Building a Moat Around Your Online Business
In dealing with Brick and Mortar businesses, there isn’t a more authoritative and looked to figure than the “Oracle of Omaha”, Warren Buffet. The other night I was watching a speech he gave to a group of MBA students at Columbia University. A student posed the question of how Buffet values a business…such as what things bring him towards investing in a company. In the middle of his response, he used an analogy I’ve heard him talk about before.
But, until now I had never thought to equate it to my online endeavors. To quote Buffet, “I want a business with a moat around it…a very valuable castle in the middle. The duke in charge of that castle has to be hard working and able..and then I want a big moat around the castle.
Just like Buffet and his investments; what are some moats you should be building around your Online Castle?
Strength of Online Brand: Whether you are running an eBay business, a Technorati Top 100 blog, web hosting site…it doesn’t matter – how your customers and the public perceive you will determine the overall strength of your company. Buffet gave an example of Kodak establishing it’s brand in the personal photo industry…but, once Fuji came on the scene and captured what he likes to call, “share of mind,” by sponsoring the Olympics…this decreased the size of Kodak’s moat.
In the case of an eBay business, each positive and negative feedback you receive will either increase or decrease your moat. If you’re a blog owner, every new blog in your topic is potentially threatening. However, every subscriber you pick up will only increase your site’s brand. Use tools like Google Alerts too see what people are saying about your business. Re-enforce your brand by responding accordingly.
Backlinks & SEO: Every link you build, page that is indexed, directory you’re accepted to or press releases…are what Buffet would call, “placing alligators and sharks in the moat.” The larger it gets…the harder your castle will be to defend. It’s like stacking up dominoes in the sense where you might not see the results today, but doing it one-by-one will pay off in the long run. As your search rankings increase, so will the value of your “castle.” That brings me to…
Your Site Traffic & Stats: Once you have an established site, and receive a decent level of traffic… every tool you can use to monitor visitor behavior and traffic trends, will be widening your moat. First off, not every site owner does this, and secondly seeing what visitors do on your site will tell you how to respond in on site optimization. Sometimes web analytics is an overlooked topic. Keep this in mind about your site visitors: how did they get there, what did they do, and why did they leave. Consider using these tools to analyze your site stats: Google Analytics, Crazy Egg (create a heat map of where visitors click on your blog,) Hit Tail (long tail keyword tool.) That should get you started…if you’re not already using some of them.
Online Media Buying: Beyond bringing in organic traffic, you need to run a certain level of paid advertisements. This will re-enforce your brand in front of people not searching for your product. What do you see when you think of online movie rental? Netflix. Why? Because, they’ve continuously pushed their message across all major online properties. Running an online media buying campaign can be very time consuming…but worth every minute of it. Even if you spend $50 a month on Google Adwords, every visitor you pull in represents and extra hedge around the castle.
More Online Properties: Just like I mentioned in writing and selling e-books, once you get one site established…DO IT AGAIN. Leverage your sites by using existing traffic to market a new product. Building other sources of income outside of your primary biz is basic Business 101. Don’t be overly confident that Website A will be there in 10 years. Especially if this is your only income to feed you and your family. Keep building.
The concepts Mr. Buffet mentioned has not only built Berkshire Hathaway (his investment company), into a Top 50 Fortune 500 company…but it’s sustaining power is a lesson to be learned by all.
