Making Money with Price-Comparison Sites

SurferThis is the second in a series of articles on online business models written from the perspective of the person using it. In talking with at least a hundred successful online business owners the past few years, it has become apparent that there only a very few basic building blocks of an online business. As with DNA, though, there is an endless array of how those building blocks can be arranged. So while I may not necessarily endorse a particular model, I think it’s really useful to see how others are making money online.

Today’s article comes from Duncan Heath, owner of Extreme Sports Trader, a surf clothing and extreme sports website in the UK. His site sells items like Animal backpacks and allows users to trade anything from kitesurfing equipment to snowboards. I love the model and the story of how he got there. I think both are extremely valuable.

If you’d like to feature your successful model, just let me know!

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If you were to ask me to summarise what my website does and how it makes money, in a nutshell I would tell you that it is a price-comparison and classifieds website for extreme sports clothing and equipment, and the main sources of monetization are advertising and affiliate sales. If you were to then ask me for a bit more information on how it was started and how successful it is, I would tell you the following…

Back in 2008 I saw a gap in the market for a classifieds website that provided a platform for the buying and selling of extreme sports equipment and accessories. I figured that with big items such as surfboards and snowboards, people want to see the item in person before they buy, rather than carry out transactions over the internet as you would on Ebay. I also thought that if the site was niche enough I would be able to tap into a captive audience and create a loyal user-base.

After a lot of effort promoting the site (mainly via SEO) I started getting the visitor levels I wanted and people actively engaging with the site (buying and selling). However, I didn’t get anywhere near the revenue I was expecting from AdSense (which actually requires a staggering amount of traffic to make any money from) and I couldn’t start charging people for listing their second hand items (as I had originally hoped to) as it transpired people would only really use the site if it were free.

What I had ended up with then is a website model that brought in lots of traffic, but that didn’t generate much money. I believe that classifieds sites are some of the best traffic-driving sites out there as users are supplying you with free, keyword-rich and unique content on a daily basis. Also, the more popular the site gets, the more people upload their content, and the more traffic you get. But then this doesn’t mean very much at all if you can’t make money from it.

I got to thinking, what if people were looking for a second hand item on my site and either couldn’t find what they were looking for, or found an item but it was the wrong price, in the wrong location, or had been sold already? I concluded that they would probably start looking for best price for that item if they were to buy it new, and thus the price-comparison idea was born!

I found a number of online merchants selling items in my niche and set up affiliate deals with them. The price comparison section of the site now runs alongside the classifieds section and whilst it is the classifieds section that brings in more traffic, the affiliate-based price comparison sections now brings in far more money. I’m soon going to begin cross selling individual items listed in the second hand section with their comparative products in the new section, which should improve conversion rates further.

Right now the site is bringing in a very good salary and actually requires very little maintenance time, so I’m currently looking into other niches where this business model can be applied.
Photo by Bengt Nyman.


Comments


  • Tom Moore

    January 21, 2011
    at 12:55 pm

    Very interesting to see how real-world sites make money and the struggles they face. A great article Duncan and I’ll take alot away from this for sure!


     

  • Cvos Netpaths

    February 24, 2011
    at 4:11 am

    “I didnít get anywhere near the revenue I was expecting from AdSense”

    This is painfully true, $5 CPM is average for a lot of niches.


     

  • Shane

    February 24, 2011
    at 7:46 am

    That’s always been my experience, too. AdSense is fantastic for providing a base of revenue, but it’s usually easy to double what you’re getting from AdSense just by looking at other monetization options.


     

  • Justin @ FlipFilter

    June 2, 2011
    at 5:56 am

    Hi Shane,

    I’m a little late to the party on this one, but I’ve only just found your blog.

    Another model that seems to be popping up for price comparison sites is one where you charge the merchant to list their products. Long term, it’s arguably a better strategy as your income remains consistent providing you keep your retention rates high.

    I think this probably works better in small emerging markets where the suppliers are quite fragmented and often smaller companies (Organic and Eco Supplies, Crafts, Gourmet Food etc).


     

  • Monica Herrera

    September 3, 2011
    at 5:25 pm

    Hi Shane,
    I’m looking into developing a price comparison site too, but am having a hard time finding a web developer. Do you have any suggestions? Also, do you have a ballpark idea of the low and high of what it would cost? I know a lot of it depends on the site’s features.


     

  • Shane

    September 15, 2011
    at 4:58 pm

    I think you’re looking at at least a couple thousand dollars, and it could run a great deal more based on the features you want and how much you’re able to do yourself.

    Check out Bottlerocket Creative. He’s a good friend, and I’ve heard great things about his work.


     

  • Josh @ Live Well Simply

    March 28, 2012
    at 5:04 pm

    Adsense has a lot of competition, so $5 CPM’s kill a lot of niche websites. The trick in any business is to develop a ‘secret sauce’ for success using alternative marketing methods that your competition hasn’t caught on to yet. Don’t forget, loose lips, sink ships is true for any business model. The best ones are not publicized. :)


     

  • Shane

    April 2, 2012
    at 10:35 am

    Exactly. You can be pretty sure that if someone is letting you (and anyone else who is willing to pay) in on their exact secret to making money online, it either doesn’t work anymore or it never really did.