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Neville's Digital Surrogate Brain

Archives for 2007

HoR Story Part 6: How It Works

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So after finally getting HouseOfRave.com off the ground, this is how it works:

I will show what happens from the time I get an order, till the customer receives their order. Everything is done in 5 steps. I can accept, process, account for and send off 2 orders in around 2 minutes with this system. 10 orders will take me about 10 minutes with this system:

1.) Check, View and Review Orders.
I login to the backend of my Shopsite software to see how many new orders I have waiting. I click to view all the orders and do a quick skim of the order information. I am looking for any subtle signs of fraud at this point. After 5 years, I’ve become pretty good.


I can view individual orders or all the orders at the same time:



2.) Charge Orders.
This is the most inefficient step, as I choose to process cards manually to become more familiar with the customer names, locations and spot fraud. I login to my merchant account digital gateway and copy/paste from Shopsite the needed customer information. This step goes quicker than imagined because I use my tablet PC pen. During busy times I turn on automatic charging, so this step sometimes takes only one click to charge all the orders.


Here I find out if each order is legit. If the order is declined, I make a note of it and move on. If the order was paid for using PayPal I already know it was charged. If the order looks suspicious or comes back with negative address verification, I will often call the person on the spot to verify the order.

3.) Enter Into Accounting System.
This step is very quick and allows me to see my estimated current profit, my expenses, what I owe etc.. I’ve used some pre-made accounting modules for Shopsite in the past, but I like my Excel sheet better. Over the years I have honed it to help predict my profit at the end of each month. I don’t know my exact profit until I get the monthly bill from my supplier, but this Excel sheet gets me pretty damn close.

4.) Create with Word & Send.
This step is the way THIS particular business of mine works. Once an order is ready to go, I copy/paste the information into a Word document and send it via email to my supplier. From there, they print it as an invoice and send the order. This is the way my particular supplier chooses to do business, others may have different methods.




5.)Followup.
My supplier will send me a tracking number once the order is sent. These go into my tracking system where customers can check the status of their order. The tracking module also sends customers their tracking numbers via email automatically.

How I make Money:
I pay wholesale price for the products I send out from my supplier. They send me a bill for the products & shipping each month. I charge retail price on the website and bring in all the money myself. At the end of the month, I cut a check to my supplier and the difference is my income after product expenses. I then subtract my server costs, merchant account costs, PayPal costs and phone bill costs to get my total profit amount.

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Hopefully this mini-series helps someone further understand the inner workings of a small drop shipping business!

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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HoR Story Part 5: Pros and Cons of Dropshipping

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Having an internet store that uses a drop shipper is an attractive sales model because:

  • You never have to physically send out anything yourself.
  • Zero inventory.
  • Once you get an order, you send it off and you’re done.
  • Extremely low overhead compared to a traditional business.
  • You can run it from anywhere with an internet connection.

Sounds pretty good huh? Well for the most part it is, but there are also some inherent problems with running this type of dropshipping business:

  • Your margins are relatively small. Usually between 20% and 40%.
  • You must compete with larger suppliers who are well established. Nowadays a lot of larger wholesalers are selling to individuals instead of just distributors, this is big competition.
  • You may not always have a phone line connected. If it’s just you, it’s hard to always pickup the phone like a big business does.
  • As search engines and comparision sites flourish, it’s easier than ever to find your same product from multiple vendors.
  • People ordering larger quantities of items will want deep discounts you cannot always provide.

If this was five years ago I’d tell you a dropshipping model is GREAT, and it still sometimes is….however the largest threat to this model is the wholesalers.

Previously these people would import products by the shipment container full, keep them in a huge warehouse on pallets and only sell to volume buyers. The distributors who buy the pallet amounts would then keep stuff in their warehouses and send out to individual consumers. Then after that comes the dropshippers, think of them more like middle men. As the level of technology and sophistication of these large distributors increases, they now have systems in place where individual consumers can buy small quantities of products at near wholesale prices.

As technology improves it allows these larger vendors to sell to individuals, it also allows the individual consumers to find these distributors through internet search results. So as time goes on, the middle men will slowly have more competition pressures.

SO HOW TO OVERCOME THIS?

Many of the larger distributors focus on a specific niche of products (Party suppliers, cell phones, toys etc), so they only have so much to offer. Distributors keep smaller quantities on hand of products, but can carry many items from various wholesalers. So distributors (and consequently drop shippers) offer their unique selection of products, customer service and unique store shopping experiences.

Next —> Part 6

HoR Story Part 4: Getting A Site Setup

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Back when I started HouseOfRave, simple eCommerce solutions were relatively scarce or really expensive. I remember for my initial draft of HouseOfRave I downloaded a pirated piece of software which rendered the webpage on the computer, then would FTP files to the server.

My home computer at the time was very slow at the time, so I would mainly build my page after school everyday at my high school using the brand new, state of the art 40o Mhz computers (Ha! 400 Mhz and “Fast” in the same sentence sounds funny now :-)

BUT….I had several hundred items to sell, so a dedicated eCommerce site was neccessary. However if you’re only selling between 1 and 10 items, you might consider just inserting PayPal or Google Checkout payment buttons on each of your products rather than using a full fledged eCommerce solution.

If you have several hundred items to sell, creating a site yourself is daunting unless you’re great at programming…and even then you’d just be re-inventing the wheel since there are literally thousands of solutions for e-commerce already out there (many of them free)!

HouseOfRave currently runs on the Shopsite Ecommerce platform which has worked well for me, but it requires you have your own server, and will cost around $2,000 to install.

For my latest eCommerce project called BodyMonkey.com I chose a fully hosted solution (Yahoo Stores) instead of hosting it on my own server. I did this to:
1.) Hedge my losses in case my server crashes, at least ONE business will still be running.
2.) They take care of everything including SSL security certificates, payment gateways, hosting and they constantly update the system which means new features for free.

There are lots of hosted solutions but the two I recommend are:

Yahoo Stores – I’m using this for BodyMonkey.com. This is a great system, but a little difficult to design. A HUGE plus for this is you get linked into the Yahoo Shopping system which brings in a decent amount of sales, even if you’re not fully ranking on Google yet.

Volusion.com – I’d suggest this solution if you don’t know much about setting up a freeware solution on your own. I’ve tried them before, and they’re pretty good about getting you setup with a decent looking store made with proper search engine optimization techniques and lots of other cool features. You must pay a monthly fee every month, but it includes pretty much everything you need to start selling.

If you know very little about e-commerce, I’d suggest something like Volusion.com to get started. All you really need to do is add product photos and descriptions and you’re up and selling. However you do have to pay them monthly and they take a small cut of revenue.

If you know a little more about the web, have some web hosting of your own and can do things like change a DNS or FTP files, you can probably get a FREE store setup on your own pretty simply.

BUT WAIT!!
Once you get your store running, it means NOTHING. Now the actual hard part comes: Getting people to your website.

My gimmick with House Of Rave was the rave videos and rave pictures. I gave them away for free (not such a big deal anymore after YouTube and Flickr), and it got lots of people to the site. Less than 1% of the people who would come for the free videos ordered stuff, but at least it got people to start visiting, linking and discussing my website.

You don’t necessarily need a gimmick like that, because I know of many websites that don’t have any attractions yet still make lots of sales, but it really helps get the ball rolling.

The moral here is don’t think that setting up an online drop-shipping business is all that easy. It’s just like any other real store, it requires a lot of attention at times and lots of effort to get people through the doors.

Next >>> Part 5: Pros and Cons of Drop Shipping

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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HoR Story Part 3: Finding a Dropshipper

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This is by far the most frequently asked question I get:
“How do I find a drop shipper? I’ve been looking but everything I find is junk.”

A quick tip is DON’T GOOGLE IT. If you start looking for dropshippers like that, you most likely will end up with one of those services that has a warehouse and advertises their drop shipping services. This means that have hundreds or even thousands of people signed up under them, and they all sell the same stuff. Most of the stuff they sell is usually generic stuff you can buy at Wal-Mart, hardware stores or other common retail outlets. This means you’ll be competing with thousands of similar sites plus large retailers.

So how do you find a dropshipper for my niche product?

You simply look for people that already sell what you want to sell. My target dropshipper already sold rave & club type of stuff, so I gave them a call. You can generally tell if someone is a supplier if they have proper contact information, someone always picks up the phone and other small cues by looking at their website.

Often times the supplier with a warehouse will not have any sort of drop shipping program. You must create it. Simply explain to the head decision maker that you want to sell his products, and he ships them out whenever you send him orders. Usually a business owner will be happy to expand his business base if it’s not too much of an inconvenience.

Most likely several places will reject your offer before you find one that accepts. To get accepted faster, don’t call someone and say, “I wanna build a website and sell your stuff.” I suggest you first build a sample store, perhaps add some of the suppliers products on there for good measure and THEN call and say, “I can expand your customer base by selling your products, I’ve already got a store ready to go, check it out at …..” A business owner will take your request more seriously if you already have something in place and it looks like you’re experienced.

I started HouseOfRave before I had a supplier. I had already built the site and added some sample products, I just needed to fill it with a suppliers inventory. For this reason I quickly got someone to jump on board.


Think about it from the suppliers point of view:
1.) If your website appeals to a different niche than theirs but sells the same stuff, they can effectively expand into a different niche without doing a thing. For this reason, try to appeal to a different niche than your supplier, don’t just try to steal their customers.

2.) With you selling THEIR stuff on a different site, it creates artificial competition in the niche. It’s kind of like when you buy gum; whether you buy Juicy Fruit, Winterfresh or Double Mint, some profit always goes back to the Wrigleys company.

3.) From a search engine optimization perspective, if you type in a product, the supplier can be number in a top search results and so can you. This means if someone buys something based off a search result, the supplier is more likely to make money.

So to find the supplier I first compiled a list of websites and suppliers of rave/club products. I started calling. It took at least 10 calls before I found someone who was willing to work with me and didn’t require up-front payment (and didn’t ask how old I was). This was a very narrow genre of products, so if you’re looking for a more common product, expect to make A LOT MORE calls. Word of advice: Calling is more powerful than sending an email. The supplier in California I was working with imported all these products themselves, and even had their own website selling the stuff. I got an agreement to use their images and descriptions on my website, and get wholesale pricing on individual orders. I would pay them my balance at the end of each month.

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ACTIONS TO TAKE:
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1.) Identify a genre of products you would like to sell.

2.) Do your homework and compile a list of everyone that sells these products.

3.) Find out who actually sends stuff out (you don’t want to contact another drop shipper).

4.) Ask if they can drop ship for you.

5.) Start inputting the suppliers inventory in your store and start selling!

Word of Caution: If you want to sell a common item like MP3 players, computer parts etc, you have a very large uphill battle. There are thousands of other places already selling these things, some very established, and they will often kill you based on price and reputation. Imagine if you’re selling a digital camera that Wal-Mart also carries. Most people will order from a larger retailer just based on trust, and most likely they will never find your site in the first place. The larger places will also kill you on price.

I sell these 3-packs of Oggz for $49.99. The product was extremely successful in the smaller markets and eventually started selling at WalMart. The price at WalMart was $28.00!! My wholesale price wasn’t even that low! So to even TRY competing based on price I’d have to take a loss which is not an option. While people still order the Oggz at my $49.99 price, the price internet-wide has dropped once the product went mainstream and is being sold by hundreds of retailers.

So if you want to sell extremely common items like digital cameras etc, you probably have a better chance selling them on Ebay….however then you’ll REALLY be in a constant price war.

Having a unique offering of products always helps attract buyers to your site, because it’s often difficult to get such specific items elsewhere. This is why I chose such a niche genre of products such as rave/club items for my first business.

The best thing to sell is something no one else has. I didn’t have anything like that, so the next best thing was to sell items that very few people had.

Next >>> Part 4: Getting A Site Setup

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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HoR Story Part 2 : Finding Something To Sell

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I was a senior in high school, age 17, living with my parents, about to leave for college in a few short months and had very little cash. I wasn’t prepared to buy any inventory and ship out orders each day, so I had to get a little more creative if I wanted to sell physical products. I decided to find someone who sold what I wanted, then ask them to send the products out for me (aka Drop Shipping). First I had to find something to sell.

This was a bit hard. I took a sheet of paper, and in my tiny handwriting I listed about 300 products. EVERYTHING I COULD THINK OF. Lamps, mugs, pens, speakers, couches, guitars, software, beds, mini-blinds. Whatever popped into my head, I wrote it down. I then started narrowing the list down. The first items scratched off the list were the items with either way too much competition or things out of range for my $200 budget. Couches, computers, ceiling fans etc. were scratched out. I then started to search the competition for other products by doing search engine tests for the products.

Keep in mind, this was my first eCommerce project, so I wanted to enter a very small niche where I had a chance of survival.

I ran my final list of 10 things over with some friends and family….but still nothing was looking fantastic to me. My 12 year old brother helped me brainstorm a bit, and it was actually one of HIS ideas that stuck. Rave, club and party stuff. I did a quick search for that genre of product, and there were about 10 websites that sold them. Two of the websites were good, and the eight others were total crap. I KNEW I could make more professional and easier to use sites than 80% of the competition, so I set my sights on the rave/club/party genre of products.

Competition was low and the products wouldn’t be very expensive, so this seemed like an ideal testing ground for my first eCommerce site.

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ACTION TO TAKE:
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If you don’t already know what you want to sell, get out some paper.

1.) Start writing down different products. Anything. EVERYTHING. List at least 100 products. Since “products” is such a general term, I’d say list at least 300-400 items.

2.) Start narrowing down the options. Start by crossing out obvious things that either have way too much competition or are out of your range. I started crossing off things like couches, airplanes, computer monitors etc…

3.) Identify possible targets and niche markets. Maybe you’ll get clobbered trying to sell books, but perhaps you could experience some success with your knowledge of antique books from the Victorian era…or some niche market like that.

4.) Start researching your potentials and even further narrowing the list. Is a certain niche already filled by lots of big players? Can you do a much better job than the competition? Is the niche large enough to make profit?

Next >>> Part 3: Finding A Drop Shipper

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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House Of Rave .com Story Part 1

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When I was in high school I decided to start an online business. I started making several hundred dollars a month doing very little, and I never saw a single product I sold until 5 years later.

The store was a rave/club party store called HouseOfRave.com. It still exists today and is going stronger than ever.

The store made between $500 and $1,000 per month all through my college years, and when I started taking it seriously, the profit started to reach over $4,000/per month.

This is the story of how I started this business from the very beginning:
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Curious about eCommerce back when I was in high school, I decided the best way to learn was to create an eCommerce website of my own. I had no clue where to start, so my first step was NOT coming up with a product to sell, but HOW to start an eCommerce business. I voraciously read every article, how-to and software review I could find about eCommerce, mainly hitting upon the topic of eCommerce software, merchant accounts and marketing techniques.

I was already pretty computer savvy and knew the ins and outs of building regular .html web pages, but the ‘Add to Cart’, Shopping Cart and credit card transaction functions were well beyond my knowledge. I decided if I was to launch an eCommerce store soon, I would have to use pre-made shopping cart software.

I started downloading evaluation versions (and illegal downloaded copies if I could find) of different shopping cart software. I started creating sample stores, changing templates, adding sample products, placing test orders and playing with every possible facet of each shopping cart software. I now knew the in’s and out’s of creating and managing an eCommerce store.

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ACTIONS TO TAKE:
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If you’re a slightly more web-savvy person, you can experiment by installing OScommerce or other open-source shopping carts on your own. While these are free, you DO have to know what you’re doing. If you don’t know what FTP or DNS is, this might be a little advanced for you.

If you’re not extremely web savvy enough to install programs on your own server, take the free demo-trials of some fully-hosted eCommerce solutions like Volusion. Hosted eCommerce solutions like this make it very simple to start a full fledged eCommerce store….but it’ll cost ya. The bad part is they charge a monthly fee for your store. The good part is they make creating products, pages etc. very easy, and they do most of the work for you.

The key here is to just take the first step and start playing around with the systems. Place test orders, add products, try re-designing the templates. You’ll start learning a lot quickly.

NEXT >>> Part 2: Finding Something to Sell

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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Money Made Since 01-01-2005 – Gone

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From the beginnings of this blog on November 17th 2004, I openly wrote how much money I made, saved and spent. However I rarely reported what I earned through partnerships or consulting. This means what my actual finances were and the finances listed on this blog were different.

December 2006 was the last month I publicly accounting my income. For all of 2007 I haven’t listed specific income, and I will finally take off all that income on the NevBlog.com sidebar.

The plethora of bloggers openly listing their income generally hide their identity, write under pseudonyms or don’t name the companies they work for.

It’s not exactly hard to find out that I look like this:

…or that I live in Austin, TX. and Houston, TX., or that my phone number is:

…so listing detailed income gets tricky. Let’s say I do some consulting for a company and I openly list how much they’re paying me per month. It’s not fair to them to openly list that information.

One of the interesting things people found about this blog was the fact I so openly listed income. It was also good for me, as I felt self conscious about my finances if they were too low. An open environment definitely helped.

But for now, I’ll stop writing every piece of specific income on this blog.

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Here is the income for 2005 and 2006. And yes…I know I listed “Change Jar” as income when it’s not.

Money Made from January 2005 till Deceber 2005:
Online Biz – Jan. $ 502
Work $ 253
Work $ 281
Ebay Sale $ 100
Change Jar $ 55
Online Biz – Feb. $ 751
Work $ 271
Change Jar $ 30
Rebate $ 30
Work $ 229
Lottery Experiment $ 2
Web Design $ 100
Online Biz – March $ 946
Syntel Dividend $ 270
Ebay Sale $ 218
Ebay Sale $ 340
Water Experiment $ 5
Work $ 246
Work $ 248
Online Biz – April $ 836
Web Design $ 300
Change Jar $ 32
Surveys $ 55
Books $ 165
Selling Notes $ 105
Work $ 297
Online Biz – May $ 1,024
SYNT Dividend $ 21
FO Dividend $ 6
GE Dividend $ 10
Work $ 213
Change Jar $ 17
Work $ 167
Online Biz – June $ 718
FO Dividend $ 11
Work $ 274
Work $ 261
Online Biz – July $ 834
Work $ 304
GE Dividend $ 10
SYNT Dividend $ 11
Change Jar $ 35
Acco Brands $ 183
Work $ 210
Books $ 30
Online Biz – Aug. $ 804
ACCO Dividend $ 7
Work $ 228
Change Jar $ 76
Online Biz – Sept. $ 654
Selling Pixels $ 1,350
FO Dividend $ 11
SYNT Dividend $ 11
GE Dividend $ 9
Online Biz – Oct $ 1,120
Misc. $ 1,000
Birthday $ 200
Online Biz – Nov $ 1,630
Change Jar $ 115
Online Biz – Dec $ 1,801

Total on Dec. 31st 2005
$ 20,021


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Money Made from January 2006 till December 2006:

January 2006
Selling Pixels $ 700

Online Biz – Jan $ 1,131
SYNT Dividend $ 11
FO Dividend $ 11

February 2006
Change Jar $ 85
CraigsList $ 100
Online Biz – Feb $ 2,016
Adsense Experiment $ 138

March 2006
Mobile Marketing $ 158
Other $ 3,000+
Online Biz – Mar $ 1,915
Selling Pixels $ 100

April 2006
First order f/ new biz $ 30
Other $ 350
Selling Pixels $ 50
MobileCampus $ 110
MobileCampus $ 50
Online Biz – Apr $ 1,080
SYNT Dividend $ 11
FO Dividend $ 11

May 2006
SYNT Sale $ 681
ABD Sale $ 175
Other $ 1480
Selling Pixels $ 50
Change Jar $ 55
Online Biz – May $ 1,345

June 2006
FO Dividend $ 11
PGH Dividend $ 12
DYN Sale $ 250
Other $ 30
Online Biz $ 2,505
FacebookProfile $ 28

July 2006
Online Biz $ 1,770
Other $ 300

August 2006
Online Biz $ 1,600
Other $ 300
Change Jar $ 80

September 2006
Online Biz $ 1,700

October 2006
Online Biz $ 5,000+
Other $ 1,000

November 2006
BIDU Sale $ 230
Stock Dividends $ 32
Other $ 500
Adsense $ 120
Online Biz $ 4,000

December 2006
Stock Dividends $ 30
Other $ 500
Online Biz $ 4,500

Total on Dec. 31st 2006
$ 38,341

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Last Account Snapshot:

Explanation of accounts

Why Is Google Paying Me So Much?

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I rarely check my Google Adsense earnings because I don’t use the program much, but I got a bit of a surprise to see some mysterious extra income and thousands of extra page views in the last few days:

It’s odd because none of my stat programs show any significant increase in traffic on the sites I have Adsense on. Adsense generally earns me less than a dollar per day, but all of sudden it’s sometimes been paying me over $12/day!

There’s on average an extra 13,000 page views per day ever since Dec. 3rd, and I have no clue where they’re coming from.

This is kind of the equivalent of free money falling from the sky! I’m a little baffled, but not complaining ;-)

Comment Policy

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For a long time I’ve allowed anyone even anonymous posters to freely post comments on this site. However that doesn’t seem to be working so well.

With WordPress you can see IP addresses and other info; however an anonymous Blogger comment without using any third party allows anonymous posters to remain completely anonymous.

It’s just a known fact that in a completely anonymous environment safe from any social repercussions people will inevitably start saying mean or stupid stuff. Point in case: YouTube comments. Good lord they’re the stupidest comments ever. I don’t even bother reading them for that matter.

This brings me to another point. When anyone DOES try to leave a constructive or encouraging comment on this site, there are a select few individuals who try to unnecessarily rip them apart JUST because they were nice towards me. That isn’t fair at all, and quite annoying to most people. A personal attack on me is fine, but don’t spill that over to others.

While stupid comments are sometimes entertaining, they don’t provide any growth value and actually stifle more intelligent remarks.

So now above the comment field it now reads:

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I ask that if you would like to leave a comment that you think of this website as my family’s home and that you wouldn’t say anything on this site that you wouldn’t, as an invited guest, say in someone’s home. Constructive criticism is welcome, as we all benefit from such advice. Rude, mean, or obnoxious comments are not welcome and will not be approved to post (that’s me, gently escorting the misbehaving guest out of the house). Please restrict your comments to the topic at hand, for the benefit of all who may be reading.
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That quote was taken from an article written by Elise Bauer. I couldn’t have said it better myself. I’ve also turned on comment moderation so comments will not be immediately posted. I don’t care if negative things are said, but any plainly ignorant attacks or rude posts will no longer be welcome.

Leaving an anonymous comment to me is like driving in your car, yelling something mean to a person on the sidewalk and driving off. You only do it because you KNOW they can’t catch you or figure out who you are.

If you were face to face with them, you’d never say something like that.

So to conclude: Don’t be a jackass.