View Full Version : Investing 50-100K in Web Sites. Smart move?

12-15-2005, 06:24 PM
I've been lurking here for a while and finally decided to post. I'm working on a content site that I plan to launch this coming January, but I'm also thinking about "diversifying" by purchasing one or more web sites for cash flow. Buying a site for its annual revenue certainly beats the equivalent in rental income from single-family houses.

Without sweating too much, I could invest 50-100K. The only thing stopping me is I'm concerned about getting scammed. I have a pretty good grasp of designing sites and their revenue models, and I know how to administer servers and such, but how can I verify income? Screenshots are too easy to doctor. Also, how often do you see people actually getting scammed while buying sites?

Todd W
12-15-2005, 06:39 PM
I've been lurking here for a while and finally decided to post. I'm working on a content site that I plan to launch this coming January, but I'm also thinking about "diversifying" by purchasing one or more web sites for cash flow. Buying a site for its annual revenue certainly beats the equivalent in rental income from single-family houses.

Without sweating too much, I could invest 50-100K. The only thing stopping me is I'm concerned about getting scammed. I have a pretty good grasp of designing sites and their revenue models, and I know how to administer servers and such, but how can I verify income? Screenshots are too easy to doctor. Also, how often do you see people actually getting scammed while buying sites?

The easiest way to avoid getting scammed is to buy sites from people well known in the community, someone who has a good reputation backing them up as well as other people.

Before buying an expensive site you can request your tracking code be used to track visitors, as far as income goes I would imagine you could arrange something with the seller to give "insert name of ad company" permission for you to call and get ad revenue details.

If you have been in the business logn enough you should be able to determine by the traffic the amount of income you "COULD" make from the site once setup with your ads. That's something else to consider, some people run different ads and if you have been around long enough and compared you know that some pay more than others so you could always earn more or less depending on which way you go.

I think it's easier to believe a site with 10,000 visitors making $25 a day than a site with 100 visitors making $25 a day but I`m sure with the correct traffic that is truly possible. (I would check into it MORE however.)

There's not a lot you can DO but there's a lot you can know about the site you are buying the industry it is in and what keywords/advertising sells for int hat industry and then do your own analysis.

12-15-2005, 08:58 PM
Atleast 50% of the site sales I see are shady. Even if they're not outright lying, it could be a lemon of a site. Something that is only making money because it hasn't been shut down yet.

I see very few quality websites for sale at reasonable prices.

12-16-2005, 07:30 AM
So what would you do to create some cash flow? I could put it into promoting my content site but that's a little risky on an untested concept.

12-16-2005, 07:42 AM
I think paying people to make a site for you is generally better in the long run (so long as you know what you're doing and pay people to make a good site).

You don't get the instant cash flow as the site still needs to grow, but it doesn't cost nearly as much.

I did practically 0 of the work on my new laser hair removal site myself, it cost in total maybe 2 grand to build (including paying writers). I'm confident though that eventually it could earn me as much as $100 a day, with enough promotion. So it was a pretty good deal I think. Its certainly not instant cash flow though, and people who do not have the promotional power that I do likely would not be as successful with it.

The closest thing to instant cash flow I can think of is ecommerce. More than any other type of site. It only took 3 or 4 months for me to make 5 figures a month with my ecommerce site. The problem with ecommerce though is that it is not a handsoff income generator. You either need to hire someone to run it, or run it yourself, and of course it requires storage, so you'll either need to clear out your basement/garage or rent/buy warehouse room.

12-16-2005, 08:00 AM
Great post, Chris. Can you get consistent quality from hiring people to do your content? I'm willing to farm out programming, graphic design, and server administration, but I've hesitated to outsource content because quality articles are the main selling point for my site. My competitors have tons of content, but it's either written by gurus selling their own seminars or users that must have failed English in high school.

12-16-2005, 09:17 AM
I agree with Chris in his statement that at least 1/2 of the sites for sale at any given time are shady. There are so many things that you have to watch out for when buying a site. Fake ad revenue, fake traffic stats, fake Alexa rank, search engine bans, stolen content, stolen design, any current legal disputes, etc. I saw a thread the other day at a forum of a site for sell. It sold somewhere in the $XXXX range if I can recall -- the buyer sent the money and everything seemed normal -- until the next day when the real website owner showed up to reveal that the seller didn't in fact own the site.

I second the motion to create your own site(s). If you have that kind of capital and have the time to allow the site(s) to grow, that's by far the best route. You know its past and foundation from the ground up, everything is transparent from day one.

There are good writers out there, but, they're not cheap. Great writing comes from detail-oriented, passionate, and creative people. As with good designers, writers can learn more and further perfect their craft throughout life, but it's something they are born with.

You can either draw, or you can't. You can either write, or you can't.

Having said that, I have someone that could assist you in writing quality articles. He's not cheap, but he's reasonable and very good. Get in touch if you're interested.

12-16-2005, 12:27 PM
I definately agree that the "most sites for sale are shady" -- at least the ones you see on Sitepoint, Digitalpoint, and other boards. Just like any other investment or business purchase, whether you are buying a restaurant or a stocks, you have to do your homework.

For example, there was a news article about the music industry getting ready to go after lyrics sites. What a coincidence, the next day lyrics sites started showing up for sale on the boards.

I believe I've posted about this before, but there are a couple of critical things you really need to know before buying a site, besides if the seller really owns the site.

1 - Where is the traffic coming from? If the owner is paying for it, that $10,000 a month can quickly turn into a nice $300 a month profit.

2 - How diversified is the traffic? I've seen quite a few sites for sale with good earnings and a reasonable "for sale" site. The problem is these sites are getting 90% of their traffic from MSN. The traffic should be more like 40% Google 20% Yahoo 10% MSN and 30% direct links and bookmarks.

3 - Where is the search engine keyword traffic coming from? If half of it is one keyword a shuffle of rankings could lose half of the revenue, or more, just like that.

4 - How valuable is the domain by itself? If the domain is keyword.com its going to be worth a lot of money just by itself than keyword-keyword-CompletelyUnrelatedWord.com.

Should you be buying websites? If you can find the right ones, absolutely. Many sell for a year or two of revenue max. Unlike buying stocks or bonds there are a lot of things that you can do to turn that into 6 months of revenue.

I'm going to send you a PM and may be we can talk about this a little more.

12-16-2005, 12:58 PM
I remember one of my real estate books pointed out that "Buying a well managed property can be a subtile trap." If your management skills are not as good, a profitable property can quickly start to loose money.

I think sites also have this feature. If the seller is good at SEO, has other captive sites to link from etc. The value and income can quickly disappear.

On the other hand, sites can still be bought for earnings multiples so low you can afford a few duds.

12-16-2005, 05:57 PM
I've been on the lookout for a good site to buy for ages now. I've just about given up. Why? Because I think there are VERY few sites being sold that are actually worth the asking price. You have to ask yourself the question why the site is being sold if it's a money maker? You normally find that the webmaster is "trying to raise capital for new ventures." Fine - but not easy to corroborate. The other common answer is that running the site takes up time that they want to use on other projects. Ok - but do you really want to be running a site that takes up a lot of time to run?

In particular, I would strongly advise against someone with limited experience of revenue generating sites to go looking for an existing site to buy. It's just too risky unless you know the "industry" inside out. In fact, even if you do, it's still risky!

With 50 - 100k of investment capital, paying people to create a site for you is an option. But again, I would recommend doing the work yourself for the first few sites just so you know exactly what's needed to make a site successful. After you have a few successful sites, then it's much easier to efficiently outsource work and you're less likely to get ripped off too.

With that amount of start-up capital, I think it would be worth giving ecommerce some serious thought too.

12-16-2005, 06:44 PM
Thanks for the advice, chromate. Yeah, I thought about approaching some up-and-coming eBay sellers and offering to finance their inventory. But most of the products being sold on eBay don't have high enough margins for two people, especially in the computer category.

The content site I'm developing has a lot of potential for selling information products. Having produced a successful information product, that's attractive to me. I plan to launch it in January. See my other thread in the General Promotion Forum about Beating a PR 6 Web Site.

12-17-2005, 08:53 PM
I have been looking at buying large sites for the last year ($100-$250k range).

Over the last 3 years, I have bought or partnered with five existing site owners, three of them where software sites, one ecommerce and one content.

One went very well.

Two went okay - a little bit better than break even.

One I lost about $8,000 on.

The last one I am still sitting on, has some potential, but nothing great.

I think there is a major void in the market for a site/business that helps sell legitimate web businesses (when I say businesses, I mean sites that actually generate revenue, not sites with "potential").

http://www.ebizbrokers.com/listings.html - this is one of the few places that has some largish businesses and real profit/loss statements, but web businesses have a ton of smoke and mirror and if factors. Not that buying an offline business doesn't.

12-18-2005, 08:34 AM
That's still a great record. I wonder how the Web publishing industry would respond to a venture capital company that started and/or bought such sites. Any thoughts?

Thanks for the link. Most of their listings are sold already, but I'll check out a few of the ones that are not. When buying an off-line business, it's fairly common for the owner to offer some financing. Have you seen a similar trend with online businesses?

12-18-2005, 10:42 AM
That's what I don't see when an online business sales (at least in the $100k range). I can't recall of many instances where I've witnessed the owner accept financing or payment arrangements.

12-18-2005, 02:05 PM
I have had owners, willing to partner of finance.

Inet Interactive (http://www.inetinteractive.com) has taken a Venture Capital approach. They purchased WebHostingTalk, HotScripts, and a couple other smaller sites.

Having watch my dad buy some offline businesses - it's not like any transaction is smooth on or offline.

eBizBroker's sites seemed overpriced, but the one I looked at quite seriously, the owner was willing to fiance half of the purchase.

12-18-2005, 05:03 PM
Do you know how much venture capital Inet Interactive has recieved?

12-18-2005, 05:26 PM
That ebizbroker site definitely seemed overpriced to me. $100k for a dropship business? To duplicate that all you need is contact information for the dropshipper, that information alone is not worth $100k.

12-18-2005, 06:37 PM
I don't particularly like that site.

Are there ANY sites out there designed for website acquisitions? Excluding turnkey sites and sites with nothing other than potential.

12-18-2005, 07:03 PM
Besides forums, the only other site I've seen is http://www.ibba.org/ -- but thats focused on offline businesses with a few online ones scattered in there, no telling what the quality is.

I started DevelopedSiteSales.com specifically because I found a lack of sources for listing websites for sale. I'm still planning on expanding on DevelopedSiteSales.com in the future, but for now its kind of in hibernation. I believe that over the next 5-10 years the domain market is going to begin drying up and its going to move into reselling developed sites.

That being said, if you have websites that you are looking to sell, I can list them on DevelopedSiteSales and run the listing by several high net worth individuals as well as other potential buyers.

If you are looking to purchase sites, hang in there. I'm immersed in several big projects right now but I'd like to work on expanding the coverage of DevelopedSiteSales in 2006 and turn it into a net to pull in people who want to unload their sites. If this is something you really want -- let me know!

If you don't mind weeding through 99% garbage to find a few rough gems here are the sections of forums I watch:
http://domainstate.com/ (click on Developed Site Sales)

12-18-2005, 10:32 PM
I think the sites seem overvalued because they are real. Web businesses have immensly low values compared to offline businesses. Some of it is for legitimate reasons.

One day I will develop WebBizTrader.com, as well.

12-19-2005, 09:01 AM
You have to realise that there are a lot of people that don't know the ins and outs of developing web businesses. I made my first web page back in 1995 or 1996, and have been a full-time, and profitable, developer for over a year now. To us some of these sites aren't worth 10% of the asking price, but to someone who perhaps is a stock trader and has plenty of cash they are good deals.

If you really want to get a great deal you need to be able to add value to the acquisition. For example, I know there are a lot of SEOs that are buying up old sites. A few links and a little time and they earn all their money back with no additional effort.