End of the year cleanup – 80/20 in Action
The end of the year is upon us young student and thus the time for reflection has come. Yes, that is another task for you.
You might have heard me mutter about the Pareto principle every now and then, and that is what we will usw to guide our efforts.
What the Pareto principle is, you are asking?
Well, it is mostly known as the 80/20 principle nowadays and as 80 situps with a 20liter bucket for not paying attention to you.
In broad terms, the Italian economist Pareto discovered that most of the time 20% of a business’ customers account for 80% of it’s profits. Once the rule had been rediscovered by todays economists, it has been cropping up all over the place. Alas, note that it’s reverse is also true, for example: 20% of customers are 80% of the complaints, etc…
You can do a little bit of reading on the Pareto Principle over here.
So with the time of reflection and cleanup on us, let us reflect on this and how this affects us as Affiliate Marketers.
Statistics – of course
Take out your statistics and see what has made you the most money vs. the effort it has taken you.
Kill the underperformers or sell the sites that show no further potential. Rethink the rest.
OK, so much for the condensed version. Some explanations to follow.
The most important factor here is the time/effort ratio.
Yes,this might well mean keeping a site with only small returns if it costs you nothing to maintain.
Yes, it might also mean getting rid of a medium good performer that takes tons of time and effort to get there.
But, first we have to arrive at the numbers.
As an affiliate marketer, you should have the profit (or loss) for each one of your websites at hand, anyway.
If you are prepared, you might even have an effort estimation for each site. Hours worked, for example.
if not, make one up now.
1 = no efort at all, passive income
2 = some effort required
3= major effort
Now you divide your profit by the effort.
Profit / effort = profit per hour
Sort your table by that number.
Look at it.
Decide what to do.
Ah.. a note of caution here:
I am only talking about sites that are making profit. One reason is that the calculations are not working with negative numbers and another that you probably should not hang on to sites that are leaking money.
The sections of the table
The top 20%
You should definitely keep and expand those domains. These are the ones that bring in money and fame.
Some of those might even fall into the “passive income” category. I have one of those, running for four years now. It brings in about 60-70 US dollars every year. With no effort, other than spending 6 hours for the intial setup.
This year, this equals 60$ for 0 hours of work.
But, for this site (and for your sites along this line, if you are lucky enough to have them) it also means I will have to think about expanding them, to get them to full potential.
The middle tier
Look at each one of these sites and decide if you want to keep working on it.
Does the site have potential? Do you feel passion for the site? Do you want to keep it? What amount of work would be required to make it become a star?
Expect to kill about half of the domains in the middle tier.
The good news: These are perfect candidates for selling.
The bottom 20%
Get rid of these sites. Unless you feel really, really passionate about a domain, or if you know you can and want to turn this around in the next months, get rid of it.
When all this is over, you have culled your herd down to a manageable size. And you have also freed up resources to make those sites that made it even better.
Bonus: Do what do you really want to do .. the other use of the 80/20 rule
Armed with this data, you can do even more.
Look at what kind of pages are treating you well.
What are the offers you are promoting?
Is it a shop, selling physical goods?
A PPC email submit?
Adsense income on a blog?
Think about it. Why are you doing well with this type of offer? Do you want to expand it?
Also, think about the sites in the bottom 20%.
Why are they doing badly?
Are they promoting something that goes against your ethics?
Some PPC offers, such as email leads are problematic for a lot of AMs.
Think about getting rid of this type of offer althogether.
This technique will cull your herd of offers down to those that fit your personality, your marketing strategy and your personal code of ethics, again leaving you with more time and resources for the real moneymakers.