How NOT to Build a Successful Online Business
August 6th, 2005 by Steve Pavlina
Email this article to a friend
Darren Rowse of Problogger.net recently posted a case study of a blogger who decided to quit blogging after six months due to poor financial results:
Blog Case Study - Is it time to Quit?
Darren’s post is a great read for anyone who runs an online business, not just for bloggers.
Interestingly, the points Darren raises in his post are similar to those from an article I wrote in 2002 called “Shareware Amateurs vs. Shareware Professionals.”
The blogging “mistakes” Darren notes are common to other online businesses.
Three of the most frequent mistakes I’ve seen include:
1. Thinking too short-term
The blogger that Darren mentions gave up after only six months. Many shareware developers give up when their first product isn’t a hit. I’ll tell you that if you can achieve financial success with a one-person, shoestring budget business in only six months, you’re probably superhuman. My first four shareware games were all relative flops — it wasn’t until my fifth release that I was able to produce enough income to live off.
When I think about the personal development business I’m building, six months is nothing. I’ve been at it for 10 months full-time now, and while I’ve made a reasonable dent in my long-term goals, this business is clearly still an infant. But to me that’s perfectly fine and well within my expectations. This business may be an infant, but it’s a healthy infant who will grow up big and strong.
Building a business is a lot like raising a child. It takes time and patience. If you’re going to start a business and you’re only willing to give it six months to prove itself, don’t start a business. That probably isn’t even enough time for a franchise. Would you throw out your child because it can’t fend for itself six months out of the womb?
I make most of my business decisions within a working time frame of 2-5 years… and for the big decisions with far-ranging consequences, I’m thinking 10-20 years out. This is just like the parent who starts saving for their child’s college education before the child can even read and write. If you want to start a real business and not just a hobby, think long-term.
2. Failure to optimize
An online business will have processes that get executed over and over. Some of these are human processes, but many are executed by technology, and in my opinion, it’s the technological processes that are the most important for an online business. Whenever someone loads up your home page in their web browser, that’s a process being executed. Reading a blog entry is a process. Clicking an ad is a process. Finding the site is a process.
Due to the sheer volume of processes an online business executes every day as well as their incredible interconnectedness, it isn’t hard to achieve tremendous performance gains through process optimization. A 10% improvement here, 15% there, 8% there, and pretty soon it begins to add up. As I’m sure some people will recognize, this was the basis of W.E. Deming’s work with the Japanese after WWII. If you can measure it, you can improve it.
If you generate income from Google Adsense, for example, there are plenty of web sites that provide practical optimization tips. Just do a Google search on “adsense optimization” and similar search terms, and you’ll find plenty. By gradually applying Adsense optimization tips easily found on the web, I was able to permanently increase this site’s CPM (i.e. revenue per 1000 page views) by 68%. However, by performing other optimizations (search engine optimization, marketing improvements, posting changes, site tweaks, etc.), I was able to increase this site’s daily Adsense revenue by about 500% in five months. Most of these changes took only minutes to implement, like adding RSS subscription buttons to the sidebar or changing the ad colors. If I’d never made these optimizations, it would mean permanently lower revenue, which would mean much slower growth for this business and more problems for me.
Optimization is generally one of the easiest ways to increase revenue for an online business. Even just one hour spent on intelligent optimization can generate enormous payoffs down the road.
3. Failure to market effectively
How many blogs receive dismal traffic because all the owner does is write posts?
I think that if you dare to be an entrepreneur, you need to learn marketing or have someone in your business who’s skilled at marketing. While you can outsource a lot of different business tasks, I don’t think the core marketing of your business should be one of them.
I never had any formal marketing education (my college degrees are in computer science and mathematics), but when I started my shareware business, I discovered I needed to learn marketing. In addition to reading marketing books and learning from others, I bought audio recordings of several marketing seminars. It took me a full 18 months to get through them (it was about 100 audio tapes total), but by the time I was done, I had a strong understanding of marketing and plenty of ideas for promoting my business.
Marketing doesn’t mean buying advertising, which is arguably the most expensive and least effective form of marketing. I haven’t spent a dime marketing this site, but I have done a lot of marketing work for it. Marketing is really just getting the word out. Don’t keep your site a secret — let as many people know about it as possible. Post comments liberally on other blogs, write articles and allow other sites to use them, swap links with bloggers in the same field, make search-engine friendly pages, and so on. If the content you produce is valuable, then you’re providing even more value by sharing it.
I think the most important realization I had about marketing was this — if you have a product or service you truly believe in, then you’re actually doing people a disservice but not telling them about it. Think about that. By NOT marketing, you’re depriving people of value.
If you aren’t eager to tell people about your site, perhaps it means you’re not offering something you believe in strongly enough. This simple idea contributed to my decision to retire from active shareware development and start this personal development site. I have no qualms about promoting this site because I believe in its value. I don’t feel embarrassed or apologetic when I tell people about it. If you’re providing real value, then your marketing is doing people a favor as opposed to asking for a favor. I wrote more about this philosophy in the article Marketing From Your Conscience.
I think a failure to do marketing for an online business is a form of self-sabotage. If you learn about a fantastic new web site, do you tell other people about it? Of course. Is your web site worth telling people about? If you don’t believe it is, you’re likely to avoid marketing it. Somehow you’ll just never seem to get around to doing any significant marketing work.
If you want to build a sustainable online business, focus most of your energies on providing value and on communicating that value. If you get those two things right (and it’s going to take longer than six months to make a real dent), you’ll be more driven to do everything else right.
Now for a good way to actually build a successful online business, read Build Your Own Successful Online Business.
August 6th, 2005 at 7:36 am
An excellent article that has great relevance for the new writers’ site I’m working on at the moment (Writers Blog Alliance). I’ll link to this from there. Thanks.
August 6th, 2005 at 9:56 am
Excellent article. It’s taken me six months to build the traffic level I have for my blog. If I didn’t exercise patience and the willingness to learn marketing skills, I would have given up a long time ago.
August 6th, 2005 at 12:24 pm
Steve,
There’s a particular bad habit that a lot of single guys have and want to quit. You haven’t addressed it directly, largely because this blog is G-rated.
I’ve successfully put myself on a diet, and I’m beginning to track my time, and quitting this is a lot harder than either. I think that what I’m quitting can erode motivation over the long term (as can any unhealthy drive, even being a blog-surfing addict). Can a young single guy quit it? I’ve had ups and downs including months-long clean streaks, and I think that:
- Being optimistic about other aspects of life is the best prevention.
- Having a long clean streak helps.
- If you want to reach goal X consistently, shoot for X*2 (a clean, reality-focused mind)
- Quitting goes hand in hand with doing other things right, like quitting tech websurfing, or doing chores.
I want to try a couple tactics in the future:
- Affirm my goals every morning, and track how long I’ve been clean.
- Meditate (in general, not on the topic) and make positive plans
- A recovering alcoholic that I once interviewed said it helps to have good friends, partly because they know when you’re lying.
Nobody says much that applies to quitting this addiction, even indirectly. A post about quitting addictions, or eliminating purposelessness, would interest a lot of people.
Thanks for the blog, and for reading.
August 6th, 2005 at 6:14 pm
Steve, great post! I agree with your three points; they are very important. I have just started a blog, and it’s hard to blog when you have about two readers, but I keep myself energized by picturing the future - when I have lots of readers who will be glad to read the archives I am writing now, and who will be happily checking out the ads.
August 6th, 2005 at 8:28 pm
Hi. Made my way here via ProBlogger. Just wanted to let you know I enjoyed reading this post very much.
August 7th, 2005 at 3:23 am
I’ll second Anonymous Coward’s suggestion for an article on breaking addictions, particularly *that* addiction. I suspect it’s a very common addiction, but because it’s so modern (past 5 years or so), there are no established support groups for it (unlike drugs or alcohol).
I struggle with this problem too, and it causes me a lot of guilt. I’ve looked far and wide, and I’ve found very little support material which isn’t religious. Steve, your advice on this topic, if you have any, would be *much* appreciated - and probably by more people than would readily admit.
I can imagine the article title spreading rapidly across the blogosphere, if you ever wrote it
August 7th, 2005 at 4:34 am
Thanks for the tips Steve. I find ProBlogger to be a refreshing island in a sea of hype. I’ve noticed numerous changes to your blog over the last few months but the main look and feel remain simple and uncomplicated. The focus of your site has always been “content” and that you do very well. I have been experimenting with ad colors to better blend in the ads in my site. After reading numerous essays on the effect of color, I am wondering what you have found to work the best?
John
August 7th, 2005 at 6:51 am
@John: The most common piece of advice is to make the ad colors fit the site’s color scheme. The exact colors that work best are different for everyone. Otherwise, Google would be telling us exactly which colors to use.
For me the most significant factor has been testing. Google makes a big deal about that too. You just have to try a lot of experiments and measure the results. It’s tedious at times, but the data is invaluable.
Keep in mind that whatever optimizations you do now will benefit you over the next decade. An extra $10 per day from Adsense will ad up to $36,500 over the next 10 years. It’s likely that at some point in the future, you’ll look back on the optimization work you to today and think, “I’m really glad I did that.”
August 7th, 2005 at 7:31 am
Steve, You always seem to come up with a post / article that applies directly to what I’m going through in life. I’m not sure if you can read my mind or that your writing has become so good that it hits home more often than not.
I recently started my blog and have been trying to keep the postings frequent and on topic as best I can. I didn’t start the blog to make money (but that can’t hurt), but to instill some discipline on myself to keep up with my projects.
Much of what you have written here applies to most things, not just online businesses. I can see how it would relate to relationships, health, investments, savings, and learning.
Again, great post!
August 7th, 2005 at 10:07 am
[...] How NOT to Build a Successful Online Business - an excellent article on building a successful online business. I think that you will find a lot of good articles at Steve Pavlina . com’s personal development blog. [...]
August 7th, 2005 at 12:00 pm
Terrific advice — not just on building a sustainable Web business, but on building a sustainable self-directed career in general.
August 7th, 2005 at 12:48 pm
Good article with lots of common sense (which I’ve discovered is not all that common) and really applies across many industries and fields. I’m 3 months into my startup at http://www.fullthreadahead.com and would only add that one should set incremental targets during that first year. Seeing small steps often let you see progress towards that long term goal
August 7th, 2005 at 1:16 pm
Another great post Steve! The idea of accepting that we “have time” is an important one with any endeavor. Not that we shouldn’t be maximizing every moment we have but remembering that with consistency the results will come after the work has had enough time to gain traction. Once I realized that this was inevitable it all seems a lot easier as I plug away at my own blog: ratsoringo.
Please keep the great posts coming.
August 7th, 2005 at 3:24 pm
[...] The first is How NOT to Build a Successfull Online Business by Steve Pavlina - Here Steve sumarises 3 points that contribute to the failure of an Online Business - Thinking too short-term, Failure to optimize, and Failure to market effectively - And provides useful information to overcome them. [...]
August 7th, 2005 at 10:08 pm
Carnival of the Capitalists
Welcome to this week’s Carnival, sponsored by MarketingLinx, the best marketing site on the web, as determined by you. Contribute a link today to get your reward! This week’s contributions were fantastic. Hosting really is a different experience from…
August 7th, 2005 at 10:18 pm
It’s hard to appreciate how much effort it takes to get a business off the ground until you try. I’m doing it now (trying to at least) and I think I’ve underestimated the effort by at least an order of magnitude. Being a cog is much easier.
August 7th, 2005 at 11:03 pm
@Addicted: This one is biggie for me, too. Anyway I got my eyes opened by http://fourmilab.ch/hackdiet/ … I managed to shed 13kg (28lb) in approx 5 months without any heroic effort. And the best thing is that it seems to stay that way (no yo-yo effect). Your mileage may wary, of course.
August 7th, 2005 at 11:04 pm
omg. should spell-check before submitting :-/
August 8th, 2005 at 3:08 am
This post has been added to the Carnival of Personal Finance #8!
August 8th, 2005 at 5:29 am
Very insightful article. The points you mention are applicable to any business not just online ones. The thing about online business, is that the cost of setting one up can be relatively small. I guess that leads people to think short term which as you pointed out is a bad idea.
In any business the key is building critical mass. Once you have that critical mass interested, you are likely to see an exponential growth. I also liked the line “By NOT marketing, you are depriving people of value.” Thats if you think you are providing value in the first place
Setting up an online business is also lots of fun. If you are not having fun, then others wont either. I certainly am having lots of fun with http://www.tripmojo.com
August 8th, 2005 at 7:36 am
I found your article and website via the Carnival of Personal Finance — thanks for putting the article together! Time very well spent reading it. I had a feeling that businesses took a while to get up and running — even online ones — and your experience reinforces that. It’s also good to hear your stories of perseverance. That’s another piece of advice that I’ve heard helps a website become successful — putting a bit of yourself in the content.
Thanks again, and I’m glad that I found your blog!
August 8th, 2005 at 10:30 am
I found your website via Indie Gamer and I must say that you have continued the useful posts you used to make in the dexterity forums. I will visit your blog often!
August 20th, 2005 at 6:27 pm
Hi Steve,
This is a very insightful article.
Are you sure you did computer science and mathematics?
Man, your words are from the soul, you write with feelings.
Love your article.