Display advertising is everywhere. With the world constantly checking their smart phones or scouring aimlessly on the internet, display advertising has found its way (knowingly or unknowingly) into the minds of internet scrollers everywhere.
Display advertising isn’t one size fits all, and each website will have its ads placed differently. But know this: as the world continues to get more and more digitized, the website you’re browsing and the content you’re reading will be subsequently subject to display ads. The question is—why not use it to your advantage and start a display advertising business yourself, or better yet, acquire one that is already working?
We spoke with Dan Egerstad, who runs Internet Yield, a portfolio of online businesses, about his work in display advertising and asked his advice for other entrepreneurs looking to get into display advertising or those looking to refine their strategy in this area.
He has been working in the display advertising space for many years and has witnessed its evolution. Dan explained, “Display advertising used to be very easy. You basically just threw in an Ad Sense code and that was it. You placed your ads and everything was fine. With the proliferation of mobile phones, things started to change. We had to adapt to make ads better for phones and screens of different sizes.” He continued, “But the complexity of display ads really progressed over the past few years. It’s gone through the roof. There are so many middle players in the space. The publisher does not even get 50% of the money they put into the ads and it’s quite difficult to understand all the different players and the technologies in use. That opens up opportunities though.”
Considerations When Buying or Building a Display Advertising Business
What to look for when acquiring or building a display advertising portfolio will vary depending on the entrepreneur but it is important to keep these best practices in mind whether you are planning to build now or acquire down the line. Here are Dan’s best practices when it comes to display advertising, and capitalizing on an oversaturated market:
Dan looks to buy websites from $200,000 to $1M. “That’s our sweet spot, but that changes over time depending on our portfolio.”
It is important that you do not discriminate against smaller websites—as you might write off websites that are truly promising. “Every once in a while, we take a step back and will look at smaller sites,” said Dan, “It isn’t written in stone for how we acquire for our portfolio. We have bought sites that are more expensive, and we have bought sites that are cheaper.”
Dan mentioned it is important that you look at a website’s potential, its current worth. You need to look for/at the following:
- What is the risk level of the business?
- What is the size of the business?
- How long has the business been around?
- Does it show stability?
- Have there been shortcuts made in the process of building the website?
“You want to make sure that the previous owner has produced good content. It is a definite ‘no’ from me when I see that a previous owner has taken shortcuts such as buying links or engaging in black hat SEO.”
“There are never going to be perfect websites. There will always be things that you do not like about a website, but you want to make sure that the owners have done the legwork in a real way in the beginning and throughout the building of their websites. That is why most of the websites we are buying come from original founders.”
To know whether a display advertising website is worthwhile:
- Look at the numbers
- Use different tools and statistics to see the history of the site
- Examine the content on the site— make sure it is high quality
- Make sure backlinks are genuine (It’s okay if some are bought, but you want to make sure that most of them are genuinely sourced.)
“The most obvious numbers to look at are the financial numbers. What is the revenue? What are the costs? At the same time, traffic is very important to us because a site with good traffic provides a solid foundation.”
Dan went on to share that for sites with good traffic, you can always increase revenue, and you can always find ways to make improvements. It is important to not only focus on the current revenue.
“If traffic is there, you can always make a profit from it. You of course are taking a gamble if the website only has good traffic and low revenue, but you can often increase revenue with substantial traffic.”
Why Display Advertising and 6 Best Practices
Dan and his business partner started off building SaaS businesses, but it became obvious where their heads were—in the digital ads space. They found that working with display advertising opened them up to working with many different websites in a variety of niches—a great opportunity for restless entrepreneurs, as Dan described himself.
They decided to focus all their time and attention on their networks to build their display advertising portfolio. They acquired their first website in February of last year and since have acquired almost 20 websites. Dan (alongside his business partner) has worked on developing, design, marketing and even the finances of his entire portfolio. They have a team located in Sweden and many remote—and have had their hands on every aspect of the business.
As the business grows, and he is forced to become more hands off, he has found what he claims to be the six best practices when it comes to display advertising.
Choose a Niche that is Not Overly Saturated
If you can’t really grow the website in its current niche, then it is going to be hard to improve the revenue. Make sure you are choosing a niche that doesn’t already have too many players in the game.
Dan mentioned that you do not need to know everything about the niche you are buying in. The most important thing is that you know how you are going to improve the website and how you are going to increase traffic in the long run.
“We do not care so much about the niche. We focus on the numbers and the overall facts of the website. Some niches are very special and K-pop is definitely one of those,” said Dan.
If you are looking at a coffee website, you do not need to know much about coffee to purchase a site in this niche. Why? Because coffee is coffee. It is quite easy to work with. You just need to have a good website to work with.
Dan explained that it wasn’t necessarily the case with K-pop. K-pop is such a niche subculture that you really had to understand how to work with the community. You must have at least some type of shallow knowledge to understand what the community was looking for.
Be Wary of Websites with Too Many Security Issues
Unless you are a developer (like Dan), it is important that you make sure the website you are building/acquiring doesn’t have too many security issues. Dan shared that a lot of websites are slow and are susceptible to security risks. If they were built on WordPress, they tend to have about 20-30 different plugins to solve tiny problems. “Most of the time the plugins that we see used are completely unnecessary. We can just use one plugin that we build ourselves and remove 20 very unnecessary plugins. We usually just rebuild the code base and that always gives us another edge as well,” said Dan.
These additional improvements usually boost the website speed and make the website more Google friendly, but you need to make sure that the cost of improving the website outweighs the risk. In Dan’s case, Dan and his business partner have 20 different code bases that they must maintain.
“To the surprise of most people, we do not look at the platform when we are deciding to acquire a business because we are developers. We have a development team that is really good and pretty much every site we buy, we build from scratch anyways.”
Dan and his business partner are developers, so they are used to buying websites that are sometimes disorganized. They often change their websites over to their own systems and build the site out that way. This enables them to modify the site according to their preferences.
Use a Google AdSense Alternative (They Pay Better Than Google)
“You need good partners. If you operate in different regions and different niches, you will likely work with a range of partners. AdSense is not the best way to make money anymore on some websites. You need to find the right partner for your specific site— that is crucial,” added Dan.
The following are Google AdSense alternatives that pay better than Google:
- Top in the industry
- Full-service ad management
- Must have 50,000 sessions in the previous 30 days
- You create content, they do everything else
- Transparent
- Best for beginners
- They will tell you if you are a good fit for them
- There is no limit to the number of visits you need per month
- You can put your ads on any page that you want
- They do not control anything and give you a tutorial for where to place ads on your website
- You need to have at least 100,000 visits to be accepted into this network
- Their approval process can be difficult
- They pay the most
- Website speed isn’t as good as others
- You can make good money
- They optimize everything
- They focus on website speed and core web vitals
- They control everything and they tell you what to do
Keep Your Ad Design in Mind Based on Your Audience
Emphasizing the design of ads may be important for the type of website you are working on. It is critical to consider how design plays into your website’s success. In some instances, design is a very important element of your website—these visitors are often looking for a community of collective people with the same taste—so you need to make sure the design of your ads are appealing to this audience.
For others, design isn’t as important, especially if they are just hopping on to discover an answer to a question. “We do not personally focus on design a whole lot. We just try to give a decent user experience. We will use designers to produce ads and create the appropriate look and feel. So, know your visitors and know what you need to do to produce great results,” explained Dan.
Adjust your website to fit the audience you are serving. If you have generic content sites you can focus on serving generic content (for instance on a foodie website, you can share recipes) but if you have a complex website, like a Swedish website that is focused on chess, you’ll want to figure out a way to adjust content to fit your target audience.)
“Different markets perform very differently with different niches and different types of ads,” said Dan.
There is more to display advertising than people think. It isn’t just finding a big display ad partner that you put on all your websites.
Users will be angry if you have massive ads all over the site, totally clogging up their computer screen and negatively affecting their experience. You need to know your visitors and understand what your customers really want. You need to ask yourself: How far is too far? How annoying will this be for a visitor when they land on the site? Will they leave if I place this ad here?
If you are a luxury brand writing about luxury cars, it’s better to have very few ads and make those ads super premium because you will make more money in the long run, even though not necessarily the short run.
Recognize How Much is Too Much for Your Audience
Yes, you can hammer on ads to increase your revenue, but you might lose users that way. Some users do accept a lot of ads while others truly loathe them. You need to adapt to your user base and find a good mix. Make sure you are always experimenting and find good placements with ad sizes.
“You need to provide something that your users will react well to and have a long-term goal in mind, you can’t just be focused on short term revenue.”
Choose a Non-US Audience
Pro tip: If it is non-English, that’s a good thing because it removes other competition.
“Only around 10% of internet traffic is actually in the US so it’s crazy from my perspective that people are only focused on US websites when 90% of the market is outside of the US.”
He explained that the language doesn’t matter that much as you can always find people that can help you work with the website. Yes, it is harder to research, but it is not impossible. You can research enough to know how to fluidly move around the website and improve it. Don’t let a language barrier hold you back from a good investment.
Internet Yield’s Most Recent Acquisition: KingChoice.Me
“We like websites that are non-US focused because the US market is very competitive,” said Dan.
“Try to beat out the competition when buying a website and make sure that the website you are buying ranks well on Google,” he added.
“We are focused on Europe. Although KingChoice is not a European-focused website, it is more important for us that it is outside the US than that it is a European site. KingChoice has mainly traffic from Asia.”
If a website has good traffic and a good source of revenue but is badly built, you can always take steps to improve the user experience, which in turn will increase traffic and increase revenue over time.
You might run into a website that keeps crashing and has bugs throughout, but if you are able to build out an entirely new system and improve the website drastically, you are ultimately sitting on a cash cow for you and your business. Dan found great success when choosing a non-US market website. He did his research and found that there were tons of opportunities to increase traffic and figured out how to improve the user experience.
Considerations When Looking to Acquire a Display Advertising Business (Including Risks to Be Aware Of)
When you are considering acquiring a display advertising business, it is important that you do the proper amount of due diligence. The following are key factors to consider before diving deep into buying a display advertising website:
Traffic– The number of visitors who visit the site is an important metric to examine. Dan shared, “The traffic is very important for us, because we believe that with good traffic, we can always increase revenue. We can always find improvements to make, so we don’t get fully focused just on the current revenue.”
Price Range- Of course it is important to know your ballpark range when looking at sites. Dan noted that he currently is interested in sites between $200,000 and $1M.
Your Risk Tolerance– It is important to have a solid understanding of what you are comfortable with in terms of risk. Dan noted, “Me and my business partner are very low risk players. We look at websites that have been around for a long time and are showing a lot of stability.” Maybe you are more willing to take on a business with more unknowns. What’s critical is that you know where you stand.
Advice for Those with Content Businesses
Don’t take shortcuts. Your mindset should be that this is a website you want to keep and maintain for 10 years. With that in mind, you are going to build a good foundation. If you are in a lower price segment, you can take more risks but when you move up to the $100,000+ level, buyers are looking for a good foundation. So, do not take shortcuts. Do it the right way. It will pay off in the end.
Ted Mikulski, a programmatic advertising expert who built Newor Media, added a last bit of advice for entrepreneurs looking to get into display advertising.
“When running a website, there are two key purposes. One is for visitors to find what they need and are looking for, while the other purpose is for you to monetize your website. You must find the balance between the two. If you are just focusing on one, say you are focused on monetizing as much as possible, you’re incentivized to pack your website with ads and videos, but the user experience may suffer. On the other side, you are likely to create a great experience and visitors are getting what they need but you are not making as much money. Finding a balance is key.”
Trends in the Display Advertising Space
Display ads are getting complex. There are more players in the space, and more and more people are saturating the US market. Shifting gears to the affiliate space, Dan advised that business owners stay away from Amazon when desiring to enter the affiliate space, but of course it is up to each business owner and what they want to get from their display advertising portfolio. In his opinion, Amazon is such a big player with too much power. He has seen friends’ sites get thrown out of the Amazon Associates Program without explanation, even though they have run their sites correctly. Most people getting into the business right now are not focused on display ads but focused on affiliate websites, especially through Amazon. It is a great time to get into display advertising if you are interested in checking out lesser-known spaces—or like Dan—lesser-known niches and places outside of the US.
Exiting Your Display Advertising Business
Once you have built a display advertising business you are proud of, it is worthwhile to find out what your business is worth. FE International has extensive experience advising advertising business owners on valuations and throughout the exit process.
From a big-picture perspective, you’ll want to evaluate and analyze the advantages and disadvantages of passive and direct display advertising, the quality of traffic coming to your site, the authority and backlink profile of your domain, the quality of your content and so much more. These are the factors you can weigh when considering an exit, but once you become serious about selling your site, you should get a valuation from a professional advisor.