Framework for Choosing a Profitable Niche & Estimating Opportunity of a New Affiliate Site (and An Example You Can Steal)

One of the biggest pain points and mistakes I see beginners building affiliate sites making is in their niche selection process (or lack there of).

This is also arguably the most important part of the site building process as your niche in many ways determines the potential ceiling of earnings you can achieve.

There is lots of conflicting advice that is thrown around about suggesting you should follow your passion, build a general site, go super niche, find low competition ect.

The reality is there is no one right answer, basically anything can work, just comes due to personal preference, level of experience, goals, and ability to execute.

Personally I enjoy a more data driven approach that that boils down to a 7 step framework that can be applied to any search opportunity.

  1. Identify potential niche opportunity
  2. Size the Market Opportunity & Ability to Monetize
  3. Level of sophistication of the current players (competition analysis)
  4. Benchmark earnings estimates of current players in the space.
  5. Transactional Keyword Mapping
  6. Budgeting Your Project Cost
  7. Handicapping Your EV and Odds of Success

Content Sites: More Arbitrage Than Startup

The strategy I believe is most effective can be summarized as reverse engineering (ie. copying what works).

What makes content sites unique to other business models is the predictability of outcome and ability to size the opportunity.

It’s what attracted me to the space in the first place, you don’t need a novel idea to start a business and make money, just the ability to execute and capture transactional SERP rankings.

Generally you can look at any search opportunity and estimate an earnings range of outcomes you are likely to achieve if you enter the space. Sure you may over or undershoot slightly and monetization methods can change/algorithm shifts occur, but this is not the type of business where you will 100x your expectations or fail due to lack of “product/market” fit.

These opportunities can be viewed as an arbitrage where the organic traffic for particular terms can be monetized and results in a direct revenue per visitor amount (typically $.10 – $1.00+ for transactional terms), so if you gain ranking positions and gather a higher organic traffic value than the cost of content to create – you have a profitable (and sellable) business.

1. Identifying an Interesting Niche Opportunity

In this initial stage you are just looking for opportunities that you may want to create a niche media project around and pursue.

This is a vital step as it determines how valuable your traffic is and will decide how easily and effectively you are be able to monetize.

Ex. You can build a site about fish tanks or ant farming to 100k+ visitors, but you may get there and be disappointed to realize that a personal finance site with 2k visitors is more profitable.

Ways to brainstorm ideas include:

  • Requesting prospectuses from online business brokers for what’s on the market currently.
  • Looking at fast growing businesses on the inc 5000 list to see trends in industries experiencing a lot of growth.
  • Be curious, click on FB, Taboola, Outbrain type ads to see the type of products being promoted
  • Looking at industries or products on where there are many high paying affiliate offers available on sources like MaxBounty or OfferVault.
  • Be curious as you are surfing the web and using analysis tools on sites you stumble across in your day to day life.

Can’t Think of a Niche, But Want one with $1M+/yr potential? Try one of these:

  • Sleep
  • iGaming (Gambling/Online Casino)
  • Forex
  • Home Security
  • Moving
  • Insurance
  • Personal Finance
  • Dating
  • Pharma
  • SMB Software
  • Digital Marketing
  • Merchant Services
  • Background Checks
  • Credit Repair/Debt Products
  • Hosting
  • Auto
  • Tools
  • Senior Housing/Care
  • Rehab
  • Jewelry/Engagement Rings
  • Supplements
  • Beauty
  • Lead Gen (Legal, Medical, Dental, Roofing, HVAC, Pest Control, Internet, Phone, ect)

2. Evaluate Commercial/Monetization Opportunity

Look at some of the sites around the space and find out how they are making money and roughly how much. Are the sites owned by large companies? How long have they been around? How many pages?

Is everyone dependent on a single program? Are there multiple programs? Is affiliate an important growth channel for companies in the space? Do they value and understand it?

3. Transactional Keyword/Site Mapping

Use Ahrefs, Screaming Frog, or “site:” to get a complete look at the terms sites are targeting and an idea of all the target keywords that is driving revenue. Pull data for competitor sites and aggregate all keywords to get a better idea of all the keywords in the space that are available and can drive significant revenue.

Determining RPV for a single transactional term using the following metrics:

  • Search Volume
  • Clicks
  • CTR
  • ClickOuts
  • CR
  • Commission $

Typically transactional keywords can be broken down into 5 categories: Best, Comparison, Review, Coupon, and other.

Best

Best keywords have high commercial intent and revolve around users trying to find the “best” product in a particular category. Terms used in keyword phrases include “best”, “top”, “safest”, “most comfortable”, “Cheapest”, ect.

Comparison

Comparison terms compare two (or more) individual product offerings. These phrases typically include the terms “vs”, “comparison”, or “alternatives”

Review

Review terms revolve around individual product or product type reviews. These phrases typically include the terms “review”, “buyer’s guide” or similar keywords.

Coupon

Coupon terms are generally the highest intent affiliate terms as the search generally occurs as the user has already decided to make a purchase. Because of this many brands don’t work with coupon players or they offer an alternative commission structure. Coupon keyword terms generally contain the terms “promo”, “Coupon”, “Voucher”, “Discount”, or similar terminology. This space has been heavily impacted by browser extensions like Honey and white label affiliate providers.

Other

Other terms that can have strong commercial intent vary by industry. Typically they can be location based ie. “phone providers in San Francisco” or how-to where a product is required to solve the user’s problem ie. “how to start a blog”.

4. Evaluate the Level of Sophistication of Current Players

Using Ahrefs and WebArchive, learn about your potential competition. Are they large public companies? Is there a sophisticated team behind them? Do they operate other sites in the niche also?

Many people are scared away when they see big players in the space, this is not always a bad thing, it generally means there is a lot of opportunity.

On the flip side it’s important to be self aware, if you are looking to treat your affiliate site as a hobby side project and there are only a few transactional terms in the space that are dominated on pages 1/2/3 with corporate owned properties – you may want to focus on other channels (like YouTube or Podcasts) where individual/personality driven content has an edge over corporates.

5. Benchmark Earning of Current Players

Instead of fearing competition because there are multiple large players in the space already. View it as a proof of concept that the niche is viable enough to support multiple large properties.

While you can find a way to make money in essentially any industry, some have a much larger pie overall.

For example, there are dozens of personal finance/credit cards sites doing hundreds of thousands a year + in affiliate, but maybe only 1 or two about ant farming (if that).

Based on Ahrefs rankings of transactional terms and knowledge of industry commissions and conversion rates, it’s not too difficult to get a rough idea of how much a site is earning.

An important data point to consider is not only how much sites are earning, but how many there are and the volume distribution among them.

6. Project Cost Estimate

Look through you list of mapped keywords, how many pages much you create to target and rank for the highest value terms?

What type of lnikbuilding must be done to be competitive in the space. Are you ok with a cookie cutter design or will you work with a designer to build out a custom site.

Content Editing costs? ect.

Essentially you are trying to discover the minimum you can spend to flesh out an idea and have a shot at seeing if it is successful enough to continue investing in.

7. Handicapping Your EV and Odds of Success

If you’ve played poker you are probably familiar with the idea of “Expected Value” or EV. Basically this is how you can determine the statistically-weighted outcome of an event and then can determine how much you are willing to spend to realize the outcome.

Ex. If a coin flip landing on heads results in $1mm, the EV is $500k so it would be worth spending $499k to flip the coin.

Similar to poker, there is randomness and noise created by the algorithm, but over time if you do the right things constantly you can have an edge and make consistent returns.

But unlike poker where the cash you can win is zero sum from other players, the value gained from the zero sum organic traffic available is *mostly* independent from the amount spent by website owners trying to acquire those rankings.

Many “gurus” selling a course or shilling Bluehost for affiliate fees will not tell you this, but sites do not predictably grow and succeed 100% of the time.

Especially in recent years, there have been tremendous algorithm shifts where even some of the most high quality sites have been negatively effected, even if they avoided grey hat tactics.

For affiliate sites you can look at all the other sites in the niche and get a idea of potential opportunity in the best case, middle case, and worse case scenarios. Then you can handicap the likelihood of each outcome and add a multiple based on your skill level to see if the opportunity is worth pursuing.

Some would argue it has limited value due to the uncertainty of outcomes and impact of your ability to execute against an opportunity.

I agree that is definitely not a perfect model, but I think it can to useful to demonstrate just how much upside there is with many of these affiliate sites with minimal downside if you can keep your costs low and execute effectively.

When you factor in the digital marketing skills and management skills you gain that can be leveraged into other business or even used to get a job in the industry I still believe building affiliate sites is a great bet for many.

Real World Example: Home Security

Ok, great you understand the framework, but let’s look at a concrete example to see how it can be applied in a real world scenario.

Identify Niche Opportunity

While scrolling through MaxBounty offers I stumbled across a few high ticket home security offers that caught by eye:

  • $320/lead for Deep Sentinel Security
  • $80/lead for BestCompany.com Home Security

Seems like home security will be a growing trend and concern for Americans as the world becomes more uncertain and violent attacks are publicized prominently across TV channels.

It’s also a high LTV recurring subscription product offering, so each new customer is very valuable to home security companies.

It has a reputation for being a very sales driven industry (lots of aggressive mormon door-to-door sales) with little true differentiation between product brands.

Also based on previous affiliate experience, I’m aware this is a popular space for bigger players so there is likely significant revenue opportunity.

Also since BestCompany is an affiliate themselves, this shows there is a strong market for clicks and leads in the space and there should be no issues monetizing the traffic if you are able to achieve rankings in this area.

Evaluate Commercial/Monetization Opportunity

We already kind of touched on this in the first section, but I did some more research on the space and found multiple CPA opportunities with leading providers that pay in the $200-$400 range per sale and $40-$100 per call. Since these are the public rates, if you achieve sizable volume you can likely negotiate an even more favorable private deal.

It’s also interesting to see many of these sales are converted over the phone, so it’s important you find an affiliate partner you can trust to accurately report sales and convert a high percentage of customers.

Transactional Keyword Mapping

Next I began to dive into the the SERPs and look that structure of existing players to get an idea of the most valuable terms in the space.

At this stage it doesn’t have to be completely comprehensive but it can give you a good idea of the number of keywords that drive significant value in the space and the distribution among them to later be an indicator for the number of transactional pages you will want to produce.

Here’s an example of what I found for core transactional home security terms

2 quick notes on this:

  1. I didn’t include every individual product review or comparison term, although I think it would be wise to target every variation as commission is high enough to cover multiple article costs with a single sale.
  2. Generally I’d try to break down click opportunity from the overall search volume number, but I just kept the basic number as a traffic potential estimate to make up for related terms a page targeting the main keyword can also rank for.
wdt_ID Type Term Search Volume CTR ClickOuts Converison Rate Conversions CPA Commission ($) Monthly Earnings Potential EST RPV
1 Best Best Home Security Systems 30.000 40% 12.000 5% 600 $ 200.00 $ 120,000.00 $ 4.00
2 Best Best DIY Home Security System 4.100 40% 1.640 5% 82 $ 200.00 $ 16,400.00 $ 4.00
3 Best Best Self Monitored Home Security System 2.200 40% 880 5% 44 $ 200.00 $ 8,800.00 $ 4.00
4 Best Best Wireless Home Security Systems 2.100 40% 840 5% 42 $ 200.00 $ 8,400.00 $ 4.00
5 Best Best Smart Home Security System 800 40% 320 5% 16 $ 200.00 $ 3,200.00 $ 4.00
6 Best Best Security System for Apartments/Renters 200 40% 80 5% 4 $ 200.00 $ 800.00 $ 4.00
7 Best Best Security System for Businesses 200 40% 80 5% 4 $ 200.00 $ 800.00 $ 4.00
8 Best Best Security Systems With No Monthly Fees 100 40% 40 5% 2 $ 200.00 $ 400.00 $ 4.00
9 Best Best Home Security Camera 8.500 40% 3.400 5% 170 $ 200.00 $ 34,000.00 $ 4.00
10 Best Best Outdoor Home Security Cameras 400 40% 160 5% 8 $ 200.00 $ 1,600.00 $ 4.00

Eventually once you build up enough authority in the space you could also expand to tangentially related areas like Medical Alert Systems, VPN, identity theft protection, Bluetooth trackers, video doorbells, smart home devices, ect – so the opportunity is actually much, much larger.

Evaluate the Level of Sophistication of Current Players

Once you have an idea of distribution of keywords that drive revenue for the space – I like to do a deep dive into who is currently winning in the space. Quickly found 20 that seemed to be some of the biggest, but there are dozens more out there.

Will eventually do a deep dive on the space in a similar depth and format to the sleep/mattress affiliate landscape breakdown.

wdt_ID Site Ownership # of pages Traffic EST Earnings/mo
1 ConsumerAffairs.com general affiliate company 75600 5.752.034 n/a
2 Usnews.com corporate 2.89mm 31.754.416 n/a
3 Pcmag.com corporate 553000 14.095.076 n/a
4 Cnet.com corporate 4770000 50.546.742 n/a
5 Businessinsider.com corporate 3870000 45.148.196 n/a
6 Reviews.org ClearLink 2010 1.137.753 $ 796,427.10
7 Safewise.com ClearLink 2020 527.483 $ 369,238.10
8 Safety.com Red Ventures 781 482.711 $ 337,897.70
9 CreditDonkey.com n/a 5960 361.238 $ 252,866.60
10 BestCompany.com general affiliate company 13200 249.564 $ 174,694.80

Notes on the players currently in the space:

  • Corporate affiliate media players Red Ventures, Clearlink, Centerfield all active in the space. Says that this is a vertical with millions if not tens of millions in yearly affiliate commission opportunity.
  • Very sophisticated and experienced independent affiliate operators, but also some smaller anonymous affiliate sites doing well.
  • Large media (USnews especially) making a serious dent in the space.

Benchmark earnings estimates of current players in the space.

Haven’t worked in this vertical before, but (based on the quick research above) would estimate the distribution looks something like this…

Number of SitesOrganic Affiliate Revenue/yr
3$1.5mm+
8$250k – $1.5mm
15$50k – $250k
20$5k – $50k

Even if these number are off, it’s a good representation of how I think about a vertical and the distribution of earning potential.

Budgeting Your Project Cost

Ok so now you have an idea of the affiliate opportunity of a niche, how much will it cost for you to compete in a meaningful way?

Based on the number of transactional terms you mapped out earlier, you should be able to have a rough idea of the size of site and number of transaction terms that are worth targeting.

Depending on your skill set and how much you are able to work on the project will impact how much you will allocate for each bucket.

Below is an example of what I estimate it would cost me to create a high quality site in the home security space to the point where I would know if it’s worth continuing to invest in.

BucketEST Cost
Domain (You may want to test a few) $                              2,000.00
Links/Campaigns $                              5,000.00
Content (150 money + 100 supporting) $                            17,500.00
Editors $                              1,500.00
Designers $                              1,000.00
Products + Photos + Videos $                              5,000.00
Total $                            32,000.00

Handicapping Your EV and Odds of Success

Based on this rough EV calculation, there is tremendous upside in the home security space and it would be worth spending ~30k (per the budgeting step) to realize the outcome.

Likelihood Total Site Earnings after 36 MonthsAsset Value after 36 MonthsTotal EV
1%$2,000,000 $3,000,000 $5,000,000
9%$500,000 $1,000,000 $1,500,000
10%$100,000 $250,000 $350,000
15%$50,000 $70,000 $120,000
20%$25,000 $30,000 $55,000
25%$10,000 $25,000 $35,000
20%<$10000$10,000 $15,000
Weighted EV$260,750
Ability to Execute Multiplier (0 – 2)1
Your EV$260,750

Note: While I’m all about analysis and assessing market opportunities – eventually you will have to recognize that you will never have complete information and you need to take action.

Thoughts on this framework and model? Do you think it’s a useful way of sizing niche opportunity or an unnecessary formality that overcomplicates things? Would love to hear feedback from either direction.