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Why Niche Websites are a Great Business Model

Why Niche Websites are a Great Business Model

I personally believe that building niche websites is one of the greatest internet marketing business models out there.  When it comes to internet marketing, there are literally hundreds of different ways to go about making money.  As you are probably aware, these can often be very exiting and enticing; however, they can often be difficult to implement as well.  Unfortunately, niche websites are no different.  There is a big learning curve to building niche websites that get free traffic from the search engines; however, once learned the process can be replicated over and over again.  This is why I feel like its an excellent business model.  In fact, I like this model so much, I will be blogging about how you can build niche websites step by step – you can follow along on the niche websites hub.

As you are aware, I have been building niche websites for a couple of years now and in fact support my family full-time on the income I generate through this business model.  So, I can tell you from my first hand experience that the potential of niche websites is HUGE.  Its a scalable business that really can be built into a multi-million dollar business.  So here are the 3 main reasons why niche websites are an excellent business model to pursue:

  1. Its a growing market
  2. Its scalable
  3. It generates passive income

A Growing Market

If we want to analyze the niche websites market, we need to consider a couple of factors.  First, are more people using websites?  And secondly, is there growth in the spending for online advertising?  The answer to both of these questions is a resounding YES!  Here a cool little chart from Internet World Stats, that shows the increase in number of internet users over the years:

 

The amazing thing about this growth is that still only 30% of the world’s population is using the internet.  There is still huge growth potential.  However, the real way that niche websites make money is typically through selling some sort of product or displaying advertising on your websites.  So, what we really need to know is if online advertising is increasing. Here is a recent article that discusses how Google believes the online display advertising market will be expanding from its current $24 Billion market size to over $200 Billion annually.  I can live with a 10 times growth rate!  Anyway, I don’t think I need to go any further here – more and more people are using the internet, and companies are spending more on online advertising.  The market is awesome!

A Scalable Business Model

Being scalable simply means that you are able to replicate the process of building niche websites over and over again.  There are actually a couple of different ways that you can scale niche websites into a much larger business.  The first is to take the approach of Demand Media, Inc. (DMD) – well known for owning eHow.com.  They simply have a few large websites such as ehow and produce TONS of content and generate income from advertisers on their site (including Google Adsense).  As you can see from their income statement here, they produced over $250 million in revenues last year.

I run a similar model with a slight twist.  Instead of maintaining one large website with various topics covered on it; I product lots of “niche” websites that focus on one exclusive topic for each website.  I still get traffic from the search engines just like Demand Media does; however, my websites are more tightly focused on individual topics or keywords.  My model is also scalable in the sense that once I have built one site, I can move onto the next and the first website continues to make me money even without much attention.

Then to really scale this business you can hire others to write content for you, build websites for you, promote your site, build links, or many other tasks.  So, once you have learned the ins and outs of developing niche websites, you can begin to hire others and really build this business on a large scale (if you want).

Passive Income Potential

To be honest, I usually hate talking about passive income because its usually associated with a bunch of hype/snake oil and someone trying to sell you something.  You all know what I mean, its about half the make money online products out there.  However, I only talk about passive income here because I am living proof that its possible.  I have websites that I have built over 2 years ago and have put almost no effort into since that time, that are still making me money every day.

In fact, I could literally do nothing for a month and my income would be basically what it was last month.  Now I don’t expect that this would go on forever; however, overall, the maintenance of niche websites is very small.  You build them once and get them ranking in Google, and then the traffic starts coming in day after day whether you do anything or not.  I will discuss what is needed to maintain your websites in the future; however, for now I just wanted to point out that there truly is passive income here.

Obviously some websites will require ongoing attention and the search engines will change over time; but there is a much larger passive element to this business model than a traditional brick and mortar business for example.

Don’t Be Deceived – This Business is NOT Easy!

Overall, building niche websites that target a specific topic and that rank well in the search engines are a great business model because internet advertising is increasing, its a scalable business, and it holds a lot of passive income potential.  I will be discussing in the coming weeks and months how to go about building a niche websites business – such as I have done for myself.  However, I have to give you fair warning that this is NOT an easy business!  Yes, it has great potential, but there is a tremendous learning curve and you are likely to see a lot of failure before you see any success.  In fact, I had years of failed websites before I saw any real income (read my recent guest post for some of my failures).

The ability to judge your potential competition is extremely difficult and most people will just never “get it.” I hate to say that, but from what I’ve seen, despite even my own coaching, some people are just never able to put all the pieces together.  In addition, there is a certain element of luck involved.  Some websites will just do better than you ever expected.  I have been lucky and found a few over-performing keywords (but I have also had many more failing websites).

Anyway, if you get involved in niche websites, you need to view this as a business venture with risk.  I make no guarantees of your success.  You may find that passive income you are looking for; or you might find lots of hard work with no monetary rewards.  This is true of any business, and anyone that tries to convince you otherwise is probably selling a junkie course or ebook.

So, there you have it – there are some great reasons why niche websites are an excellent business model, but you need to be aware of the risks as well.  What do you think??? I would love to hear your thoughts below.

40 Comments for this Post

  1. Niche Websites Hub | Niche Pursuits

    Niche Websites Hub | Niche Pursuits

    […] Why Niche Websites are a Great Business Model (Posted May 23rd, 2011) […]

  2. Tom

    Tom

    Spencer,
    This was a great post. I love the internet graph you show. Like you said, the internet has so much potential as an advertisement for a website. It’s endless.

    I agree getting ranked to #1 does take work – I’m working on it. I’ve seen some people make a website and expect things to happen over night when it takes a little more work.

    Thx for the great post!
    Tom

    • Spencer

      Spencer

      Tom…thanks! Success in any venture certainly doesn’t happen overnight, and niche websites is no different…but its certainly possible!

      • Trent Dyrsmid

        Trent Dyrsmid

        Hey Spencer,

        Great post and I can see you have many more to come. Have you heard of a tool called SEcockpit for research and project management? I’m using it and LOVE it. It runs server side and is so unbelievably fast…it puts the samurai to shame.

        Trent

        • Spencer

          Spencer

          Never used it. However, I have a different tool that I LOVE that I will be discussing in the near future…

  3. Ralph

    Ralph

    I have one or two websites that I can set up for a niche market, but have yet to actually do it :)

    Your site is an awesome resource to get motivated!

  4. Muzi Mohale

    Muzi Mohale

    Spencer, I must add that the most opportunities exist with country specific niches. Am in South Africa and only starting, but I foresee huge amounts of opportunities that I’m yet to explore.

    It’s amazing that I’ve been following many other ‘pro bloggers’ however since I started reading Niche Pursuits, it’s only now that I can clearly see my path. All along I’ve been wondering about…

    • Spencer

      Spencer

      Hey Muzi – I’m sure you are right! I haven’t looked at country specific niche sites; but the growth potential is HUGE (much bigger than the US as far as rate of growth). Best of luck!

  5. Terry

    Terry

    Good post, comprehensive but that pop up is beginning to get on my nerves Spencer-I am already on your list,signed up to the Feedburner rss feed but every time I come to the site there’s the damn pop up..just a minor irritation:)

    • Spencer

      Spencer

      Hey Terry, glad you liked the post! The pop up is only supposed to show once every 14 days. I will make it longer between showing…thanks for the feedback.

  6. Thomas Strock

    Thomas Strock

    Hi Spencer,

    Well, I think you hit the nail on the head when you said that succeeding with passive income and niche sites is not easy. Because it has a huge learning curve, it requires A LOT of patience and determination. Certainly a lot of fun to do though especially once the income starts rolling in ;)

  7. Ian

    Ian

    You are absolutely correct when you say that it takes work, I have been at it for a couple of years and only seen modest gains. There is no easy button. I know if I continue to educate myself and stay determined that I will succeed.

    All the best Spencer.

  8. Boris C.

    Boris C.

    Do you believe narrowing down to specific topic helps with Google rankings? I heard rumors that say it does…

    Would you really trust your niche business to people you don’t really know? Manage websites and promote them for you knowing your websites’ URL where AdSense ads are placed?

    You created 200 niche websites in 2010? How many pages does each have?

  9. Gautam

    Gautam

    Hi Spencer:
    The is is great analysis for niche site as always, like your Adsense Vs Amazon study!
    I am also now focusing on building niche sites, but not micro niche sites, rather larger 30-50+ pages site that will promote
    Adsense, Amazon and other affiliate products.
    What is your thought on small (10pg) Vs Larger (50+pg) sites?

    Cheers

    • Spencer

      Spencer

      Gautam:
      Thanks – glad you enjoyed the analysis! Also, you pose an excellent question – which probably deserves an entire post. However, in short I typically start all websites with about 10 pages or so. Then IF a site starts to rank well and I can see earnings coming in ONLY THEN will I grow it to a larger site. Rather than try to build all my sites to the 50+ page level, I only build the sites that are performing well to the larger authority size. This will save you a lot of time and money, because it is simply impossible to predict with 100% accuracy which of your sites will be big winners and which ones will be money pits. Start small and grow big if the money is there. Hope that helps.

  10. Raj

    Raj

    Thanks for all the motivation and tips you have been providing.

    Lately from May 2011 there is been further changes to google algorithm that has affected many small sites. With current factors how are your sites doing ranking wise? Were any of the sites hit with penalty? It looks like thin sites are not being favored after the panda update.

    Also I have been doing adsense from many years and I have not seen so bad CTR and earnings which is happening in current month of May 2011. Infact today’s earnings are so less I might not bother doing adsense. Please note that my traffic is only down 20% after the panda update in April 2011.

    It seems to me that I am not the only one with drop in earnings without the corresponding change in traffic. Just check google support forums and webmasterworld.

    I have many sites across different niches and this really does not makes sense. It seems after the panda update the ads are not matched properly or something is going on.

    Please let me know your input as I am really feeling the pinch with revenue loss of 70%.

    Thanks

    • Spencer

      Spencer

      Raj:
      I have not noticed any effects from the recent Panda updates on my sites. I have read many stories such as yours about getting affected, so I’m sorry to hear about it.

      On the other hand, I don’t think the Panda update would effect your CTR and earnings. Users that come to your website should still on average click just as many ads as before. Also, advertisers are paying just as much before for their adsense ads, so I’m not sure why you have seen a drop in click value. All the CTR and earnings on my sites are just as good if not better as they were before the updates. I can’t explain whats going on with your sites unfortunately.

    • Boris C.

      Boris C.

      Same thing here. Over 50% loss in revenue.

  11. mak

    mak

    I did had a big downfall since April 16 2011.
    All my adsense revenue went down in some sites down to 0. Some of my sites lost all their rankings too.
    On avarrege i lost 80% of my adsense earnings.
    I started promoting all the sites since then and just this week i have seen a small increase on earnings.

    • Spencer

      Spencer

      Best of luck promoting your sites in the future!

  12. Sjors

    Sjors

    Nice inspirational post, at my young age (19) I already know what kind of business I’m going to pursue! Really enjoying all your posts.

    I was wondering though, in your opinion:

    How many pages do you have on average on each of your niche websites?

    How many web pages do your websites need to have before you put on adsense?

    Do you have all the websites on the same server? (same IP adress)

    I’ve read stories of quite a few people getting their sites slapped by google, for no particular reason at all. (probably bad/low quality content)

    Are you not concerned google slapping all your sites, do you take any precautions to prevent it? What is your opinion on this?

    Thanks in advance, and keep it up!

    • Spencer

      Spencer

      Sjors:

      I start with 10 pages or so and then grow the site as it shows promise of earnings.
      I do NOT host all my sites on the same server. I have lots of different hosting accounts. I use multiple IP address hosting.
      I am also taking precautions against getting slapped by google; including the hosting accounts I mentioned. In addition, I have multiple adsense accounts, I always use different themes for my sites, I don’t use google analytics or webmaster tools, and do whatever I can to avoid leaving a footprint in Google.

      • Steve

        Steve

        Ok…now I’ve seen Google say that you can only have 1 adsense account..or is that adwords ? I wanted to separate them but I was afraid Google would find out..Am I off on that one ? Also do you have a business structure or are you running as a sole proprietor ?

        • Spencer

          Spencer

          Steve that’s correct an individual can only have 1 adsense account. However, an LLC can also have 1 adsense account. I own multiple LLCs. So I have one adsense account under my personal name. And then the LLCs have adsense accounts under their names. This 100% within google guidelines.

        • Kief

          Kief

          Spencer,

          Where do advise getting the LLC’s registered for a low rate and is there a particular state you use? Do you register all your LLC’s under different states? What about address and contact numbers for the LLC’s – are they different for each? This kind of info would be very helpful to know.

          Thanks,

          Kief

  13. paula mooney

    paula mooney

    I just love it, the way you write and think and explain things.

    Being a webmaster since 2005, in some ways I feel like I’m just getting started- – but I’ve learned so much already and am amping up my niche website business.

    If I learned one thing from the Google Panda update it’s that we can spread our risk around and succeed.

    • Spencer

      Spencer

      Paula – glad you love the writing! Thanks…
      Yes, its very important to diversify your risk…best of luck!

  14. General Overview of the Niche Websites Strategy | Niche Pursuits

    General Overview of the Niche Websites Strategy | Niche Pursuits

    […] s1);})(); 0Digg DiggAs I recently discussed, building niche websites is an excellent strategy for 3 main reasons.  Niche sites are in a growing market, they are scalable, and they can generate […]

  15. Hetal Shah

    Hetal Shah

    Hey Spencer!

    Great post. Though it is not that much easy to implement but still I am going to try it for sure. At least I will learn something..

    I am following “Niche Website Hub” to start my own niche site…

  16. Steve

    Steve

    You are spot on “It ain’t easy !” Finding the niches and looking at data is time consuming…Not to mention getting your page to rank period..I’m having fun and I’m learning everyday..Thanks for the post..

    • Spencer

      Spencer

      Steve – its definitely not an easy process and there is a HUGE learning curve. But if you put in the time and discover what works, there are certainly rewards to be had.

  17. Tim Wright

    Tim Wright

    Hi Spencer. I really like your website and am anxious to learn more from you. The biggest challenge I am STILL having (… and I’ve been doing this a LONG time …) is getting my head around keyword research. I have Market Samurai and have watched probably hundreds of “keyword research” videos, but still can’t make the connection for some reason. Making “some” money online, but not enough to replace the other things I’m doing.

  18. Jim

    Jim

    There are quite a few articles here that Spencer wrote that pretty much shed much of the mystery of Keyword research.
    Obviously you still have to put in some work, but I think keyword research is much much easier now thanks to this blog and of course Long Tail Pro.

    • Tim Wright

      Tim Wright

      Thanks, Jim. I’m enjoying learning from this site. Just need to dig in a little more. :) I’ll probably pick up Long Tail Pro as well.

      Tim

  19. eric

    eric

    I love the truth here! I am happy for the way you laid things out as to what can be expected from building niche websites and the work involved. Your story is very inspiring to me. I am going to be following the niche websites hub in 2012 to build passive income. Your story reminds me of myself and where I want to be in life. I have a goal of moving from the 9-5 world to just doing internet marketing within 2 years. I have decided to take MASSIVE daily action in 2012! It will start with following along with your amazon project that I am also working on. I purchased the Niche Profit course (through your email) and I am through module 2. I bought two Domains and I will be using them for creating amazon product pages.

  20. The Leaving Work Behind 100 – My Top 10

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  22. NSP Update 1: Finding the Right Keyword to Target | Niche Pursuits

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  23. Faye @ Romantic Movies Reviewer

    Faye @ Romantic Movies Reviewer

    No matter what choices you make, it takes time to make money online.

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