Nowadays, it isn't uncommon to hear of a distant friend or two selling their website for a handsome sum.
The easiest way to relate to website investing is by positioning it as “digital real estate”. Just like traditional real estate, there are a few ways to get into this market:
- You could start a new website from the ground up and then sell it.
- You could go with a starter site and bypass most of the setup time, grow the traffic and revenue and then sell it.
- You could also buy a site that's already generating income, improve it and then flip it.
However you choose to go about it, you'll learn that there's room for every path. There are people that only build sites from the ground up… and there are people who own several websites and flip them together in packs (ex. two sites in one deal.)
Content sites can command between 2-3x annual earnings, and it's going up steadily. I'm sure there will be a pullback where the market says “no more guys” but we aren't there yet and the multiples keep rising.
The big thing about flipping websites is that you don't need any sort of brokers license or be an accredited investor, or anything else.
You just need the money, and sometimes you can even borrow it.
What Types of Websites Can You Flip?
In reality, there isn't any type of website that's off limits. Even websites that use the most black hat SEO techniques ever have the ability to be purchased… (which we are not encouraging!)
It all just depends on whether you have a willing, capable, and serious buyer.
To give you a quick rundown on the types of sites you can start, acquire and get some ROI out of, here's a quick list:
Content Sites – These are sites monetized through ads and affiliate commissions mostly. They could also include digital or physical products, but the premise is that they rely mostly on publishing content to convert visitors into clicks or commissions.
Suggested reading: How a site visitor earns you a commission.
eCommerce Sites – This is where a physical product, digital product, or even a digital service is the main driver of revenue. Some of these sites selling physical products don't even maintain the inventory themselves and use “dropshipping” as their business model.
Software as a Service – This is simply software on the cloud that's charged on a monthly basis or another regular interval. The idea is that people aren't storing and taking care of the software themselves on their own local servers but the company is providing the software as a service and updating it on the fly without any intermediaries.
Those are the big three types.
Although somewhere in between might fall sites that generate leads for local businesses, these are called “lead gen sites” and an example of one would be a site that generates real estate leads and allows a real estate agent to rent this highly ranked site and use the leads for themselves.
What Determines The Multiple For Websites?
There are many factors that determine a multiple, most of which is the environment and appetite for these investments.
Below are some of the major factors that will always be part of the equation:
Traffic Diversity – Are there multiple ways people are finding the site? Either through social media, affiliates, SEO, or more.
Earnings Consistency – What's the average income for the site and how long has it been earning this amount for? The longer the better.
Operational Efficiency – How much time is the owner spending on this business?
Historical Selling Prices – How much have other similar sites recently sold for?
Revenue Diversity – How many ways is this business generating revenue?
Backlink Profile – Is the site using PBNs to keep it's rankings up? This isn't positive or negative, but generally, sites using PBNs have lower multiples. They can still be attractive purchases though and some people don't mind the links and the lower multiple. It's a better deal to them.
Niche – Is this niche up and coming, seasonal, evergreen, or in decline?
Where & How Do You Buy/Sell/Flip Websites?
In general, there are 2 distinct routes you can take to get involved with income generating websites.
1) Work With a Broker
This is where companies like Empire Flippers, FE International, Quiet Light Brokerage, and others come into play.
These guys usually deal with larger sites and the minimum you'll see is a 20K price tag.
The main benefit of using a broker is that they do their best to vet the business, seller, income and traffic sources before posting it as a listing.
The main disadvantage from a buyers perspective is that they are very skilled in bringing up the value of a listing as they're mostly working with the seller. A disadvantage from the sell side is the fees brokers take.
The majority of the time, sellers are going through this process for the first time and for them it's one of the biggest transactions they'll have in life, so the experience of a broker can be valuable in guiding them.
2) Independent or with a Consultant
One of the most popular places to find or sell websites independently is Flippa.com (read our review here.) It's not completely independent because they have a platform and escrow setup in place, however, there is no vetting of the listings.
Facebook groups are also a good place to find websites. There are many Facebook groups, like our own, that cater specifically to content publishers and authority site owners.
You can dig around Facebook to find marketplace types of groups OR you can approach groups that have strong affiliate communities.
Just make sure the admins are ok with it! 🙂
Finally, you can go the independent route but also hire a consultant. These are usually folks that have bought and sold websites many times over and already know the process quite well.
NEED CONTENT FOR YOUR AFFILIATE SITE?
- SEO DRIVEN CONTENT
- CONVERSION FOCUSED
- END-TO-END SOLUTION
Due Diligence For Websites
Whether you are buying or selling a website, set expectations to see or share the login details of your Google Analytics, Amazon affiliate account, and any other services that are important to the sale.
If you're selling, be sure that you can set the permission levels so that the invitees can't make any changes and DO NOT SHARE YOUR LOGIN DETAILS. Only invite them into the platform via the admin panels so it's secure.
For buyers, once you've sent over a non-binding letter of intent and it's accepted, now it's time to get your hands dirty.
Look at financials (are they really paying that much for hosting?), look at SEO, consider the strength of the site's relationships with stakeholders (affiliate programs), and do whatever you can to build a better argument for why this site isn't worth the price the buyer is asking. In the hopes of getting a lower price or adjusting the deal structure in your favor.
What Makes A Good Flip?
The idea of flipping websites involves getting a good deal in the first place.
An old adage goes like this:
“The deal is made on the buy.”
This means that once you purchase the site, it's set in stone and that price is the baseline where profits can begin. The lower the baseline, the better.
Of course, paying extra to get the deal done is ok, but only if you are confident and have done the math that it's worth that extra addition to your baseline.
For content sites and other forms of digital real estate, it's all about finding parts of that business that can be improved. Here are the main areas we try to find holes in:
- Traffic sources
- Income streams
- Audience engagement
The faster you can make improvements to a site, the faster you can realize your money back. This also means you can command a higher price for the sale (if it remains consistent of course.)
Create a Thesis
With any investment, you want to be sure that your idea of the future aligns with your investment nicely.
What needs to happen in order for your site to see a healthy return after you purchase it?
Is the topic of the site going to remain popular?
Do you need A, B, C to happen or do you need A, B, C, D, E, F, G, H to happen?
Be realistic and know that the shorter the string of events that need to occur, the higher the chances of success for your site.
Here's an example of an investment thesis when it comes to niche sites and authority websites:
“This site is in a good position because the niche is in the early stages of becoming an evergreen topic, the advertisers are willing to pay more to appear on the site, and the number of recurring revenue products is growing for which we can become affiliates for.”
Next, you'll want to rate each one of those ideas on their chances of occurring.
Try to also poke holes in your arguments too. Don't just look at the positives but look at the biggest risks.
What Should I do Now?
If you're in the market to buy or sell a site, I don't think you could go wrong by first reaching out to us at Human Proof Designs.
We've already bought and sold dozens of websites ourselves and employed the same strategies to help others.
Digital real estate and flipping websites is a unique opportunity right now and we're not just saying that because we've had the good fortune to participate in it.
Good deals are getting harder to find, but the multiples for selling sites is also growing. That just means that it's going to be harder to get into this business model in the future if things keep going the way they do, so that's why it's a good idea to start studying, prospecting, and learning the ropes early on.
Don't step into FOMO and force yourself to purchase anything through emotion… But be prepared to act when the time comes.