A Number of people buy shares and real estate to make a quick buck. However, most fail to realise the huge opportunity in the virtual world where websites priced at 8-10 times the monthly income they generate- are undervalued compared with other investments.
This investment option is now catching on with venture capitalists, who are injecting funds into websites with a promising future. Taking advantage of the opportunity, you, too, can buy virtual real estate and make a quick gain.
Online real estate includes domains (web addresses) and websites. Compared with plots and apartments, websites are cheap and can developed by individuals.
Websites offer regular income and value appreciation even if you just manage to keep them up and running. Regular income ensures you get back your investment in less than a year, an annual return of more than 100%. If you add value you can also sell the website for a profit almost immediately or after holding it for a short period.
You can also look at the option of creating a new website but getting traffic to it requires a lot of effort and time. Future income is also uncertain. When you buy an established website, you skip the most difficult phase of website development.
Flipping websites involves four steps-spotting a website for purchase, negotiating and closing the sale, adding value and selling for a profit. Success in flipping websites will depend on your expertise and understanding of the online space.
Finding a Website
Like in any other investment, you need to spot an asset that is undervalued and/or has the potential to generate more income. A website with a lot of visitors might have been neglected by its owner due to various reasons. Or, its income might be falling due to poor organisation or outdated content. Such websites are ideal for purchase.
Before starting the search, you must identify the niche and keywords for the website that you want to buy. Check how many times a particular keyword is searched in Google to gauge the demand. Google keyword Tool provides the statistics on search keywords. It will also give you an idea about the money that advertisers are paying in that niche. You can also go through the Google Trends data to see which topics are popular.
Once you zero in on the topic, it is time to identify the potential targets. Search engines are a great tool to find under performing websites. Identify a few websites and contact their owners. Scoring for websites directly is more likely to get you a bargain due to lack of competition from other prospective buyers.
You can also visit online marketplaces and auction sites such as Flippa.com, BuySellWebsite.com and WebsiteBroker.com.
Conduct a thorough due diligence of you want to avoid ending up with a dud website. Identify a few websites and then narrow down the list by reviewing them based on factors that affect valuation and revenue.
Domain: Like wine, an old domain is considered better than a new one. The Web address should ideally be small and include your target keyword. It should be memorable and easy to type. One-word domains can be obscenely expensive and beyond the reach of small investors.
Traffic: Higher traffic means more page-views, ad impressions, sales and income. If you are just starting out, buy a website with free ‘organic’ traffic from search engines. Do not buy a website that gets traffic through paid sources. You can use tools such as Alexa.com and Compete.com to get an estimate of the traffic.
Do not trust the seller if he sends you traffic statistics as screenshots or typed documents as these can be easily forged. For authentic figures, ask for direct access to analytics data.
Financials: Income generated from a website is what makes it an attractive investment. A stable income over the long term (6-12 months) is better than a high income in just one month. Look at the cost of operating the website ( hosting, search engine optimization, etc), its income and sources of revenue. Google AdSense is one of the most popular advertising networks. You can replace existing advertisements with your own AdSense ads. If the site uses affiliate programmes, you will have to get yourself approved from those programmes as well.
Workload: The work required to maintain the website must also be factored in. If some work to maintain or upgrade the website is require to be outsourced, include this cost as well. Compare the price with cost and time required to build a similar website from scratch.
Negotiating A Deal
Equipped with a review of the website, contact the owner and ask if he is willing to sell. You can find contact details on the sell. You can find contact details on the website or through online Whois domain registration information.
E-mail the owner by introducing yourself as a serious buyer. Tell him what you like about his website and why you want to buy it. If a website is not being updated, raise the point and ask if he is willing to exit.
If your email elicits a positive response, question the owner about the asking price along with details of traffic, revenue and profit. Avoid quoting the price first as the negotiations from five-six times the monthly income it generates.
Website which do not make money or attract traffic can be bought cheaply. Your offer for unmentioned websites should be based on earnings of other websites in the same niche. You can find earnings data of similar sites in listings on website marketplaces.
Once the price is settled, you must check the credentials of the seller before making the payment. Using an escrow service for large payments will safeguard you from fraudsters.
Initiate transfer of the domain name to an account held by you and get a backup of the complete website, including its database and other settings. Get complete control of the website by moving it to your own server before releasing the payment.
Once you have the website, you can let it earn passive income for a long period. Be sure to undertake regular maintenance and update content. If the previous owner was investing in search engine optimization (SEO) of the website, you might want to continue it to avoid any decline in income.
Flipping will require you to undertake more extensive work to increase the site’s value. Though exact strategies to increase traffic and income will differ, common steps include optimizing content for SEO, improving the design and structure, adding content and including advertisements.
For instance, revenue can jump sharply by placing advertisements prominently, blending them with content or using different sizes. Forums can be revived by actively moderating the content for spam and alerting members about changes in the forum. With creative thinking, you can increase icome menifold. Beginners should start by buying a website with small income. Investing in large websites without expertise can prove fatal as online assets can lose traffic and valuation quickly. Watching auctions on marketplaces can help you gain confidence.
Flipping requires you to have a target and strategy for improving the online property along with an exit plan. The best time to sell is when traffic and income are rising or have been stable for a few months. If the site is on a downward spiral, its valuation will be lowered to factor in the negative performance. Do not rush to sell even if you manage to increase the site’s income in a short period. You must let the website grow for some time to instill more confidence in the potential buyers.
When you want to sell the website, you can get it listed on Flippa.com or any other marketplace. You must provide details about the website ( age, target audience, revenue sources, etc). Make sure to back your income and traffic claims with verifiable data from tools such as Google Analytics. Explain the reason for selling.
Staying safe from online fraudsters is important. You should use escrow services when selling for a large amount. Through this you can initiate transfer of the website after the buyer has deposited the money in the account. You get the money after the buyer confirms the transfer. This makes the transaction safe for both the parties.
Do not defer your investment decisions. The next time your browse the Internet, keep an eye on potential investments for your online portfolio.