Small Business Saturday: Dig Deeper and Understand Your Revenue Model

Yesterday I wrote a post titled, Does your brand need a Facebook app discussing how Facebook apps could be used to build your brand and attract more customers. I also discussed a Facebook app that I would be working on and sharing with all of you. I got a great question which inspired this post.

The question I received was:

It would be nice if you could go more into detail on what the FB App will do, how it will work / function and ultimately how it will help your site(s).

This very closely reflects the questions I get from friends and family members when I explain domain investing. They usually say, well what does each domain do and how do you make money with them? Good questions right!

Every one of us should be asking these kinds of questions and really digging deeper to understand how a business model works. Without asking questions like this you end-up in a situation that many Domainers are in, an idea with no firm model for making money. I’d say that over 75% of the emails I receive from people with domain portfolios haven’t made a dime from their domains and haven’t had much luck selling them. You can get into these kinds of situations when you don’t ask this same question before each domain that you buy.

So dig deeper and understand your revenue model. This means with every domain you buy you should have something that has worked for you in the past that you can compare it to. Suppose you buy and sell domains and you have had great luck selling travel domains, you know which names sell and you have buyers to sell to – you have a revenue model. Now let’s say you see a credit-related domain you want to buy, if you haven’t successfully sold these before, start with one and prove your model. Prove you can either find a buyer or monetize the name, but you have to dig deeper to understand your revenue model BEFORE you jump in and buy a zillion domains.

Now I would be really letting Scott down if I didn’t answer the question he asked me yesterday, what is my Facebook App going to do and how will it help my site(s). If you can’t answer a question like this don’t build your app because you have no model for success.

The app I am building will link into my kayaking directory which has now become the most comprehensive Kayaking directory on the Internet! There are tons of kayakers on Facebook and they love to share their trips and adventures with friends and other Kayaking enthusiasts. However right now there is no way for them to find kayaking stores, clubs, or adventure locations through a Facebook app. By making this app I will be able to provide a valuable service to Kayakers on Facebook who in-turn will discover my site and my brand.

Here’s where the model gets really exciting for me. By driving more traffic to my app I not only drive traffic to my site but also to my fan page. As I get more fans I can drive even more traffic to my site by writing daily posts that highlight some of the great content we have to offer and specials being offered by our partners. This brings more targeted traffic to our advertising partners and allows us to access a whole new audience since this traffic comes from Facebook not Google or direct navigation.

As I’ve said before Facebook Apps and Pages will never replace domains, but it does allow us to tap-into the traffic. This is just plus traffic and it can be highly targeted if you do the right things to engage your audience. Of course you always have to think of your revenue model – since my directory makes money through direct advertising and directory listings I can continue to increase my costs as my traffic increases. I can also offer my advertisers great ways to promote their brands through Facebook. Right now I only have about 200 fans, with this app I hope to get above 1,000 which would allow me to offer a much more attractive package to advertisers.

Sounds like a lot of work? It sure is, I’m building a business, but every choice I make I dig deeper and make sure I understand my revenue model. Since this is my first directory I don’t have past success models so I’ve reached out to people who have had success to get their advice. By digging deeper I can understand what’s worked for them and apply that to what I’m doing. At the end of the day generating revenue from your domains is all about traffic, the more of it and the more targeted it is the more revenue you can make if you have a good model for converting your traffic to revenue.

So there you have it, thank you Scott for asking a great question and inspiring this post. Everyone reading this who doesn’t dig deeper with every domain purchase may end-up in that sad situation where they have a portfolio full of names but no model for making money with them. You can make money with domains but remember not all domains will make you money – you have to pick the right ones and to do that you need to dig deeper and understand your revenue model!

Morgan Linton

Morgan Linton