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Online Monetization Strategies and Secrets

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Online Monetization Strategies and Secrets Powered By Docstoc
					         GROW AND TRACK
          YOUR STARTUP
            REVENUE

                               Th e F or mul a fo r On li ne Re venue
         y
Backstor
                                If you’re planning on starting an online business, you have to think about revenue
                                from the outset. You can come up with an amazing idea, but a great product
About the author                won’t require a significant amount of time or money to produce, and will have little
                                to no distribution cost.
Jason Lawrence Nazar is
the Co-Founder and CEO of
                                The best way to think of revenue is as an exchange of value. The amount of
Docstoc.com, which
                                revenue you earn is directly correlated to the amount of value provided to others.
provides the best quality
                                Especially in the online space, more value leads to more profit.
and widest selection of
documents to start, grow
and manage your small
business and professional
life. Before starting
Docstoc, Jason was a
partner in a venture
consulting firm in Los
Angeles where he worked            Remember:
with dozens of startups. He
holds a BA from UCSB and
his JD/MBA from
Pepperdine University.
                                  “A successful online
Docstoc.com hosts the best
                                  company provides
quality and widest selection
of over 30 million
                                  goods that take very
professional documents            little time and
and resources including
articles and videos to make       money to produce,
every small business better.
Docstoc is a top 500 most         and with very little
tracked website worldwide
and has over 25 million           distribution cost.”
registered users.




                                                                                          Adapted by Rochelle Bailis
Examples of Online Revenue

 E v e rg re en Cont ent                       Com modi tiz ed Serv i ce




                                                LegalZoom took a highly valuable hourly
                                                service, legal work, and commoditized it—
                                                turned it into a product. It turned legal
                                                consultations and labor into a package
                                                available at the click of a mouse.
  These sites create content, either in-
  house or via outsourcing, and treat that
  content like an annuity. Content sites
  derive revenue from a simple process
  where, for example, they pay $10 for a
  piece of content, and over the course of a
  specific period of time they’ll make $15
  back from advertisements on that page.           Aggre gation o f
  They build a massive business off of this
  formula, and grow from there.
                                                  Pe ople and Data

                                                 These websites succeeded because they
                                                 reached a critical mass of people and data
                                                 that holds value for consumers. At
                                                 eHarmony customers pay for access to a
                                                 database of other individuals searching for
                                                 a life partner. LinkedIn has reached a
                                                 critical mass of professionals seeking to
    V i rt ual Goo ds                            connect with one another. These websites
                                                 can make money through ads, paid
                                                 access or subscription, but they are all
                                                 based on people trying to connect with
                                                 one other.




   People pay (either through fees or ad
   exposure) for access to a digital
   world where they can interact with
   friends online, and create, grow,
   exchange or buy virtual goods.
Different Types of Online Revenue

On lin e Advertising

CPM                                        CPA                                 E-Commerce
(cost-per-thousand) is the amount of       (cost-per-action) the user
money you make for every thousand          needs to complete some
people that view a particular page or      sort of action for you to
unit. It’s the most common                 get paid, such as making a           E-Commerce
                                           purchase or filling out a
measurement that you’ll see mentioned                                           simply refers to a
when people talk about ads. Lower          form. CPA is the hardest to
value ads placed somewhere like a          master, since it requires            service that sells
Myspace page will only have a CPM of a     the customer to actually
couple cents. Higher value websites like   click an ad, and then                virtual or
the Wall Street Journal might make $50     complete an action.
- $100 CPM on their pages.                 However, it also provides            physical goods
                                           the highest yield, and it will
                                           also be the best way for
                                                                                online. Examples
                                           you to advertise your own            include Amazon,
CPC                                        product on other sites. It’s
(cost-per-click) is run for Google         win-win for the advertiser           eBay and Zappos.
AdSense, and pays you every time           and the ad host, since
somebody clicks on one of your ads.        neither can lose money,
How much you’re paid can be a range,       they only have potential
maybe 5 or 50 cents per click.             revenue to gain.




           One-time Sale s                                              Subscription

      This is simply a one-off deal or sale.                 With a subscription service, you will
      For example, Twitter charges for                       sell continued access or use of a digital
      access to certain feeds, and a                         or physical good, and it will bring in
      company can pay once for access                        recurring revenue. I prefer this because
      to different levels of API data.                       it assures a steady flow of money.


      Tip: Diversify

      My goal in online business was to make money through each of these methods. I spent
      two years building Docstoc as a product that could earn revenue through multiple
      channels. We earn money through online advertising, and we’re a top AdSense publisher.
      We sell documents one-off, but we also have a subscription service. Maintaining a variety
      of profit streams has helped Docstoc maintain stability, and paved the way for growth.
       The 10 Rules of Making, Tracking and
       Growing Revenue
1.      Hunt Ele phant s                                     2.   Sma ller Fund ing:
                                                                  Don’t Wait

  “Hunt elephants” is another way to say aim big. If you’re        If you’re planning on
  going to center your energy on something when you’re             raising seed capital from
  starting off, focus on something with a potentially large        family or angel funding
  pay-off. Take an approach that if you’re lucky, can turn into    under a million dollars,
  something huge. This may mean spending all your energy           don’t wait to start
  on one big deal, instead of smaller deals that are easier to     earning money.
  attain but won’t allow your company to skyrocket.
                                                                   From the day your
                                                                   product goes live, you’ll
3.    Big F u nding: Scale, Then Charge                            need something to
                                                                   sustain yourself and
                                                                   build upon, and fast.
 If you’re planning on raising significant capital, you have the
 ability to scale your product, and then charge for it.            For example, a friend of
                                                                   mine started a business
 For example, it took Docstoc 18 months before we got to a         called Laughstock,
 position where we charged for documents. We spent a lot of        which is like Fandango
 time building out our repository of documents, and increasing     for live comedy events. I
 our traffic over a couple years. If we’d immediately started       was on the board of his
 selling and managing documents, we wouldn’t have been             company and I believed
 able to scale into such a big                                     in him, but I knew he
 business.                                                         wouldn’t be able to raise
                                                                   more than a million
 There was another company                                         dollars. He couldn’t wait
 that started around the same                                      for a year to build
 time as us, and sold paid                                         critical mass of users,
 documents from day one. But                                       he’d need to start
 they didn’t scale, because they                                   making money
 had no users. Docstoc, on the                                     immediately.
 other hand, now gets 25 million
 people a month coming to our                                      So he changed his
 website directly, and another                                     business model, and
 10 million people a month that                                    turned Laughstock into
 see our documents embedded                                        a software service that
 in external sites like the New                                    runs ticketing for the
 York Times.                                                       major comedy clubs
                                                                   around the country. He
 Once we had the scale, we could insert a marketplace of paid      makes $5,000 a month
 documents, and they actually sold. Our advantage was that         per club, and is now
 we raised money upfront, a total of $4 million, which allowed     able to build out his
 us to focus on growth first.                                       community features.
4.           Le verage “Freemium”

 The internet is a great place to build a business off of giving away things for free, mostly
 because it doesn’t take much work. In the case of Docstoc, we have over 15 million free
 documents that users can download after registering. The great thing is that these free
 documents are actually generated by other users. We basically outsourced the community for
 these free products, and pull in new registrations every day because of them.

 This took care of one of the big costs of building a business: the cost of production. The other
 cost is marketing. We didn’t really start marketing until a couple months ago, before that we
 grew our website from organic SEO, links and referrals.

 The key is to leverage “freemium” in the beginning, by giving consumers a free taste, and
 enticing them to take a bite out of the product they really want.




                                                          5.
              s




                                                                  Try Charging for
             p
          u




                                                                  Ev erything
         t
      r




                 A Tale of Two Cities
     a
  t
 S




         The Bay Area and Los Angeles are both            This is a tip I got from Jeff Tinsley, the
         prominent startup locations, but I’ve found      founder and CEO of MyLife, a website
         that both communities approach money             that pulls a lot of revenue and runs very
         differently.                                     successful ads. He told me simply this:
                                                          “Try charging for everything. You will be
         Bay Area companies often build amazing           surprised what some people will pay
         viral products that are astounding to            for.” The same motto applies to other
         behold, but don’t focus enough on how            aspects of business, such as sales:
         they will make money from it. The founders
                                                          offer value, and let the customer
         are pure technologists, and don’t like talking
         about money.                                     choose.

         People in LA don’t necessarily make better       I’m not encouraging you to be
         websites or products, but they still make        careless. I am trying to prevent you
         money. Companies in LA do what they can          from letting perception dictate what
         to start making revenue, however they can.       you offer. Too many entrepreneurs put
                                                          off charging by telling themselves that
         My suggestion: Merge those two                   their product is too expensive, people
         mentalities. Create incredible products, but     won’t like it, or it’s not ready yet… etc.
         also be interested in revenue from day one.
                                                          Don’t pre-qualify the postponement of
         I’m not saying “don’t be afraid of money”
         I’m saying that you should be excited about      your services. People will spend money
         making money.                                    on the things that they want, and what
                                                          they want might surprise you.
6.       Fo cus o n W hat’s
         Working
                                                  7.        Acqu ire Traf fi c
                                                            Prof itabilit y

Every online business functions the same way:     Internet business is one big math formula.
you launch your product, then test a variety of   Your goal is to earn revenue by bringing
tactics to grow your revenue. Ultimately, these   traffic into your website for less than it costs
approaches will define your success or failure.    to create and maintain it. That’s it.
                                                  	
Every internet company has a finite life. You      There are hundreds of internet marketers
have no way of knowing its span. It could be      that don’t go to startup mixers or
six amazing months followed by a successful       TechCrunch conferences, but quietly make
exit, or eight months before your business        millions of dollars through traffic profitability.
implodes. Maybe your business just moseys         They make sophisticated pages for other
along for five years. The only moments that        people’s offers, and buy traffic into those
determine your company’s success during its       pages so that they make a commission off
lifetime is the number of times you try new       it. They have figured out how to exploit this
things.                                           formula.

It might be the 2nd or 10th time you execute a    If you want to earn revenue, your goal
change, but every time you innovate you give      should be to design a flow that involves
yourself the chance to be in the right place in   buying traffic into the pages that are making
the right time, with the right product, and get   money for you, in a way that remains
that big break that will catapult your company    profitable. Whether you make money off ads
to a different level.                             or services is up to you.

When you’re trying to grow, always focus on       For a company like Docstoc, our process
what’s working, then improve, invent and build.   was to build out a great product, then spend
Matt Coffin, founder of LowerMyBills, did          money acquiring traffic that will generate
some research and found that companies were       profit, through both ads and the services we
making money off helping consumers find the        provide. We succeeded in bring in traffic for
right mortgages for them. So he focused all of    less money than the traffic generated, and
his energies on creating a product that does      thus beat the formula.
that (but even better), and
ended up making a multi-
million dollar website based
on that service.
                                                                     When a lion is
Coffin turned over rocks until                                        hunting, it doesn’t
he found something                                                   chase all of the
interesting that could make                                          gazelles at once, he
him money. Then he started                                           focuses on one
digging. Investors and other
                                                                     gazelle and channels
entrepreneurs will encourage
you to focus on “the next big                                        all of his energy into
thing,” but sometimes it’s                                           taking it down.
important to stay on one                                             Harness your energy
track. Don’t worry about                                             and target it towards
jumping on the next boat,                                            an effort, like the lion.
focus on one product,
tweaking and improving it
until it works.
8.        Se t an d Track
          Reve nue goals

This step is pretty simple: set and track your
revenue goals. You can never realize your
company’s potential if you don’t have a
mission. Know what you’re going to do and in
what period of time, then work towards it.




              g Tools
      Trackin                                    9.     A/B Test Key Metrics

  Google Website Optimizer
                                                 The best way to track your revenue is to
                                                 test as much as possible, then let the data
     Google Website Optimizer is a               tell you what’s working and what’s not. I
     great way to change elements of             recommend using A/B Tests to test
     your website for testing, such as           metrics such as views, clicks, intent to
     colors of buttons and text. You can         buy and actual buys.
     then measure which changes are
     leading to higher conversions, and          I promise you, with A/B testing the
     link it with Google Analytics (which        changes that you realize add value to your
     can track your traffic in greater            site will often seem counter-intuitive. You
     detail) and AdSense.                        might try making text larger, or add a call
                                                 to action, and find that it actually results in
     With this powerful combination you          lower traffic.
     can track who’s visiting your site,
     who’s clicking ads and who’s                It only takes a small amount of people
     purchasing your product. A few key          coming to your site to distill enough
     things to remember: if you can              information to improve your webpage. A
     increase your conversions from 1%           significant statistical variance within even a
     to 2% you have increased your               couple hundred people can help you make
     revenue without necessarily                 educated decisions on how to alter your
     boosting your traffic. Similarly, if         site’s features and increase conversions
     you can get a customer who’s                (customers who actually purchase
     spending an average of $20 on               something). The more traffic you’re
     your site to spend $40, you have            working with, the more accurate your
     doubled your revenue without                information will be, but don’t let your
     increasing traffic.                          numbers prevent you from testing.
10.          Ben chm a rk Re v enue and Re- Evaluate
             Ass umpt ions

This is the final and most important step when it comes to increasing revenue:
benchmark your revenue and re-evaluate all the assumptions you have made.

Every entrepreneur sets goals, and projects how much revenue these plans will
generate. Once that projection period is over, you must review your goals, and
compare the actual revenue to your projected earnings. If it was less than you’d
hoped, it’s time to re-evaluate your assumptions.

What did you assume would play out, but didn’t? What new assumption will you
need going forward?

At Docstoc we go over our projections both monthly and annually, and review
projected versus
actual revenue from
our subscriptions,
sales and ads. I
explain to the board
what my assumptions
were, and what my
new set of
assumptions are as
we move forward.

I’ve been lucky
enough to tell the
board that my
assumptions were
lower than projected
and revenue has been
higher than expected,
almost every month.
The only way to make
this happen with your company is to discipline yourself. Force yourself to have
regular board meetings, and spell out what you are going to do. This puts pressure
on you to execute.

So remember, if you’re planning on tracking and growing your revenue, focus on the
things that are most important. Don’t be afraid to focus on the big initiatives, and
keep taking huge chances. If channeled properly, the same amount of energy that
will get you small $10,000 pay-offs might lead to 50 million dollars of recurring, high-
value revenue. Turn over rocks until you find that tiny diamond, then start digging.
Don’t get distracted by other rocks. It will be worth it when you strike gold.

				
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Description: How to make, grow and track your online revenue.