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Dec 05, 2002
Case Study

How SitePoint Mixes Revenue Streams to Stay More Profitable than Competing Publishers

SUMMARY: The fun thing about this Case Study is it is a true rags-to-riches story of a lone entrepreneur who started a content site for a hobby, and then built it into a big profitable company.

Useful metrics on the percent of visitors who sign up for a newsletter using the site's pop-up are included.

Also, if you write or managing edit articles for your company's site or email newsletter, you absolutely *must* check out sample issue of SitePoint's "Scribe" newsletter that is also included.
CHALLENGE

It all started as a hobby. Back in 1997 Web designer Matt Mickiewicz was frustrated because he could not find anyplace online that had links for useful tools and downloads for webmasters.

He put up one simple Web page with a few links.

Mickiewicz was thrilled to find it drew traffic well beyond his expectations. He did not think he would ever make a cent from it, so he waited until April 1st 1998, the day that Network Solution's prices dropped, to register a domain name so he could build a whole site around the idea. "I was that cheap back then," he laughs.

Two weeks after the new site, Webmaster-Resources.com, launched it was named Site-of-the-Day by the LA Times. Accolades in USAToday and Windows Magazine followed.

Finally in October 1998 Mickiewicz landed his first advertiser. "My first big sale was for $800. I was so excited."

Over the next year things really exploded. "I was making ridiculous amounts of money," says Mickiewicz. However, new competitors and places to link to were launching daily, and the workload to keep up with it all was crushing. "It really was getting too big for one person to handle."

After saying no to some tempting buy-out offers, Mickiewicz decided to recruit two experienced executives to help him turn the site into a real ongoing publishing business.

Mickiewicz, who is based in Vancouver, did not put any geographic limits on where those execs had to be, they just had to be the right ones. When his search turned up two prospects in Melbourne Australia, he made the deal happen.

"We agreed over the phone to work together, then I flew down for 2-3 weeks in the Fall of '99. I put $10,000 into the company bank account to cover marketing expenses, and only drew a salary from then on." His new partners, CEO Mark Harbottle and CTO Jason Donald, agreed to moonlight for no salary until the company bank account built up enough for them to safely quit their day jobs in March 2000.

A month later, as they staffed up and rented office space the dot-com boom started to crumble. How would the new "real" company survive?

CAMPAIGN

Together, the team dramatically revamped four aspects of the publication to create a solid foundation for growth:

-> Revamp 1. Changing the name

After a high profile article in Windows Magazine came out with the site's URL spelled incorrectly without the hyphen, the team realized you can not run a serious Web business with an address that is so easy to typo. It costs too much potential traffic.

They changed the company name and domain to SitePoint.

-> Revamp 2. Redesigning the entire site

Mickiewicz built the initial site by hand as a series of static HTML pages, which is fine for a hobbyist, but no way to run a large site. They immediately invested in a new content management system that everyone could use easily.

"It took a few months and cost us quite a bit of money," Mickiewicz says. "We had to re-enter all our content into the database. It was an enormous pain in the ass." Worth it.

The new site also included an intranet-style admin system with to-do lists and project management features to help everyone work as a group, despite the distance. Plus it had a home-built metrics system so the team could see how visitors interacted with the site, which revealed to everyone's dismay that more than 50% of visitors never went past the site's home page.

"We tested two different new designs," says Mickiewicz, "We removed all banner ads and all unnecessary options from our home page, and we cut things to reduce loading time. " (Links to old home page and the winner of the two test pages below.)

-> Revamp 3. Ensuring a steady stream of high-quality, low-cost content

The team launched message boards to get community-style content flowing from visitors. Then they recruited a group of mainly volunteer advisors, developers and directors to moderate and post expert notes.

They did not have the budget to pay a large editorial team or freelancers to write articles to keep the rest of the site fresh and interesting. They decided to recruit columnists and contributors who would agree to work for nothing in exchange for the spotlight.

Content Director Georgina Laidlaw took five steps to keep fluff and self-promotional dreck off the site:
a. Authors are asked to submit ideas for approval before writing the entire story
b. Laidlaw reviews all submissions (even from long-established contributors) and rejects "a large part of them."
c. Authors are given a style manual with explicit guidelines. "You can't do self-promoting, repeat what's already on the site, 'Internet' is capitalized, etc.," says Mickiewicz.
d. Laidlaw continually educates and inspires authors by sending them a monthly "SitePoint Scribe' email newsletter Issues include cash "bounty" offers of $125 for articles on particular hot topics, profiles of popular SitePoint authors, and guidelines on what it takes to be a published. (Link to sample Scribe newsletter below, definitely check it out!)
e. When an article is accepted, the author must agree not to give it to any competing publications for a set period of time. Laidlaw also recently removed direct-to-author email addresses from the site (now to reach an author you must email them via SitePoint) to make it a bit harder for competitors to poach her best writers.

-> Revamp 4. Ramping up email newsletters

Sponsors were clamoring to put ads in newsletters, and email clicks drive more Web pageviews as well, so the team ended up launching three: The TechTimes, the Tribune, and the Community Crier.

The big challenge was building the list. Mickiewicz admits they have tried almost every tactic you can name to convert site visitors into newsletter readers, including:

a. Adding subscription forms to every single page in a highly visible position on the navigation bar.

b. Testing a wide variety of incentives. "We've offered PDFs, eBooks, discounts, etc."

c. Continually testing new pop-up art, including pictures of SitePoint staffers, very simple forms, and eye-catching art. The site even ran a contest last month offering $100 to the best new pop-up art submitted, in hopes of generating a breakthrough idea.

(Note: The site cookies all visitors "indefinitely" so they will only see a pop-up once. But its demographic are likely to wipe cookies or switch machines frequently. So Mickiewicz feels changing pop-up art frequently is mission-critical.)

d. Testing a DHTML ad that floats on top of content.

As the site and newsletters matured and the economy soured, the team turned their attention to finding ways to stay profitable. Thus far they have tested five major initiatives:

Profit-Test #1. Getting message board sponsorships

Every online ad sales rep knows it is almost impossible to sell ads against community because message boards are such compelling content for users that ad click rates plummet. The ad sales team invented a mega-sponsorship that offered so much value that they hoped it would be impossible to pass up.

For $500-$2000 per month (a price determined by multiplying average pageviews by $4-$5 CPM, which is about five times the average for competitors' boards), a sponsor gets:
a. Exclusive placement of a graphic and text ad on every single page in a specific topical section of the boards

b. Logo placement on the front page of the boards next to the name of the section they are sponsoring

c. Two 15-line (65 characters per line) text ad in the SitePoint Community Crier newsletter which is sent out to all registered board members.

d. Four-line text links in all outgoing "new post" notification emails

Profit-Test #2. Ultra-carefully testing CPA deals

SitePoint's been deluged with CPA and CPC offers from potential advertisers, but the team decided to turn these down flat, with the exception of just two carefully chosen partnerships.

Mickiewicz says, "I say no to everybody. We lose a lot of deals our competitors take. Companies want to buy ads at $.5, $.10, $.15 cents per click." He chose just two partners who he hoped would be worth much more than that:

a. WebTrends: The company is the biggest name in Web metrics software, so Mickiewicz wanted their ads on SitePoint from a credibility standpoint if nothing else. He wrangled a deal to get paid per sample download, and hoped it would prove profitable.

b. ProposalKit: This company is a small one-man operation which would never advertise otherwise, but Mickiewicz felt the product was so dead-on target for his particular niche audience that he decided to create and carry ads for it. Because if things panned out SitePoint would probably be the biggest sales channel ProposalKit had, Mickiewicz was able to negotiated a fairly high commission for all sales.

Profit-Test #3. Developing an alternate business

In an unusual move for a publishing company, the SitePoint team decided to launch a division with a completely different business model. SitePointDesign offers Web site design services in the Melbourne-area. Mickiewicz is quick to point out that this does not put them in competition with any site sponsors.

When they have downtime, the design team pitch in on the main site.

Profit-Test #4. Selling non-content products to readers

The design team developed a content management tool called 'Editize' for their own use because they could not find one on the market that met their needs. Mickiewicz decided to try selling it directly to site visitors as well.

Profit-Test #5. Books

In 2001, the editorial team noticed that a particular 10-part series of articles posted on the site was getting unusually high traffic. "It became one of our most popular articles, we got links from SlashDot, it was getting pageviews like no tomorrow!"

They had the author revise and update the content, and then they published it as a printed book in Sept 2001.

Why print? "People want to read long tech stuff in print, and people like to have tangible things for their money."

At first Sitepoint sold the book through heavy advertising to its own email readers and site visitors that offered four sample chapters sent via autoresponder. (Link to sales page below.)

"We avoided selling on Amazon for the first seven months because they take 55% of the cover price," says Mickiewicz. "But we got quite a few complaints from people who felt more comfortable buying it there." He caved and let Amazon sell it.



RESULTS

SitePoint has continued to be profitable every single quarter since launch, despite rising costs such as staffing.

The site's 350,000 average monthly unique visitors account for an impressive 2,800,000 pageviews. The newsletters have a combined total of 90,000 subscribers.

More details:

- After the home page redesign, the percent of visitors who abandoned the site after only viewing the home page fell dramatically from more than 50% to just 18%.

- Early on subscription pop-ups got a 8-10% conversion rate. These days conversions have leveled off to 2.5-2.8% with slight bumps for a short period after new art is introduced. No offer or design style has moved the meter in a significantly in months.

- The DHTML floating subscription offer was a miserable failure, generating a lousy .5% conversion rate plus a flurry of annoyed emails from visitors.

- Although ad agencies "skip over" the message board sponsorship idea because according to Mickiewicz they want to run a standard ad unit across many sites, sponsors who do in-house media buying are thrilled with the idea. "Mostly smaller companies advertise in our forums. It's been very successful."

- Mickiewicz is similarly thrilled with the results of his two carefully chosen and negotiated CPA partnerships. He notes he gets about $.75 cents per click for his ProposalKit ads, which is about 10 times industry average for CPA deals.

- SitePoint's design division is doing fairly good business in the Melbourne area, and the income has been a nice supplement during advertising lulls (and vice versa).

- The Editize offer is not doing as well, partly because software is a fairly complex thing to sell. "It's like 20-40 copies per month at $127," says Mickiewicz. Since there are virtually no associated costs, he's not turning down the income!

- The printed book has sold far more copies for a far longer period of time than the team ever dreamed it would. "We've sold over 5,000 copies. It's been out for 13-14 months now and it's still selling very well. Most other print publisher's books die out in three to six months because they have so many titles coming out that they just can't give each title it's own attention."

About 10-15% of sales come from Amazon, but frustratingly most of those are due to SitePoint's own marketing efforts. Mickiewicz explains, "Our sample chapter autoresponder sends out a final message saying 'Why didn't you buy? What could we have done differently?' and a lot of people reply, 'I bought it on Amazon."

Fired by the success of the book, the SitePoint team have authors under contract to write more of them. "We're planning a whole line," says Mickiewicz.

Useful links:

Sample of SitePoint's "Scribe" newsletter to inspire and educate the site's contributors:
http://www.contentbiz.com/sample.cfm?contentID=2219


SitePoint's old home page:
http://www.sitepoint.com/indexspecial.php.old

The new home page:
http://www.sitepoint.com


Book sales pitch (including autoresponder pop-up):
http://www.sitepoint.com/books/

SitePointDesign
http://www.sitepointdesign.com


Editize
http://www.editize.com


[Note: All monetary amounts above are cited in US$.]
See Also:

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