Horizontal Or Vertical Business Models: Which Is Right For You?

written by John Beckham on March 12th, 2010 | No Comments

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I recently received this unsolicited email from Craig Shinney (slightly edited to protect identities) –

I just wanted to write to tell you that about one year ago, I started getting into Internet marketing and experimenting with all sorts of different methods of the various types of blogs and tools that all the different marketers recommend. It was an amazing journey.

The reason I’m writing is to say that you were the first “expert” to catch my attention. I read through your archives almost religiously before branching out to other marketers. After putting up a bunch of crappy websites (that did in fact make me some money), I have since completely abandoned reading anything by those other marketers and have remained a faithful reader of your blog.

I’ve since come to the conclusion that it’s all about creating quality content, as you instruct your readers to do, not “trick” your visitors into buying something you’re not at all an expert on, written by Filipinos who can’t even use proper English.

Obviously Craig is generalizing when he talks about Filipinos, as there are no doubt plenty who can use proper English and are subject matter experts. The point he’s making is that many marketers teach a business model that relies on using outsourcers, who often don’t have English as a first language, to create ebooks and other information products, which are then sold online using clever marketing.

The quality of these information products is sometime suspect, yet with the right marketing process, including some good copywriting, sales will come.

There’s nothing inherently wrong about this model. You find a need in the market, then use other people to create products to meet that need. Your job is to wear the marketer’s hat, do the research, find demand then put the pieces together to serve that demand, then rinse and repeat.

I call this a horizontal business model because instead of going deep in just one industry, the strategy is to move from market to market, creating websites and products to sell to unrelated industries until you have a small army of small income streams. If each website you set up can make $200 a month in profit, then you only need ten or twenty successful implementations of this system to reach “quit your job” money.

This model has proven very successful for many people and is taught in various forms as an entry strategy into the world of Internet marketing.

I’ve promoted many courses that teach a version of this system, with the most successful from my point of view being Niche Profit Classroom. If you want a much more detailed breakdown of this strategy, check out my interview with Adam Short, the creator of Niche Profit Classroom.

Why I Chose To Go Vertical

The system I teach to people, which Craig touched on when he mentioned creating consistent quality content, is to go vertical in your market (or “go deep” as I have previously written about).

However going vertical is about more than just creating quality content, it’s about market domination through consistency and long term asset building.

Only briefly early on in my online career did I chase the horizontal strategy. For a very short few weeks I thought I might strike it rich with Pay Per Click marketing in AdWords, to send traffic to landing pages and then offer affiliate products or send that traffic to pay per lead offers.

If I could “crack the code” that so many other AdWords experts had supposedly done, I could set up campaign after campaign and spend $1 to make $1.10 back. I would essentially go horizontal across different markets using a PPC traffic generation strategy, which today is still taught and used by many marketers to make millions of dollars online.

I quickly realized that I much preferred to develop a meaningful connection with a small group of people – my tribe or community – who I would foster and help, often for nothing in return other than the recognition that I was helping people. Emails like that from Craig certainly help motivate me, so thanks Craig.

Obviously I wanted to make a living too, but thankfully I had the patience to do one thing online for a period of time without much financial reward, because I could see where I was going, and enjoyed what I was doing. That, and I had already built a successful online business that was paying the bills, so the pressure was off when it came to blogging and carving out my place as an expert.

Therein lies the challenge of “selling” what I currently teach. Pitching hard work using concepts that are essentially a foreign language, is not going to convert well. Yet when I talk about my system of going vertical into just one industry, long term asset building, establishing authority and then leveraging it to create multiple stable income streams around the one identity, that’s what I’m selling – hard work.

The horizontal strategy is easier for beginners to come to grips with and has a much higher likelihood of returning some income in a shorter time frame…and let’s face it, selling hype works when you are dealing with an uneducated, insecure and susceptible crowd, looking for a way out of their current life. It’s easier to offer a taste of the dream, rather than explain the reality of what’s ahead of them.

The Best Of Both Worlds

In my case, I prefer the vertical path because I’m more creative writer than I am scientific number cruncher. Hence when I talk to a guy like Jeremy Schoemaker (Shoemoney), who loves the numbers, I feel a sense of envy at the relative ease that he can turn a profit just tweaking conversion rates.

Of course it’s possible to have the best of both worlds and Jeremy is a great example of someone who has both leveraged his love of pure marketing and profit creation, as well as create a brand and community around himself. However you will understand after a conversation with Jeremy that writing to his blog is not his first love, he much prefers the testing and tweaking of what makes him money.

Again, there’s nothing wrong with any of these models or motivations, what’s important is that you understand what you are getting yourself into and what motivates you.

Transitioning To A Vertical Model

Here’s why I don’t like the horizontal model -

You need to enjoy the research process, and if you’re not into keyword research, PPC analysis and looking at numbers in general, you’re going to struggle to find profitable niches (finding just one is hard enough, let alone several).
You don’t create significant barriers to entry and often your success is based purely on your ability to enter markets undiscovered by other people, for the time being. You can set something up and then move on, but understand that eventually your profit will erode because you haven’t created a true platform to stand on, you’re just taking advantage of latency in a market due to lack of competition. Eventually more work is required to compete, which doesn’t fit the horizontal strategy.
Distraction is the norm because horizontal is all about finding new markets. Entrepreneurs who enjoy the start-up phase of a business can find the constantly changing focus exciting, but if you can’t make something work, the lack of reward will result in floundering around without making much money. Sometimes the only way to make solid profit is to go deep because you need the leverage that only comes from scale.
Personally, only a few subjects in my life are interesting. This is probably the main reason why I have to go vertical in one market rather than spread myself across multiple niches – I simply don’t care about enough subjects to spread my energy that way. As a result of living a very flexible lifestyle, it takes a lot to get me to do work – I have to really LOVE what I’m doing to stick to it for long enough, which is why I treasure the combination of intrinsic and financial rewards gained from becoming someone valued in a community.

Everyone Needs Recognition

One thing I’ve noticed lately is marketers who are successful at making money, eventually realize that they want more than just the money – they want recognition too.

A primary motivation every human being has is the desire to have meaning to other people, and just selling ebooks created by other people quietly from your home is not going to feed this desire.

Once you start making money, you may find yourself with motivation to share your knowledge and experience with other people – to actually participate in your community and perhaps even establish yourself as an expert.

Sure, you still want to get paid to teach and talk about what you do, you wouldn’t be an entrepreneur if that wasn’t true, but an equally important desire is to have people benefit from what you create and for you to experience the return from this – to see the outcomes other people experience and feel warm and fuzzy on the inside as a result.

This is a wonderful thing, it forces us to care about other people beyond ourselves, even though ultimately we are doing it because it makes us feel good. As long as we all benefit, you can’t complain right?

So Which Model Is Right For You?

I’m not going to advocate you choose one business model over another because your personality and current life situation dictates what is best, right now, for you.

What I do want you to take away from this is an understanding of the advantages of going deep and following a vertical focus into one industry.

The financial and personal gains from doing this can be quite significant. You will feel that you are building something you care about, which can motivate you to do extraordinary things, like write new blog posts to your blog each and every week for five years. That might seem incredible right now – yet most people manage to go to a job they hate five days a week, 9 to 5, for years, which to me, is much more incredible, but not in a good way.

If you’re going to put effort into something in your life, make it something worthwhile.

Yaro Starak
Vertically Integrated