Episode 2 of the Website Investing Podcast is with Ewen Finser from Owl Mountain, which is aiming to become the Berkshire Hathaway of Digital Assets. Owl Mountain has an acquisitions side, proprietary deal flow service for buyers (Falcon River with John Hart) and now an incubation / build side. I previously spoke to Ewen on the Flipping Websites podcast which was a very popular episode.
This is a conversation on the ROI and risk profile of building vs buying, that ran two hours. In this part 1, free subscribers get the first 30 minutes; paying subscribers also get part 2 in their RSS feed.
Sponsored by Ezoic
This podcast is sponsored by the Ezoic platform which my main software review site runs on (literally in terms of using their nameservers) to monetize through ads, maximise site speed and gain insights from their big data analytics tool.
Part 1 Show Notes
The acquisitions funnel is still a problem they want to solve, but Ewen’s evolution led him back to doing modelling on expected returns on the build side rather than buy, where the asymmetric downside doesn’t exist. He finds building (rather than continually searching to acquire) is a better, more predictable way of allocating investor capital, one where you are in control of the downside.
As he puts it:
“Ground-up websites is the better risk-adjusted return”.
He talks about how when you buy a content site for $200k, there’s so much more to lose than gain in some scenarios. He calls this an iceberg risk where you may have identified 10% of the problem when talking with the seller, in terms of a bad backlink profile or low quality content, but you never really know what’s under the surface until you own the asset. Also the larger the website, the higher the content maintenance costs which a lot of investors do not factor in.
The catch 22 is that you can mitigate the downside risk by buying a greater number of smaller assets, but then you run into operational issues from managing a larger number of websites which is hard to scale.
In building from the ground up, you have complete control on the silo structure and you have full control over the inputs. Ewen is using his experience and success building out websites since 2012, to now focus on the organisation and systemized deployment of capital.
Incubation pilot program
Ewen has a pilot program started in May 2019 of $250k for 10 sites launching within a constrained environment with the same amount of capital deployed. Initially each site gets $10-15k for ~100 articles to establish a base of (pillar) content). He then lets each site sit, to prove that it deserves more capital, i.e. that it’s a good niche.
Ewen is creating an evidenced based approach to building, using portfolio theory to incubate sites with the same inputs, where he fires bullets and then cannonballs.
10k unique sessions over the trailing 30 days is enough proof to deploy the cannonball, which is also the tier to get approval to Ezoic or Mediavine (when you already have an existing account) as he knows they can achieve $100-$400 a month based on historical RPM (of $10-$40).
8 months in (at the time of recording), the first 3 sites in the batch are already closing in on the 10K sessions a month mark. Ewen has assumed that 50% of those 10 sites will arrive on schedule, 2 of them will be late bloomers which will get there but not the first year, 2 bullets only generate a small amount of revenue, and 1 is modelled at $0.
Then the remaining $100k gets deployed as cannonballs into the 5 sites that arrived on schedule to total ~$35k per site.
His key skill set is niche identification, putting together great keyword wireframes of niches, as he and his team has looked at so many verticals. Ewen still does the KW research as enjoys it (views it as prospecting) and because you want to prioritise around lucrative topics, i.e. KWs with affiliate programs attached.
They have a really good team of project managers, growth managers, editors, VAs and over 100 writers in their rolodex for all types of niches. What he needed to create to execute this model was a content management system, so he built a software tool which automates software assignment, approval, publishing and payment process through a wordpress login, where writers can self select from the available topics.
The writers profile have their rate per word, whether that’s 2c or 6c which can vary per site (topic), and it allows them to use the wordpress text editor to write up the content and complete the SOPs using checkboxes such as add schema markup and H2 tags. It then gets sent to an editor (who get notified by email) and are paid hourly, to create a natural tension with the writers - they either approve the article or send it back.
Ewen only has two touch-points:
Importing a google sheet with keyword topics (which he does once a month across their entire portfolio) which his project manager then releases as they need to ("load balancing")
And at the end they have a one click payment facility (Paypal Mass Pay integration) that cumulatively invoices for each writer.
He may spin off a service for other site owners where content gets automatically pushed to their websites (step 1) or may release to the market as a SaaS tool (step 2). He would like to integrate the Market Muse API so that content could be scored before being published (version 3).
Ewen averages 3c-4.5c per word across all writers and niches, then there is an editing cost add on of $10-15 for editor time / tools.
80% of the initial $15K is content. The other 20% is used for projects such as heavy link outreach or a Pinterest strategy, to see what works. Some sites just have 100% content which was his original strategy, to see how far just content get you and how fast.
Going forward, Ewen is going to start buying expired domains and existing sites in order to acquire a cannonball. With the latter, if he can acquire the content plus some revenue along with traffic that is already half way there (5k sessions a month), it’s a big time save and a good investment.
Episode 2 Part 2
In part 2 of this conversation, we talk about:
The time-based goals for incubated sites, in terms of hitting breakeven / paying back the investment / doubling the $250K invested
Ewen’s concept of planting flags in niches to end up with a main authority site where you find green shoots in the sub-niches
When Ewen will look to exit the incubated sites
How he structures and incentivizes internal operations
Why the P&L for a potential acquisition is irrelevant
Why sub $50K investments make the most sense to us
Part 2 is for paying subscribers, you can access by hitting the button below.