This article by Morgan Linton (co-founder of Bold Metrics) while a little old (2011) is bang on the money. Morgan details the reasons why a directory won’t make money perfectly.
He refers to “domainers”, but the same reasons go for marketeers, web-entrepreneurs, and mareting guru’s.
Directory sites can be huge money-makers, those who do it right can generate tens of thousands of dollars a month. The problem is that while business people understand the directory model, Domainers often don’t get it. Now since I personally know a handful of people making a small fortune with directories I think it’s important for Domainers to understand how they do it.
The problem comes down to a general line of thinking – if I build a website it will do all the work for me, just like parking. Sorry guys (and gals) today is the day that way of thinking dies…and if it’s just dying today then you’re a bit late to the party. However in reality the party hasn’t even started yet so you really aren’t that late.
Let me state this one more time in a little different way – a good business needs a website, but the website does not create the business. As you know I’m an analogy nut so here’s my analogy for this one. Building a website on a good domain name is a bit like building a physical storefront. To open for business you can’t just open the door, you need to have a business model. The problem Domainers are having now is that they are confusing a website with a business rather than seeing it as the front-end of their business.
So now let’s get to the topic of the post – why most Domainers aren’t making a dime with directory sites. Domainers expect that making money with a directory website just means building a directory website. The problem with that model is:
- How do you get people to sign-up for your directory?
- How do you get people to pay for listings?
I can’t tell you the number of times I’ve heard, “well I put up the directory, why aren’t people signing-up?” The answer is that nobody will sign-up unless you have a nice stream of traffic or a way to reach-out to people and let them know your directory exists. Even local plumbers and painters advertise their business to get clients, and as a business owner you’ll have to do the same. Initially unless you have a very high-level of traffic you’ll have to start-off by letting people list for free and then add in paid listings once you have the traffic to justify it.
If your directory site only gets 1,000 visitors/month people usually won’t pay anything to be listed in it, and if you can get people to pay it’s going to be under $50/month. If you want to charge more you’ll have to either focus on SEO and grow organically (slow process) or use Google Adwords and pay for your traffic (much quicker). The fact of the matter is that people want to join your directory if it means more business for them. If you have a few hundred visitors each month do you really think you’ll send a meaningful number of clients to the people in your directory?
Ranking well in competitive niches like Insurance and Law is a lot of SEO work – in many cases you’ll be competing with people spending a fortune on SEO and 50K or more every month on Google Adwords – but hey, they’re running a business! If you want to compete with them you’ll have to run a business too. Now I’m not saying you have to spend a fortune marketing your business – it really depends on your niche. Every niche has different competitors and a different barrier to entry.
Now let’s get to the root of the problem. The reason most Domainers won’t make a dime with directory sites is because they think that making money with a directory site means just building a website. This is a problem! Building the website is only the beginning, putting-together a model to populate the directory, advertise it, up-sell, etc. is what it takes to run a profitable directory business. If you’re looking for a model where you sit back and the business builds itself a Directory is not the way to go. If you have a vision to create a real business on your domain you should have a basic business model, a starting budget, and a set of goals.
So take a look at that directory site you had built for $500 or $1,000 and then ask yourself, “what am I doing to run this business?” If the answer is, “nothing” then you know your problem. A directory business won’t run itself, it needs you to get it started and most importantly it needs traffic to entice people to pay for a listing. If you’re one of those lucky Domainers already getting 10,000+ unique visitors coming to their domain each month you already have the traffic…but too many Domainers are building a directory and expecting the traffic and revenue to just magically appear…and if that’s the situation you’re in it’s time to stop selling yourself and lie and start running a business.
Why Most Domainers Won’t Make a Dime with Directory Sites
by MORGAN on FEBRUARY 18, 2011