One theory of web marketing starts off with controlling cost. Where you try to find what works right now, and do exactly what is needed to get to the level of success you want to reach. The theory sounds valid, but...
- By the time something is common knowledge, its value and effectiveness has decreased and is heading lower.
- The markets are shifting. Tomorrow's marketplace is uglier and more competitive than today's marketplace. And it has lower margins for average players too!
- Those who invest in building real assets are going to eventually beat you. And their success is self reinforcing.
Investing & Adding Value is Better Than Being Cheap
Rather than thinking of how to control costs while growing a web business, it is better to spend that same time, energy, and focus learning how to create value and how to get people talking about how valuable your widget is. When I was new to the web I kept my reported income far lower than it should have been because I kept reinvesting in learning and marketing, even when I was heavily in debt. Some of the spend was a waste, but I know enough to compete in many markets with minimal investment.
How to be Cheap
Two months ago my mom told me she wanted to create a new blog about Diverticulitis, a topic effecting my grandma. With no warning, that afternoon I...
- learned how to spell the word Diverticulitis (2 minutes)
- used WordTracker's free keyword research tool (2 minutes)
- bought my mom a $6 domain at GoDaddy (2 minutes)
- spent 5 minutes aligning the DNS, hosting her site at Dreamhost, which allows unlimited sites to a $7 a month account. I recently created a 5 year account for a friend and only spent $300 for 5 years of hosting!
- set my mom up with a default Blogger template (5 minutes)
- created a cheesy logo (that took me 5 minutes to make using low end $50 logo design software I bought years ago)
- modified the CSS file to match the logo (5 minutes)
My mom wrote 10 blog posts that took her ~ 5 to 10 minutes each, and a week later I spent 5 minutes and ~ $80 submitting it to a couple directories.
A few months ago I bought a domain name for $2,500. Last month I was offered $17,500 for the domain, and not too long ago the same guy paid over twice that for a similar but worse name. If he offered me that much I might have sold, but unsolicited offers are typically on the low side.
Today I was sent an unsolicited $500 offer for my mom's new site. Why? Because the site already ranks in Yahoo and Microsoft. If I spend a few hundred more the site will likely compete in Google too. My marketing knowledge was expensive to acquire, but everything else was good enough to compete for cheap or free (at least in that market at this moment in time).
The reason this story is remarkable is because people were willing to buy such a small site when it was so new. In two months the site was conceived, created, competing, ranked, and someone already made an offer on it. Two months ago that same domain name was $6.
Everything is Becoming a Commodity
It started with the average travel broker, then it hit classified ads and regional monopolies like newspapers, and it is working its way toward your industry. Just look at all the above web industries listed that are free or nearly free. Due to more efficient markets, automation, outsourcing, and the need to compete on an open marketplace, the margins for almost everything needed to compete on the web are heading toward zero.
My mom's new site competes on about $100 of investment, but in a year or two that domain name might have cost $500, and a couple more competitors entering the field might have pushed the marketing costs to $1,000. A year or two later the domain name might have been $2,000 and the marketing costs might be $10,000.
Don't Become a Commodity
The three solutions to the commodity issue are
- use new technologies to create and publish the DIY tools and information that will commoditize other businesses competing in your space
- build your knowledge in related fields that interest you, such that you can add value to multiple points on the value chain. Google is search + ads + documents + hosting + syndication + etc etc etc. I know a bit about SEO + SEM + marketing + branding + conversion + domaining + etc etc etc.
- Invest to build your awareness and brand (build mindshare and distribution) to where you are not considered a commodity. Create enough of an abundance of demand that you chose who you work with.
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