Monetisation 101 Part 3: Directory Sites

This article is Part 3 of my ‘Monetisation 101′ series. Part 1 in the series covered important policies that apply to the monetisation of .au domains; Part 2 looked at domain parking.

Directory sites are a very popular monetisation approach. Many people see directories as an easy way to earn passive income: “stick up a site, charge people money to list, our customers even generate all the content (listings)” – sounds amazing! If only that were true in all cases, in reality most directories will earn cents on the dollar and gradually (or swiftly even) fade into internet obscurity.

That’s not to say that the model can’t work though, examples of very successful (and very large scale) directory sites include: Yelp, TripAdvisor and Zomato (which acquired the locally well-known ‘Urbanspoon’ brand). However, you would have to devote a huge amount of time and resources to build an epic directory site of that scale (i.e. put your heart and soul …and a whole lot of money into it!). For that reason, this article focusses on directory sites of a scale that can be realistically managed by one or possibly two people.

When you boil it down, there are just 2 key factors behind the directory sites that do well – topic selection and effort.

1 – Topic

Not too big, not too small

I suggest aiming for a large enough market segment to make it worth your while, but not so large that you will struggle to effectively compete with incumbents and gain sufficient market share. It could be that you pick a large market/industry, but then focus on a particular geographical area (e.g. Melbourne), or you may choose a specific segment of a larger market (e.g. focus on ‘dentists’ within the broader healthcare industry). A small slice of a big market can still offer a tidy return 😀

The site focus should be a topic that will attract both businesses (your customers) and visitors (their potential customers) in sufficient numbers for a successful venture. If your focus is too niche, then you risk investing resources in a site that will never reach the necessary scale due to limited market interest.

It’s a fine balance picking a focus that’s not too big for you to stand out from the crowd, but also not so small that it lacks the capacity for sufficient revenue.

Commercial focus

Importantly, the site should be related to an industry (or topic) with businesses that will pay money to list in the directory. For example, charities would be a bad choice (and charging them could be morally questionable!). Another example of bad targeting would be a directory for ‘fish and chips’ takeaway shops – they may be commercial ventures, but the likelihood of them paying much (if anything) to list on a directory site is incredibly slim. This may seem really obvious, but so many directories fail because their intended customers are just not going to pay (or pay much) to list on a directory site.

Picking a highly competitive space is not necessarily a bad thing either, at the very least it suggests that there’s a lucrative market to tap into. Targeting proven, existing markets is arguably less risky than attempting to pioneer a new type of directory focus (i.e. aiming to create an entirely new business model and/or market). Naturally, you’ll need to fight harder for attention in a competitive market, but the listing rate you can charge each business is likely to be higher than in less competitive areas.

2 – Effort

Sell, sell, sell!

Being able to sell is a skill (some would say art) that will help you in any business, but the hard truth is that sales start with effort.

Putting up a quick directory site and taking a ‘build it and they will come’ approach is unlikely to yield great results. You need to get out there and bring businesses on board.

Build

To start with, your site will have limited visitor traffic and very few (if any) business listings. Two problems to solve, but my advice is to focus on getting business listings first, as addressing this problem will also go some way to solving the other (visitor traffic).

Without sufficient content, your site will be of little value to visitors. Build up the listings on the site, so you have something to offer. Having depth of content will improve your search engine rankings (showing up in search results), which will in turn help bring visitors to the site. Listings don’t have to be the only content either. For example, you could add articles, videos, news or ‘how to guides’ to broaden the range of content offered on the site.

You could even add some business listings yourself to get the ball rolling, particularly if your directory has a ‘claim’ function. If you’ve seen directory listings on sites with a button saying something like “claim your business listing” – that’s the ‘claim function’ I’m referring to. This feature allows businesses to take control of the listing content, so they can then make updates as they see fit. Tread carefully with this approach though, as some businesses may see this as you ‘holding them to ransom’ (e.g. asking them to pay and claim the listing in order to add new details); or they may even just be annoyed that you’ve added their details without asking. If a business complains about this, you could offer them a one-time discount to claim the listing, waive the fee for the first year, or just politely offer to remove the listing entirely if they’re particularly aggrieved.

It’s also helpful to start marketing your directory site to potential visitors once you have some depth of content, as healthy visitor numbers will help attract more businesses to list on your site (and retain the ones you have).

Final thoughts

Other revenue models

There are other revenue models that can be used for directories, for example you could offer free business listings and aim to make money from advertising. The reason I haven’t covered this approach, is that in order for it to be worthwhile, the site would need to generate significant traffic volumes to make sufficient revenue from advertising. I’ve tried this approach myself and the revenue wasn’t high enough to warrant ongoing investment in the directory.

Just a snippet

This article is really just a very brief intro to directory sites. I haven’t touched on many aspects, such as the platform to use (incidentally, WordPress is the most common approach). We’ll be offering advanced materials on this and many other topics in the future 😉

Thanks

My thanks to Tim Connell for sharing his experiences and some great tips on how to run successful directory sites.

Up next…

In the next instalment of the ‘Monetisation 101′ series I’ll be looking at affiliate marketing – so stay tuned!