011 we were bringing in quite a bit of money each month. We had a monster month in January 2012 ($45K) where we sold a bunch of sites, but over average for the last 6-8 months is in the $16K – $18K per month range. We give monthly income reports and updates to inspire others and to hold ourselves accountable.
What is your rationale for giving away so much free content?
This way of doing business definitely did not come naturally to us. Previously, we believed that if you have a profitable process you keep it to yourself and maximize the value as long as you possibly can. We joke this is the “old school” way of doing business…a path we were previously committed to. I’d read Chris Anderson’s book “Free: The Future Of A Radical Price” and really liked the disruptive nature of free in industries that typically charge but, honestly, we were a little chicken-shit to apply it to our “real” business.
We viewed AdSenseFlippers as a side project, even long after it was showing some legs and turning a profit. Because this was a new venture for us, we felt much more confident in applying methods that we thought might help shake up the IM industry. Before getting involved in the IM (internet marketing) industry I have to admit we looked at it with distrust and (in Joe’s case) a bit of disdain as well. We thought much of it was snake oil and weren’t sure we wanted to get involved in that. Ultimately, there are plenty of charlatans in IM, but we’ve come across quite a few that are not and I think that has much to do with the fact that like attracts like, possibly?
This new model has completely changed the way we view business. Giving away our entire process step-by-step has built us authority in the niche by showing we know what we’re talking about and brought us quite a few potential customers that has given us the “wonderful problem” of having more buyers than niche sites to sell. Ultimately, though, it’s the connections we’ve been able to make and the doors that have been opened that, I think, will provide us the most value.
Since starting AdSenseFlippers we’ve had people stopping by Davao regularly to meet us, we’ve met up with some amazing entrepreneurs in Puerto Galera and Bali, Indonesia, and I’ve met (and since had the opportunity to work with) a true business hero of mine over the last year. None of that would have happened, I think, without our first step forward with a new mindset.
What is a niche site?
Here’s a quick breakdown here:
- Keyword Research – $2
- Domain – $8
- Site Setup – $2
- Site Content – $19 ($5 for primary content, $10 for 4 pieces of secondary content, $4.00 for time)
- Various Admin/Tracking – $5
- Link building – $5 – $20 (We’ve varied our link building costs over time. Currently, we’re spending next to nothing, but that will be changing in the very near future as we’re doing an ROI test on link building.)
It’s hard to put an exact time on the process as we have it fragmented out to so many different agents, but the cost of creating the site is around $30-$35 each including the domain, but without linkbuilding. We’ve varied our linkbuilding process dramatically and at different costs, but the sites ends up costing somewhere between $40-$55 each all-in. We’re currently at the lower end of the spectrum because we’re not doing much for linkbuilding. That will change again over the next month or two.
The exact steps and timeline are pretty involved and more than I can cover in this answer. We lay out everything in our guide, “Building A Niche Site Empire” and I encourage you to check it out if you’re interested. (We’ve also recently published on the Kindle! It’s not free and costs $0.99…but we wanted to go “high tech” for this one, hehe. You can check it out here.)
How much does a typical 5 page niche site start making after a couple of months?
It normally takes 3-5 months for a site to reach its earning potential. We used to track this very specifically and found that our average site would earn $9 – $12 per month. (This can be a bit misleading, though, as very few are actually in that range. 30% of our sites were bringing in 70% of the revenue, making a pretty clear delineation between those that are doing well and those that are not) We’ve since noticed that our sties have dropped a bit across the board, earning somewhere between $7 – $9 per month.
Over time, we’ve ended up selling off most of our sites that are earning over $10/month and have been with us 6 months or more, so we’re left with a ton of sites that are on the very low end. If they’re earning somewhere between $1-$5 per month, we’ll typically package them in with other better earning sites and sell them off. If they’re less than the $1.00 per month, they’d be considered a dud.
What percentage of your sites fail to rank and don’t make money?
It used to be that around 20% of our sites wouldn’t earn much at all, but that’s since climbed to 25-40%. We’ve looked pretty hard at why some sites would make it and others wouldn’t, hoping we could improve our keyword research process, but none of that research led to anything actionable, unfortunately. We simply view our failure rate as a cost of doing business at this point, although we’re open to exploring it again in the future to see if we can improve our success rate.
It’s strange…sometimes the sites we build don’t end up ranking well at all on Google for their primary keyword, but end up picking up quite a bit of traffic from other secondary keywords we were or even weren’t targeting. Sometimes those sites end up ranking extremely well on Bing or Yahoo helping them to earn a bit each month as well.
Why are niche sites a good way to make money online?
I think niche sites are a great way to get started, but I hesitate to say it’s an easy way to make money. Just because we were successful at it doesn’t mean that everyone else will as well. It could be our experience with outsourcing and building processes, our enthusiasm and approach to free information…or just dumb luck!
That being said, I think building niche sites is probably the BEST way to get started. You learn the fundamentals (Keyword research, WordPress setup/hosting, content creation, link building, etc.) in a relatively low-risk, low-reward environment. Someone looking to break into IM can build a few niche sites, make mistakes, correct those, see results, etc…all in a relatively short period of time. (4-6 months) Using our methods can help others get started until they find the right fit in IM that suits their interests and skill sets. An even more robust way to “try out” making money online would be to check out Ed Dale’s free “30 Day Challenge” from what I hear, although I haven’t been through the entire course myself.
Are they really passive once they have search engine ranking?
Yes and No. They’re passive in that they continue to earn, but the amounts have fluctuated over time. We’ve had sites decline month after month for 3-4 months and then have their page views and earnings pop right back up again. We’ve had other sites that were steady as can be and others that declined to a fraction of what they were initially earning. My guess is that there is some sort of shelf-life overall (2-4 years?) if no additional work is put into the sites. We’ve talked to others that have been at this much longer than we have that have sites that have been earning 3-5 years and going strong, but we’re still a bit new at this and it doesn’t take into account the others whose sites are not earning that long.
If niche sites are a good way to make money, why do you sell your sites?
This was a question that Joe and I ended up arguing over early on. I wanted to put more money into the process and double-down on site creation for our long-term benefit. Joe wanted to slowly grow the business by only expanding with the passive income. We finally came to an agreement that by selling earning sites, we’d self-fund the cash flow to continue to build more so that we could get to a level of site creation that made sense. Otherwise, it would have taken us much longer to build out the process and earn a decent amount of money from the project.
We came up against this question again about 7-8 months into the project. Ultimately, our decision was based on the multiple we were getting (20-25X monthly revenue) and the fact that we had plenty experience building small, earning niche sites…but virtually no experience building those sites out to be even larger earners. Rather than taking the investment risk and time involved in building them out we thought it would be better to focus on what we’re good at…building them from scratch and getting them started so that others could take them over.
In July 2012, we’ll have been at this for around 20 months. We’ve done the math and realized that we’d eventually come across a turning point…a point at which holding on to the sites would have been more profitable and we’re getting pretty close to that now. We originally hired an intern to help us test through the process of expanding some of our niche sites, but his programming and design skills came into play and we needed him for higher priority projects. Throughout the end of this year our plan is to see if we’re able to expand our niche sites and improve their earnings. We currently have a sales cycle of around 6 months on average, but I’m guessing this new process would expand that to 12-15 months if we end up selling them at all.
What are some of the risks of starting a business focused on building niche sites?
It’s completely risk free! I’m kidding of course…there are quite a few risks to be aware of and try to mitigate as best you can. I’ll give examples of some of the major risks that come to mind in the order of importance to us:
- Process Doesn’t Work – For whatever reason, you end up spending quite a bit of time, effort, and energy and you just can’t make it profitable.
- Quitting Before The Turning Point – We figured we would give it 6 months from the start, but the first two months were really depressing. Lots of work and expenses with very little return. If we would have backed out then that really would have been a waste.
- Loss of ROI – At the level we’re creating sites, a quick hit (AdSense account disabled, all sites deindexed, etc.) would be preferable to a slowly degraded ROI over time. This would be pretty painful in that it would be harder to catch and ultimately cost us quite a bit of money as we went deeper into the hole.
- Deindexed Sites – This is when Google removes your sites from the index, making them virtually impossible to find on Google. We’ve had a few sites deindexed here and there, but having this happen across the board would be quite painful.
- AdSense Account Disabled – Quite a few people have dealt with this recently. You keep the sites and traffic, but end up taking a hit as other similar monetization methods aren’t nearly as effective. We’ve written a post about AdSense alternatives and our disaster plan, were this to happen to us.
I’m sure there are others, but that covers most of them…quite a few, eh? I’ll be honest and tell you that we try to not spend too much time thinking about them. We track everything really well, have contingency plans in place, etc. and we rely on that planning so that we don’t spend all of our time worrying about what “might” happen.
Several high profile niche marketers have been deindexed or banned by Google recently, what are you doing to avoid this?
We’ve been involved in several different businesses together across multiple industries and realize the simple act of going into business for yourself is risky. What if your supplier raises the price, cutting out your margins? What if a competitor builds a better mousetrap and undercuts your pricing and value significantly? What if a competitor steals your best salesperson and your clients? TONS of risk…
An overwhelming majority of the time those who have had their AdSense accounts banned were:
1. Previously banned and tried to setup a new account
2. Using sketchy sources of non-targeted traffic to get people to their site.
3. Clicking (or encouraging others to click through friends, bots, etc.) on their own ads
Now…I know a few of the niche marketers you’re mentioning and we’re pretty sure this wasn’t the case with them, but it’s important to keep the above in mind when it comes to banned AdSense accounts. Through some questioning, we’ve found that many fit into one of the three options listed above.
For a purchaser of your sites, what is a reasonable expectation of return on their investment?
Pretty close to half of our current websites sales are repeat purchases from previous customers. Some have reported back that their sites more than doubled in monthly earnings. (One in particular recouped his investment in 7-8 months) Others have found their earnings increased, similar, decreased, etc. over time. (20% up, 30% down, etc.) We’d love to take credit for the huge gains, but they often had to do with changes the client made to the sites. (Link building, added content, etc.)
We make this clear on our Buy Our Sites page and in communication with customers, but I’ll mention it here as well. We make no guarantees as to how a site will perform or when a customer can expect to see a return. That being said, a recouped investment within 2 years with an asset worth 50% or better of its initial value sets the bar pretty low, I think.
What is your long term plan for AdsenseFlippers?
At one point we’d discussed an exit strategy for AdSenseFlippers. (Ok…we were daydreaming about selling the company and fantasizing about what we’d do with the money!) Ultimately, I think the business and brand are too tied to us to sell to anyone. At this point, some of our focus has been on improving our technology and using our assets and data to build infrastructure and tools for our business. Selling off pieces of our business that are related to our brand but not dependent on it seems to be a reasonable path to take.