I was recently asked by a reader (and I've been asked before as well), “Is [building niche websites] a numbers game?” Essentially, they were asking, do I just need to build a bunch of niche websites in order to make good money from these sites? My answer in a nutshell is “Yes”, the more sites you build the more likely you will have some BIG winning websites which can really catapult your income. The reality is that no matter how much keyword research or linkbuilding you do, some of your sites are going to be losers and not make much money and others are going to unexpectedly earn alot.
So am I saying that building niche websites is all up to luck? Absolutely not! You greatly improve your chances of success by developing the necessary analysis skills that it takes to pick great keywords and build great sites. However, there IS risk involved (as in any business), so sometimes things don't go as planned (both good and bad). I really want to drill home the fact that simply because some of your sites fail or even alot, does NOT mean this business is a failure by any means.
I want to take a look at 2 examples of businesses where they “fail” most of the time, but are still highly profitable businesses. First, I want to look at salespeople and then I will briefly review the Venture Capital business model. Finally, I will reveal my own “success” and “failure” rates for the niche sites that I build.
Failure Rate Example 1 – Direct Salespeople
First lets take a look at typical salesperson. If you have ever been involved in sales (as I have) you will constantly here that “its a numbers game”. In direct sales via the phone or door to door for example – a typical estimation of conversion rates might be something like:
- For every 25 cold calls you make – you will get 1 lead interested in moving to the next step. The next step usually being a more in depth sales presentation. This might be an invite inside if going door to door or an okay to continue or call back if you are on the phone.
- For every 5 “sales presentation” you give – you will get 1 buyer.
- Overall, for every 125 cold calls you make, you might get 5 buyers.
- This would be a 4% Success Rate (and this is probably pretty high depending on what you are selling). 2% is probably closer to normal.
Obviously the numbers vary greatly depending on where you get your “cold call” lists, what you are selling, and more imporantly what sort of sales skills you bring to the table. If you are a seasoned sales professional, you might have a success rate that is twice as high as someone just starting out.
The point is if you are a typical sales person, you have a FAILING RATE of 96%! Most of the time, you are not making any money – but its a numbers game. You know that 4% of the time, someone will say yes, and that MORE THAN MAKES UP for any failures – even at a 96% failure rate.
Failure Rate Example 2 – Venture Capitalists
You might think, Well, direct salespeople might fail alot, but surely that doesn't apply to other industries. Well, lets take at the highly skilled and talented people behind Venture Capital firms. These are highly skilled and trained people with high levels of experience. They put in HUGE amounts of due diligence and analysis in before they invest real dollars into a new business, right? Of course they do! So, every business must be a big success that is backed by venture capital firms, right? Well, that's not the case at all.
Its hard to find exact numbers and obviously it varies from firm to firm, but I did find 2 interesting articles which backed my suspicion that MOST venture capital investments are a FLOP. This article here, shows that probably about 66% of all Venture backed startups are not profitable (lose money), the other 33% are profitable. This second article here is from a VC guy that says exactly the same thing that only about 1/3 of investments will ever MEET EXPECTATIONS.
So, should VC companies pack their bags up and call it quits because they fail most of the time just like direct salespeople? Of course not! The 33% of companies that actually make money are so profitable that they more than pay for the failures. So even with all the analysis and skill that VCs use to analyze their investments – they still get it wrong most of the time. But it doesn't matter because they made boatloads of money on the 1/3 success rate.
I do want to point out obviously that if they didn't have all the experience and skill and huge amount of analysis, their success rate would be MUCH lower. If they were throwing darts at a board, they wouldn't be around for long.
The exact same thing can be said for building niche websites. Its a numbers game.
The Numbers Game Behind Niche Websites
I thought it would be interesting to see how many of my sites actually meet or exceed my goal of $1/day, and how many sites are losers. So, I went through all my stats for the past 3 months and determined how many sites met certain thresholds listed below. I will just state that I have over 200 websites, but I have also just build about 50 in the past couple of months and lots of these sites haven't even had a chance to start ranking. So, I did my best to give realistic numbers by adjusting the number of sites looked at for those types of circumstances. So, these numbers aren't perfect, but they give you an idea of my success ratios and perhaps what you might be able to expect as well.
Here are the percentage of sites that meet each of these 4 categories:
- Niche Sites that Earn More than $100 Per Month – 10%
- Niche Sites that Earn Between $30 and $100 Per Month – 20%
- Niche Sites that Earn Between $5 and $30 Per Month – 40%
- Niche Sites that Earn Less Than $5 Per Month – 30%
So, for every 100 sites I build, 10 will earn me more than $100 per month. Obviously some of these are MUCH more than $100 per month. The last time I posted the earnings of my top 5 sites is here for example. These are the big winners that more than pay for any losers. Its difficult to predict what new sites will have this kind of success because of so many factors, but for me personally, about 10% of my sites earn over $100 per month.
The second category of $30 to $100 was created because my goal with each site is to earn $1/day or $30 per month. So, I have about 20% of my sites that fit into this category. These sites are very profitable. If you take a number of say $100 to build a site with linkbuilding and everything (some are less than this), even a $30/mth site earns $360 or $260 profit in year one. In year 2 the profits are even better because the only cost might be for the domain of $10 per year essentially for a profit of $350/year. But this example if for sites that just barely earn $1/day; for sites that earn $2 or $3 per day the profit margins are MUCH better.
The third category of sites is my $5 to $30 per month. These are my sites that are still profitable – about 40% of my sites fit in this category. Even at only $5 per month a niche site is basically breaking even. It will earn $120 over 2 years. Most of my niche sites will cost right around $120 to build and maintain for a period of 2 years. ($100 to build and for links and $10 for domain renewal the second year). However, remember most of the sites in this category are earning MORE than $5/month – this is just the bottom end of the category. Lots are earning $15 or $20 per month which is actually still quite profitable.
The final category are sites that I lose money on or about 30% of my sites. Yep, I fail about 30% of the time. For every 3 sites that I build, 1 of them loses me money. Should I quit?? Of course not! The sites in the other categories more than make up for these losses! I look at it JUST LIKE the Salesman and VC examples that I gave. I know from the outset that almost a third of the sites that I build will be a complete flop. But I also know that 70% of the sites that I build will make money and 10% of all sites will make ALOT of money.
So, building niche websites is indeed a numbers game.
What Success Rate Should YOU Expect?
Should you also expect the same success ratios? That all depends. If you are new to this business and don't understand the importance of keyword research, then you are probably going to fail much more. Lots of people will try this business and never be able to make it profitable. However, if you are able to dig just a little deeper for great keywords and do just a little bit more analysis of the Google competition then you can increase your success rate enough to start making some real money.
However, if you treat this like you are throwing darts at a chart blindfolded, then you are going to fail miserably. So while some sites will perform unexpectedly well; its not this “luck” that a business should be built on. The VC may “luck out” and find the next Facebook. A salesperson may “luck out” and knock on the door of the next biggest sale ever. You might “luck out” and build a new site that makes you thousands every month. But the reality is that each of these big successes come with lots of analysis, hard work, time, dedication, and most importantly ACTION!
The more sites you build based on your best effort analysis and keyword research the more likely you are to be profitable in this business.
So, yes, most of the time my sites never meet my $1/day expectations. But overall because I have taken enough action and built enough sites based on good research, I am enjoying a very profitable portfolio of niche websites.
What do you have to say about your success rate? Have you experienced similar numbers? I would love to hear your thoughts!