How To Make Your Online Business BOMB PROOF
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Let me ask you a question:
If the internet is a great place to build a business - why do so many people fail at it?
Surely with enough time, and enough money, anyone should be able to build a converting sales page, and a product that doesn’t get any refunds.
It’s not that hard to do those things - converting sales pages are scientifically test-able, refinable, and ultimately controllable. Products are the same: with testing and work, a product can easily be developed into something that fits well into what the market wants, and raves about.
And there’s no shortage of people out there who would love to own an automated business. And who can (and do) spend thousands of dollars trying to achieve just that.
Yet they fail at an alarming rate.
What is the Reason for Their Failure?
I feel that I have an answer to that question which is logical, prove-able, and definitive.
But before I get to that, let me say that I’m excluding the common reason’s why Newbie Entrepreneurs fail. Stuff like: under capitalized, no self control or discipline, can’t work by themselves, negative thinking, fear of failure, and blah blah blah are well documented, and though true, are not relevant to this discussion.
No, what I’m talking about is something that happens to even highly motivated, seasoned people, ex professionals, ex executives, and so forth who don’t have commitment or skill shortages, but who still can’t make their online business profitable enough to live off.
So tell me Snowboardjohn, What is the Reason for the Constant Failures in Online Business?
I’ll gladly tell you:
It’s due to something I refer to as “Internet Traffic Churn” - and the inability of the “would be entrepreneur’s” business model to absorb it.
To fully explain what “Internet Traffic Churn” is, I need to first explain why having an Internet Business is such an enormous opportunity - because once you understand the context of the opportunity, you will be in a better position to exploit it more fully and with less problems then you otherwise would.
Why the Internet is so Profitable
The internet is ridiculously profitable for two reasons:
The potential cost of leads is so low; and the potential reach is enormous.
People may argue that the cost of fulfilling orders is low as well - which is true - but fulfillment costs don’t have ANYWHERE NEAR the bottom line impact that lead costs have. Lead costs (the amount of money it costs to get a lead for your business) are probably the most expensive part of 99% of businesses functioning on and off the internet.
(When television first came out, the lead generation costs were ridiculously low as well - and many millionaires were created as a result of the cheap cost of leads. As time went on, more companies saw the results of reaching leads through the television medium and started to want some of the action. As time wore on, and the perception of high ROI for television advertising dollars was created, it became less and less profitable to use television to reach a market. Eventually the initial costs for TV ads was so high, only multi million dollar companies could do it, and even they lost (and still lose) money on many of their campaigns.)
Make no mistake about it: Internet Business profit comes from cheap leads and nothing else (significant).
Knowing this, you may ask the question: “so why is the lead cost so low if the potential profits from those leads is so large?”
Which is a good question. And I think there are two main reasons:
Reason 1. The dot com bust at the end of the nineties created a very negative perception of online advertising. A perception of wasting money, and no results. Basically it created a very generalized negative view of online business, due to the over hype that surrounded (and brought down) the first internet business back when things were just starting out. This negative perception is around in the general business population today, and while savvy entrepreneurs see through it, most business people are still misunderstanding the opportunities of the internet, and so are not creating competition and driving up prices as much as they would otherwise.
Reason 2. Emerging “Umbrella” mega businesses have holes which smaller, less profitable (but still very profitable) businesses can exploit. Google is a good example of this. Search Engine spammers take advantage of the fact that Google is chasing the big fish (the big advertising dollars, increasing their stock value, making themselves secure from other rival mega businesses) that they siphon off some of Google’s traffic at little or no cost to themselves. Google will of course devote SOME time and money trying to stop them, but realizes very well that public perception of the search engine is dictated more by PR campaigns then by actual search results. If Time Magazine says that Google is the best, then most people will believe it - not matter how bad the search results - because “if Google is bad, the others must be worse”.
A great example of search engine spam wars which are happening every second of every day can be seen for the search term Buy Viagra. The search results are pure spam, because it is so profitable to spam that particular search phrase.
Understanding Internet Traffic Churn
The moment you fully understand that the internet opportunity is a reach opportunity, you will start to understand the implications of that.
If profit is related to reach, then those who are successful must be reaching a lot of people cheaply - but how?
And there lies the true crux of the internet opportunity - how do you reach a lot of people, for as little money as possible?
Actually, I think the question should be “how do you reach as many people as you can, with as much STABILITY as possible?”. Because profitability is synonymous with INSTABILITY. What works with an enormous ROI today, may not work at all tomorrow. What works with minimal ROI today, may work forever. And vice versa.
The problem though, is not that traffic models are unstable (though they are), the problem is that most internet entrepreneurs FAIL TO ABSORB AND ACCOUNT FOR TRAFFIC INSTABILITY IN THEIR BUSINESS MODEL.
I call the rate at which traffic (the visitors that are the basis of a lead generation strategy) fails, the Traffic Churn Rate.
And in my experience, Traffic Churn Rates are the highest where the percepted expectation of return is the highest.
You can build a great sales page, and a killer product - but that doesn’t mean shit if no visitors ever see it. And because Traffic sources are organically changing all the time - it is not possible to test and quantify it very well - after all, incoming traffic is related to the market place perceptions of larger websites then your own, who send traffic to your website(s). These larger sites get traffic from other sites as well - whose quality, and content, and visitor demographic are unstable. All you can do is adjust your sails, and try to catch as much wind as possible.
And there lies the MOST PROFITABLE AND LEAST RECOGNIZED SKILL:
Creating Business Systems that Absorb and Adjust to the rate Incoming Traffic Fails
A great friend of mine recounted to me recently that he was sitting down with a 21 year old friend of his in late 2001.
The friend of his was receiving $100,000 checks every other week from his affiliate marketing business.
Needless to say, that kid is retired now at the age of 26, a multi millionaire.
How did he do it? Simple, he bought Google Adwords ads, and ran them straight through his affiliate links - didn’t even own a website. Back then, you could tip as many keywords as you wanted into one adgroup and pay 5 cents a click for as many clicks as you could get.
No editorial reviews. No quality score. No real competition.
No need for business systems.
I have another friend who currently makes about $1,000 USD per day profit from adwords advertising. He has special software which manages his bid prices in real time, along with which keywords are converting, and the placement of the ads, and so on. All developed in house, and being refined all the time. He has a team of software designers who make this program work, and keep it working, and improving.
Because these days, that is the way the system is working.
Eventually the Umbrella Mega Businesses start to squeeze more and more profit - they go after the billions, then the millions, then the hundreds of thousands, and so on down until they have maximized their profitability to the nth degree. And then they start at the top again.
The flux that the mega businesses create is what your business model needs to absorb.
The Two Things Your Business Model Must Have To Absorb “Mega Business Flux”
It’s simple:
1. A front end product.
2. As many affiliates as possible.
Why do you need these two things?
Basically it’s because the front end product is a list builder - it’s your main source of leads. After people buy the front end you get them to “opt in” to a list to receive the product. As long as that list keeps growing, your business will continue to grow.
Sure you COULD try and promote the front end yourself - and many people do - however in my experience it is FAR MORE PROFITABLE to give away most of the front end revenue to affiliates, and sell a backend product or coaching program which you take 100% commission on.
By spreading your risk over a large amount of traffic generation strategies (because your affiliates will generate traffic in varied and unique ways) you make it likely that however the mega businesses shift traffic flow, your business will always catch a reasonable amount of it.
As long as your incoming traffic to the front end product is stable - then you have something to work with, to make more money.
If you are in a CONSTANT BATTLE to get traffic, then you will never have enough “breathing room” to sit back and really maximize the profit of your market(s).
Make sense?
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March 29th, 2008 at 3:14 am
Welcome back SBJ. Glad to see you’re writing again. Really interesting to hear about your friend who has special Adwords software. Like your thoughts on lead gen and the traffic flux problem.
March 29th, 2008 at 5:31 am
Cheers Chris,
I’ve been spending my time on holiday and working on my real web business(s).