Jacob's ideas taught me how I can build $2,000,000 of wealth each year

Pedal2Petal · Post by **Pedal2Petal** » Wed May 23, 2012 3:57 am

This is going to sound very far fetched, and I hardly believe it myself. I will be backing up my assertions with proper figures however.
I'm a slightly better than average web technologist. I have a very limited understanding of computer programming, and a below average eye for design. Most crucially, I have a fairly strong grasp of search engine optimization.
Two years ago, I built 3 little websites in a week's time that have brought be about 50 cents per day each ever since with no additional effort. I never appreciated what this really meant until I started reading Jacob's ideas on this blog and doing some of the math myself.
Let's find out the investment equivalent value of one of these tiny sites. Fifty cents per day for 365 days is $182.50. I need to subtract my expenses which are about $12.00 per year per website, bringing us a figure of $170.50.
Here's where Jacob's math comes in - multiply any annual expense or income by 25 to get the investment equivalent amount, which is the amount you need to have saved to pay for that expense forever. $170.50 in passive revenue needs a savings of $4,262.50 invested in a fund that pays 4% over the rate of inflation. This effectively means that each little site I build is on average equivalent to $4,262.50 in the bank (the word "bank" used loosely here)
I did this calculation just 2 days ago and was completely floored. Immediately I started building these little sites again full time. I can easily put 2 sites together in a single day, probably 3 or 4 if I really wanted to push myself. There are people with much stronger programming skills than I have who automate the production of hundreds of these sites an hour, but the quality and income of each site is extremely low. I don't like to push myself though, so I'll assume that 2 sites is the max I can comfortably produce on average.
Here's where my second thought experiment came in: what if I built these sites full time for a year - what would the equivalent in investment savings be. It's an easy enough calculation to make - I'm assuming 20 work days in a month (2 less than the average full time worker) and 12 months of work a year:
20 days x 12 months x 2 sites a day x $4,262.50 = $2,046,000 in my chosen investment equivalent income producing asset.
So am I going to start doing these sites full time? Probably not for too long, because I'm not a very hard worker and a full time job, even a self employed one, interests me very little. Right now I'm on a mini-site marathon to 38 sites though, since that's the threshold I need to reach to pay my rent every month for as long as the internet is around! I'm already 7 sites down, 31 left to go. If I work at a leisurely pace, I should have everything set up by the end of next month.
So I wanted to issue a very heartfelt thanks to Jacob for changing how I think about money. I'd love to buy you a beer sometime. Once I reach my first milestone of $18.75 per day in passive revenue, I promise I'll buy your book

-Trevor

Post by **jacob** » Wed May 23, 2012 4:03 am

Generally, the factor 25 is for blue chip stocks. For private businesses (say you owned a garage or a hotel) the figure is closer to 5-12. For websites, the magic number is 1-3.
This reflects different levels of effort and growth prospects. The lower the number, the more personal effort/the lower growth prospects.
With full time effort, it's certainly possible to build a website that can bring in $5000/year within a couple of years. However, you will never be able to sell this site for more than $5000-$15000; definitely not $125,000 as per the SWR formula.

dragoncar · Post by **dragoncar** » Wed May 23, 2012 4:08 am

That's awesome. The math is a bit off, however, because it's highly unlikely that the sites will generate that return, with no additional work, in perpetuity. Consider if you optimized those sites 5 years ago.... Google is always tweaking their algorithms to basically destroy people like you (because the sites usually offer very little useful content if they were hacked together in a day). That doesn't mean it's not worth doing, just that I wouldn't count on perpetual, carefree, income.

Pedal2Petal · Post by **Pedal2Petal** » Wed May 23, 2012 4:11 am

Hi Jacob, thanks for replying to my post!
The factor 25 I'm using is actually the inverse of 4% - not the purchase price of the asset itself. If I were to invest $4,000 cash in a money market paying 4% greater than inflation for example, I would be making $170 in interest per year. Instead, I'm investing 3 hours of my time in an asset that pays $170 per year.
Or am I misunderstanding something?

Pedal2Petal · Post by **Pedal2Petal** » Wed May 23, 2012 4:14 am

@dragoncar
Yes I have absolutely considered this risk as well, but there is risk in any investment, time money or otherwise. I have designed my sites in a way that they are different and separate enough that no single algorithm change will affect all of my websites. And all sites are full of original content and useful information, which is why they take an entire 3 hours for me to make (almost all of that time is spent writing, by the way)

Christopherjart · Post by **Christopherjart** » Wed May 23, 2012 4:25 am

I have trouble believing you have found a magic formula to get 50 cents a day for years from less than a day's work.

In any case as mentioned above, eventually Google will figure it out and drop it down in the rankings. It can be fun while it lasts though.

Post by **jacob** » Wed May 23, 2012 4:43 am

That's what I meant. You're using a discount rate of 4% (corresponding to an asset that's considered almost risk free) to value something that's quite risky and should have a discount rate of 30% or more.

dot_com_vet · Post by **dot_com_vet** » Wed May 23, 2012 4:57 am

In my experience, you need to be offering something of good value for positive long-term SEO.
Google seems to be branching out to a lot of services (self driving cars, project glass, drive, voice). Does internet advertising have a life beyond 5 - 10 years?

Post by **jacob** » Wed May 23, 2012 5:07 am

Does the internet itself have a life beyond the next decade? Those with no faith in RIM and FB tend to list the failure/impossibility to go to web3.0 (mobile/apps) as their eventual demise.

Pedal2Petal · Post by **Pedal2Petal** » Wed May 23, 2012 5:34 am

I've gotten some great comments and feedback from posting this here! If I assume a discount rate of 50%, then my $2,000,000 figure drops drastically to $163,000 - more than I ever dreamed of earning, but far less than my initial figure. I think a discount rate of 100% is too high based on the past 2 years experience I have in building these sites.
Thanks for the reality check, my plan to buy your book at $18.75 per day still stands.

simplex · Post by **simplex** » Wed May 23, 2012 10:00 am

Great idea, concentrating on a stream of micro-incomes instead of a (few) stream(s) of macro income. I also like the catchy 2 million title! Your calculation may be right if you continue to invest your labor into these sites, but also maybe not as others wrote.

Yet another thing is that income diversification is a bit lacking, but still a great idea of multiplying effort and results.

JasonR · Post by **JasonR** » Wed May 23, 2012 1:50 pm

simplex · Post by **simplex** » Tue May 29, 2012 10:10 am

I would also like to have a look at an example site. I am interested how you produce these site technically, and how you extract the money. Are the sites "just" based on ads or is there something else?

BeyondtheWrap · Post by **BeyondtheWrap** » Tue May 29, 2012 1:04 pm

I kind of get the feeling that you would run out of good site ideas after a while.

Pedal2Petal · Post by **Pedal2Petal** » Tue Jun 05, 2012 9:42 pm

@JasonR - I make all the money I need to pay my bills in 20 hours a week with the compost project, with a 30% savings rate. I suppose this means I could double the time I spend on the business (by employing less people) and achieve an 80% savings rate, but 40 hours is more than I want to spend on any one thing. Franchising is actually something I'm working on - it would basically be a one time business plan/manual purchase similar to the SPIN farming manuals.
@others - One of the sites is buy aa batteries.net, revenue is mostly from affiliate selling and only partially from ads. I consider the value of these sites to be in "editing" - explaining through words what I feel to be the best choice in a particular product category, and my reasoning. In the case of this website, I only display 3 choices of batteries - one each from the categories of alkaline, rechargeable, and lithium AA batteries. Since I have used many types of batteries, have worked in a battery shop, and have greater than average knowledge about them, I consider my opinion qualified and my information useful.
@BeyondtheWrap - I respectfully disagree. I only end up putting about 5% of my ideas into site form, and my very limited range of experiences still produces enough ideas to keep me busy for a lifetime putting sites up, content blogs, microsites and business plan ideas.

JasonR · Post by **JasonR** » Wed Jun 06, 2012 8:19 pm

dragoncar · Post by **dragoncar** » Wed Jun 06, 2012 11:22 pm

Buyaabatteries.net - Which search terms bring people to that site? Just curious.

tylerrr · Post by **tylerrr** » Thu Jun 07, 2012 9:41 pm

@dragoncar,
the best, converting search terms for that site would be product related terms probably. Terms like "buy alkaline aa batteries online" would be an excellent term to rank for...
or "best rechargeable aa battery".
Those people are highly motivated to spend money NOW. They aren't just browsing around...
I agree with the comments about offering useful, original content to make a successful website that is also profitable.
This ERE site has useful content, therefore it attracted a loyal, large audience.
The problem with many affiliate websites is that people try to take shortcuts and make fast money. That's why I don't think the method mentioned by the OP will work very well long term.
Google is constantly trying to find ways to get rid of duplicate content or spammy content and they will only get better at it.
My largest website, which I've worked on the most over a few years, is still my most profitable site. It has a lot of original, helpful articles on the site and I do very little maintenance now. It just takes on a life of its own because I worked hard to put up a lot of useful content. I make regular affiliate sales off it every month of about 1k per month profit.
Internet marketing is hard work, just like anything else, if you want to be successful. 90% of the people doing it are trying to take shortcuts and they get burned eventually.
That's my two cents on this topic...

Emanuel · Post by **Emanuel** » Mon Jun 18, 2012 8:49 pm

If it was this easy I would be a millionaire already. Small sites fade away in the index over time. What you want to do is reinvest on the sites that earn good money, ie, not that much different from a regular business.
Bigger sites attract better advertisers and if you're really big you can negotiate CPM/Lead rates.
Trust me I do this full-time and buy mini websites from webmasters that never made it with this technique.

Pedal2Petal · Post by **Pedal2Petal** » Sun Jun 24, 2012 10:35 pm

Sorry for the late reply
@JasonR My hosting is better than free because I resell hosting to several of my clients which pays more than my 130$ annual hosting bill. The 12$ per year (really more like 10$ per year) per website is just the cost of the domain.
@dragoncar The answer is in the question.
@tylerr Do I take short cuts? Probably some - but I'm well diversified into popular content sites as well as tiny little middleman sites. I try to keep the ratio pretty low actually, 4:1 or 5:1. My most profitable domains are the larger content sites, but the miniature sites go much further in terms of time invested. I think the optimal strategy is to employ both, with generous in-linking between them

I'd be interested in seeing your large site if you don't mind sharing the URL.
@Don I had the same thought, which is why I stopped making them for 2 years. One of my tiny middleman sites is getting stronger every month however, which contradicts my preconceived notion, although this could be my building up the sites I'm linking from, thereby improving "link juice" to the site. I know there is some benefit to having a site present at a URL for a longer period of time (something called the "sandbox" principle or something) which might account for some of this. It's also possible that this product has gotten much more popular over the last 2 years, since the keyphrase I targeted (I believe my SERP is 1 or 2) is now reported as competition level "high."