The rich invest their money and spend what is left. The poor spend their money and invest what is left.”
This is one of my favorite quotes from Robert Kiyosaki’s best selling book “Rich Dad Poor Dad”.
Some of the richest people of the 20th century built their empires on the back of smart real estate investments.
In the internet age, however, there’s a whole generation of millionaires who’ve turned around their lives and created enormous wealth by investing in digital real estate.
Unlike real estate investment, digital assets can be built even if you have no money to invest. If you have the right skills and are ready to invest your time, you can still build a high-value portfolio of online assets.
For example, one marketer started three closely related affiliate sites from scratch, grew them to nearly $30K/month in two years and eventually sold them for $1.8 million.
The faster path, however, is the one in which you invest both money and time in acquiring promising online businesses, improving them, and selling them for a higher price (just like flipping real estate)
For example, one investor acquired an online business for $7,500 from Flippa, worked on it for a year and sold it for $550K.
Can you imagine getting such a high ROI so quickly in any other business?
This is why flipping websites, and other forms of digital assets, is one of the fastest and most lucrative ways to grow your wealth.
And many smart investors, including Robert Kiyosaki, are already doing it.
In this detailed guide, we’ll tell you exactly how the business of buying and selling websites works, why investing in digital assets is a smart move, the risks involved in this business model, and how you can get started as a website investor.
Things you’ll learn in this article
- What are digital assets and their types
- Why investing in websites is a much more profitable business than real estate
- How to grow multiple businesses from one investment
- Ways to identify profitable website acquisition opportunities
- Who should invest in websites?
WHAT ARE DIGITAL ASSETS OR DIGITAL REAL ESTATE?
Let’s agree on the basic definitions first.
An asset (physical or digital) is something that directly or indirectly puts money in your pocket.
A liability is something that doesn’t contribute to your income and takes money out of your pockets.
For example, a house is an asset if you’ve rented it out and make money from it. But it’s a liability if you’re living in it and spending money on its maintenance without actually generating any income from it.
Spending on liabilities makes you a consumer. To be an investor, you need to put money into building assets.
I know this contradicts the conventional definition we’ve been taught in finance books which is why most people consider anything they own an asset.
But since our goal with investing is to make money, we’ll stick to this unconventional definition.
Let’s get back to the point.
Digital assets or real estate are internet-based properties that you completely or partially own.
Like houses, offices, and shops in the real world, digital real estate has a monetary value which is determined by its positioning, popularity, age, income, and several other factors.
This value can increase or decrease over time depending on the condition of your digital assets and how much money they’re making.
Websites are the most popular digital assets and most of this guide is focused specifically on investing in websites.
But there are other types of digital assets as well.
Types of digital assets
Every online business can be called a digital asset if it’s making money and has the potential to grow.
However, below are some of the common types of digital assets that people invest in
Affiliate sites, eCommerce stores, blogs, magazines, etc. are all different forms of websites that are frequently traded on the internet.
There are dozens of examples of high profile website acquisitions that turned common people into multi-millionaires
For example, Viral Nova, a viral news blog run by just one person, was acquired for $100 million in 2015.
The Wire Cutter, a product review site, was acquired by The New York Times for $30 million a couple of years ago.
Websites are the most popular type of digital assets because they often serve as the central platform that connects all the other types of digital assets together.
This guide is also largely focused on investing in websites
Domain names (website URLs) become more valuable as they age which is why they’re considered a popular digital asset that people frequently invest in.
For example, CarInsurance.com, bought for $49.7 million, is the most expensive publicly sold domain name ever. Business.com was sold for $7.5 million.
The original owner bought them for a fraction of that price but held on long enough to profit.
Mobile applications are harder to create as compared to a website which is why you don’t hear as many common people making a fortune by investing in them.
But there are examples.
Summly, an app that served customized news content, was acquired by Yahoo for $30 million.
People also invest in acquiring digital and info products like video courses, training programs, and membership programs that have the potential to grow by making small improvements.
For example, we at Alpha Investors acquired RankXL a few months ago mainly because of its high-value Authority SEO course which is quite popular in the SEO community.
We improved the program significantly by adding new modules, better content, and more actionable insights and relaunched it as Authority SEO 2.0.
Acquiring digital products is slightly trickier as compared to other digital assets since they are mostly sold because of the original owner’s credibility and brand image.
These are just some of the popular types of digital assets but there are many others.
Unlike real estate, the value of a digital asset does not depend on its location (or the location of its owner) which is a huge advantage as compared to physical property.
You can be anywhere in the world and still make money from your website or online business in a number of ways.
For example, Michelle is a digital nomad who lives in an RV and runs a popular personal finance blog that earns more than $100K per month from ads, affiliate commissions, and product sales.
Apart from offering more flexibility, digital assets grow much faster in value as compared to physical assets.
For example, 10Beasts is a simple product review site, started from scratch, by a marketer in his 20s a few years ago.
Within a year of its inception, the site started making nearly $80K/month from Amazon commissions and sponsored content.
The owner eventually sold it for $600K+ after profiting from it for over 2 years.
Overall, he made more than $2 million from the whole project.
To give you further proof of the potential of online businesses, we’re running a live case study on our site in which we’ll grow a site to $150,000 in 18 months.
That’s the kind of potential investing in online businesses and digital assets offers.
And this is why there are numerous examples of digital investors who own multi-million dollar portfolios comprised of different websites, eCommerce stores, domain names and other forms of digital assets.
Interested in knowing more?
In the next section, we’ll break down the whole business model of buying and selling websites and how you can get started.
THE BUSINESS OF BUYING AND SELLING WEBSITES
As you’ve already seen in the examples we’ve shared, investing in websites is a multi-million dollar business that offers much faster and bigger returns than most other investment models.
But how exactly does it work?
Let’s dive deeper.
Buying and selling websites is very similar to the conventional real estate investment model.
Here’s how it works:
- You buy a website that’s not fully utilizing its potential and can be made more profitable.
- You invest money in improving the various aspects of the site like design, content, branding, SEO, etc.
- The website grows in value with time as a result of the improvements you make
- You sell the site for a much higher price tag (usually 2x-3x its annual income)
There are three main parties involved in this business.
- Website Owner: The person who currently owns the website you want to invest in
- Investor: In this case, you, the person who wants to acquire a website to improve it and sell later
- Broker (Website selling platform): The platform or company that connects website owners and investors. We’ve recently launched Investors Club – a private and exclusive online business marketplace.
Hundreds of website owners list their sites for sale on these platforms where you can connect with them, evaluate their business (we’ll cover this in detail later in the post), and acquire it if you think it’s the right fit for you.
Usually, the brokers charge a small fee (we don’t do that at Investors Club), either a set price or a percentage of the selling price, for helping you close the deal with a website owner.
Depending on your goals, and the state of the website you acquire, the whole process of investing in a website, growing it, and selling it for a profit can take anywhere between 3 months to a year (or more if you want).
Once you sell the site, you can choose to reinvest that money into acquiring more websites and selling them again (something most smart investors do) or keep the money yourself.
There’s a LOT more to this business than what we’ve just shared but this is the crux of the whole model.
Why investing in websites and online businesses is such an attractive proposition?
There are several reasons.
REASONS WHY INVESTING IN WEBSITES IS SO PROFITABLE
Unlike stocks and real estate, investing in websites is still a new business model and many people still don’t realize the opportunities it offers.
Here are some compelling reasons why you should seriously consider:
An exponentially growing market
We live in the internet age where everything from smartphones and laptops to watches and home appliances is connected to the web.
But there’s still room for growth.
According to Statista, there are approximately 1.72 billion websites online (as of Oct 2019).
This number is expected to grow exponentially over the next few years as more and more businesses go online.
On the consumer side, a study by HootSuite and We Are Social states that global internet penetration is around 57%. Which means 43% of the world’s population is yet to come online.
People already rely on websites and online resources for most of their questions, information needs, and important tasks like booking flights or finding restaurants.
This dependency will only increase with an increase in the number of internet users.
How is all of this relevant to you as an investor?
The growth in the global internet population means websites that serve high-quality information and solve specific problems are becoming more valuable by the day.
Purchasing a website that’s getting traffic and generating revenue but not fully utilizing its potential offers you a great investment opportunity.
By improving its overall structure, you’ll not only be able to generate a healthy monthly income but also profit big time by selling it in a few months.
Plus, purchasing an already established site gives you a head start and allows you to use its existing traffic and audience to move forward.
This is much easier and faster than starting a site from scratch, growing a subscriber base, and establishing rapport with search engine algorithms.
A huge variety of businesses on sale
Smart investors like to diversify their portfolio to minimize risk and explore new areas for growth.
This is exactly what investing in online businesses offers.
No matter what expertise, hobbies, or interests you have, there are numerous types of websites and online businesses up for sale on different marketplace sites and platforms in every niche imaginable.
In fact, you’ll even find sites for sale niches you never knew existed.
For example, can you imagine a site that only sends weird facts about cats to its email and SMS subscribers, selling for $50,000+?
SendCatFacts.com did exactly that.
The site, which was 2 years old when it was sold for $50K on Flippa, was making around $3,200 per month by selling membership packages.
Here’s another example.
TrendyResumes was sold on Flippa for $70,000!
What was the site about?
It was making around $2,000/month by selling different creative resume templates.
Not the first niche that comes to mind when you think of online businesses.
There are countless (even more unique) examples of sites in different niches that smart investors have profited from.
This is what makes this business model so attractive.
You can buy a site that’s in line with your expertise and professional experience, use your skills to make drastic improvements, and sell for a much higher amount.
Low initial investment required
You can’t start flipping websites with empty pockets.
But for professional investors, the entry amounts aren’t as high as some of the other investment options.
You can find reasonably well-made and well-managed websites for as low as $10,000. Consider this a starting point.
As a matter of fact, we own and operate a Facebook group ‘Flipping Websites‘ in which both buyers and sellers are actively looking to flip websites that fall under that $10,000 value range.
If you’re a serious investor and have a budget of at least $20K, Investors Club is probably the best option out there with exclusive website investment opportunities that aren’t publicly available.
The truth is that most business websites and even blogs aren’t well optimized for search engines and often have poor designs.
These are common issues because starting a site and publishing content is easy but SEO and UX are technical skills and not everyone has them.
This is why there are numerous profitable website acquisition opportunities available.
There’s no upper limit to how much you can spend on website acquisitions but it’s always better to test the waters before fully committing to a new business model.
For online businesses, the best approach is to think big, start small, and change quickly.
Fast growth and high returns
Starting a new site from scratch and turning it into a profitable business is hard work.
Organic search traffic plays a key role in driving visitors to a site.
But even with great content and authority backlinks, a brand new site will find it hard to break into the top 10 Google Search results for a competitive keyword in less than a year.
A study by Ahrefs shows that nearly 60% of all the pages ranking in Google’s top 10 results are more than 3 years old.
But that’s for a new site.
What if you directly invest in a site that’s ranking well for your target keywords and is more than 2 years old?
This is why investing, instead of starting something from scratch, is such a great option if you the money to invest.
With the right monetization strategies and better optimization, you can take an established site to much greater heights in a very short time as compared to a new site.
With traffic flowing in from search engines (and other sources) there’s no limit to how much you can earn from a single site.
For example, BrillinatBusinessMoms is a simple content-based site that publishes success stories of different mom-bloggers.
From just one product, a printable business planner, the blog makes around $10-15K/month.
And that’s just one product.
They have more than a dozen listed on their site.
WebsiteSetup.org, a site that promotes different web hosting services and eCommerce tools, reportedly makes $300K+ per month from affiliate commissions.
There are numerous other examples we can share with you.
Just proves that when a site is established and gets consistent search traffic, there’s no limit to how much you can earn from it.
Doing this by starting a brand new site is possible but takes a long time.
By investing in an established site, you can start making money straight away.
Proven methods to grow business
Growing a website is not about guesswork or gut feeling.
Experienced marketers repeatedly start, build, and grow profitable websites because they follow proven methods and time-tested processes.
This is entirely different from stocks or real estate where there’s a lot of uncertainty and the fate of your investments can change overnight because of political developments or changes in government policies.
Websites are free of these external factors.
If a site is based on an evergreen topic, targets a consistent need, and publishes high-quality content that helps people take action, it will continue to grow no matter what happens in the outside world.
Digital Photography School is a great example of this.
The site has been around for years and publishes photography tutorials, info content, and high-quality product reviews.
A quick search in Ahrefs shows that it has been getting consistent traffic over the years because of its strong SEO foundation and authority backlinks acquired as a result of its useful content.
And that’s just search engine traffic.
It also has thousands of email subscribers and social media followers.
It just goes to show that buying a site that’s built on solid foundations, with a clean backlink profile, is a much safer investment as compared to other business models.
Based on past numbers and current traffic trends, you can almost predict how much you’re going to make from a site in a year’s time.
Learn from the owner’s mistakes
Consider this an extension of the last point.
Investing in a site is also a secure option because you have the whole history of the site at your disposal.
You can evaluate its search profile, its traffic history, the kind of content it has been publishing, the pages with the most backlinks, the keywords that are bringing in the most traffic, and the products that are making higher profits.
For example, here’s the traffic and revenue graph of one of the sites listed on EmpireFlippers for sale.
It shows you the trend for the last 12 months which is enough to give you an idea of whether the site is growing or not.
But you can dig deeper and ask for specific analytics data so that you can understand exactly what keywords or content is bringing in this traffic and the products that are driving most of the revenue for the business.
As a side-note, Investors Club is going to take care of the entire due diligence process for you. You’ll be able to log-in, find sites you like, and simply read our in-depth due diligence reports before you make a decision.
For example, the site you’re interested in might be getting a lot of traffic from social media. But when you investigate further, you may find that 90% of the social traffic is coming from Pinterest.
And even on Pinterest, the traffic might be coming from 10-12 pages consistently.
This will give you a much clearer picture of the site’s current standing.
On top of that, you also get a detailed brief from the seller where you can ask anything about the site’s history, its current performance, and their future recommendations.
In short, there’s a lot you can learn about the site you want to invest in by interacting with the seller and learning from their mistakes.
Multiple income diversification options
One of the biggest reasons why investing in websites is a great option is the number of ways you can make money from them.
- Stocks can only make you money when you buy/sell them.
- In real estate, you make money by selling or renting your property.
- With a website, you have numerous options.
When you acquire a site that’s already getting traffic from search engines, social media, email lists, and other sources, you only need to add new monetization methods to it to make more money.
The mind map below mentions a few of them.
For example, if you acquire a site that’s making all of its money by promoting Amazon products for a commission, you can add new monetization methods like:
- Using Google Adsense or other ad networks
- Offering banner ad slots to other sites
- Publishing sponsored content
- Creating and selling your own digital product
- Adding a shop to your site and selling products directly
- Selling products as a dropshipper
The great thing about income diversification is that it not only increases your monthly income while you own and run the site yourself but also increases the overall value of the site when you go out to sell it.
The more ways a site generates income, the more attractive it becomes to future buyers.
As we’ve already mentioned, once your site has traffic, adding more income streams is not a problem.
Easy to cash out for a huge sum
Established websites are liquid assets that can easily be sold in just a few weeks.
And the returns are amazing.
The general formula for selling site is to multiply its average monthly profit for the last 6-12 months with anything between 20-50 depending on the site’s niche, traffic numbers, current income, additional assets, work required, future prospects, etc.
This means if a site is making a profit of $1,000/month, you can sell it for at least $20,000 or more.
However, this is not a rule of thumb and there are examples of sites selling for much higher or much lower prices.
As we’ve mentioned, it depends on several factors like the site’s current income, future prospects, history etc.
When you do finally decide to sell your site, you can adopt one of the following approaches.
Find buyers yourself
Investors usually sell their sites through third party services.
But you can also go out looking for buyers yourself.
The easiest way to do it, of course, is by announcing it on your site by adding a “For Sale” page, emailing your subscribers, or posting on different niche-specific forums where you think people might be interested in buying your site.
However, this is the least efficient way of selling a site and we don’t recommend it unless you have a very strong reason to do it (we’re not sure what that would be).
There are a number of reasons for this:
First of all, you’re an investor and your job is to buy businesses with growth potential, grow them, and sell them for a profit.
Wasting your time in the operational details of selling a site is not the best use of your time.
There are lots of things involved in selling a site like documentation, allowing the buyers to verify your performance claims without actually compromising on your site’s security, managing the whole payment process in a secure manner, handing over your site assets like hosting account, domain, email list etc.
Plus, since you’re not a specialist in it, you’ll probably get a bad deal anyway.
So unless you’re getting an amazing offer from someone you personally know, selling a site yourself is not recommended.
List your site on a website marketplace
There are several such platforms where you can list your site for sale by paying a small fee.
Most of these platforms also charge a percentage of the final sale amount once the deal is closed.
We at Investors Club don’t charge any fees. Yes, you read it correctly. Click here and find out why.
The advantage with this approach is that your site is immediately visible to hundreds of thousands of buyers since these platforms get a lot of traffic plus they also send out email alerts to interested buyers.
You can list your site with a fixed price or set a minimum price and list it for auction (Flippa).
Either way, you’re likely to get a lot of offers from genuinely interested buyers.
Grow multiple projects from one investment
One of the biggest advantages of investing in an established website is that it gives you a platform where you can launch multiple successful online businesses.
With real estate, the best you can do is sell your property and reinvest the money into more properties.
But once you acquire a high-traffic website that has established its authority with search engines and enjoys a dedicated following, you can use its strength to create more businesses without even selling it.
For example, Neil Patel, who’s a leading content marketer, started QuickSprout and grew it into one of the most influential content marketing blogs in the world with thousands of email subscribers and social media followers.
He then used the same audience to launch multiple successful projects including his personal brand site Neil Patel which is now even more popular than QuickSprout.
Spencer Haws, a popular affiliate marketer, launched a site called NichePursuits where he shared affiliate marketing case studies, experiments, and ideas.
When NichePursuits became successful, Spencer launched Long Tail Pro, a popular keyword research tool, which immediately became a hit because of his huge following.
He also launched several other products and projects using his success from NichePursuits.
This is the advantage of having even one successful website.
You can use it to launch more successful projects which can be multiplied even further.
You can trigger a chain reaction of successful websites by acquiring and growing just one good site.
HOW TO EVALUATE A WEBSITE FOR INVESTMENT
By now you have a pretty good idea why buying and selling websites is such an attractive business model.
But before you put your investor hat on and start putting money into different sites, you need to understand how to evaluate a website for investment.
This is a key question because if you get this step wrong, everything goes downhill from there.
Thankfully, it’s not as difficult as you might think.
Our valuation process is pretty complex, but it doesn’t have to be the same for you. We evaluate websites based on certain parameters. Some of them are technical, others are related to the site’s reputation.
While you should definitely seek technical advice before investing in a site, understanding the logic behind these parameters will still give you a pretty good understanding of the whole evaluation process and allow you to make informed decisions.
Let’s have a detailed look.
An established business with a proven track record
Most investors buy websites to:
- Generate a steady monthly income
- Improve the site and sell it later for a higher price
To achieve both these objectives, you need to invest in a site with a steady business model and a proven track record in terms of performance and brand image.
The reason for this is simple.
A steady business that’s built on solid foundations and has been around for a few years is much easier to scale as compared to a new site that’s still looking to establish itself with its target audience and search engines.
Here are the questions you should be asking:
1. Is this a long-term business?
The first thing you need to see is whether its a long-term site or something that’ll fade out in a few months.
For example, when the last Harry Potter movie came out, hundreds of marketers started niche sites that promoted different products related to the Harry Potter series.
But in a few months, when people moved on to other things, such sites started losing traffic and sales. Most of them don’t exist today.
The same happened when fidget spinners suddenly captured everyone’s imagination. Hundreds of sites popped up that were promoting fidget spinners only. Most of them are gone now.
You don’t want to invest in such sites.
Whether you want to invest in an affiliate site, eCommerce store, or a blog, make sure it makes money from evergreen products/services.
Instead of product-focused sites, look for sites that are based around specific problems.
For example, a site that targets new moms and shares advice on raising kids is a much better option investment option as compared to a site that’s created entirely around a specific brand of toys.
2. What’s the age of the site?
A site’s age is a crucial metric for a number of reasons.
First of all, domain age is a Google Search ranking factor which means that older sites rank faster for a keyword as compared to a brand new site.
If you start a brand new site, Google might not rank your content anywhere below page five for 3-6 months because of its Sandbox algorithm.
Secondly, the older a site the more footprints it has around the web like brand mentions, backlinks, indexed pages, etc.
You can check the WhoIs record of a site to find its real age.
As a general guideline, look for sites that are at least one or two years old.
The older the better but stay away from sites that are younger than a year unless there’s something extraordinary about them.
3. Has it changed hands before?
Are you buying the site from its original owner or has it changed hands before?
This is important to know because sites that have changed multiple hands over the years are more likely to be involved in dubious SEO practices as compared to a site that’s still run by the original owner.
You can simply ask the owner about this.
But you can also find it out by using WhoIsRequest, a free tool that gives you the complete history of a domain and highlights any server changes or drops over the years.
The screenshot above shows 1 drop which means the domain expired and changed hands at least once in 15 years.
But it is possible that a site changes hands without the domain ever expiring.
You can use the Internet Archive Wayback Machine to see if the site has changed over the years.
For example, this is what smartblogger.com looked like in 2004.
And this is what it looks like today:
The purpose of this activity is to double-check if the site you’re buying has been consistent over the years in its content or has it been changing hands and switching business models.
It’s a positive sign if a site has been consistent for the last 3-4 years. On the contrary, it’s best to avoid a site that has frequently changed.
4. Is it hosted on secure servers?
When you buy a site, you’ll probably need to transfer it to your own secure servers. However, some sellers offer their site’s web hosting account as a part of the package.
In either case, you need to make sure the site is hosted with a secure and reliable web hosting company.
This is important since a secure web hosting service minimizes the risk of any security breaches, plus it also has an impact on the site’s uptime, speed, and performance.
5. A cooperative owner willing to share details
When you’re investing in a website, you need to gather as much information about it as possible.
You can’t do it without the owner’s cooperation.
Most sellers are happy to share the detailed history of their site, things that have worked for them, their recommendations for the future, and the challenges the new owner might face.
In fact, there’s a whole section of “Seller’s Notes” with every listing on Investors Club and a “Summary” section that shares the detailed background of the site with all the prospective buyers.
Most sellers also offer limited-time support to ensure that the whole process of website transfer takes place smoothly and the new owner understands how to take things forward.
Still, there are times when the sellers don’t respond to your questions as fast as you’d like or simply don’t cooperate with you once the payment has been made.
To avoid such problems, contact the seller in advance and ask as questions about the site to see if they’re willing to help.
Even a few interactions are enough to give you an idea about the seller’s attitude.
If they’re not good at communication, it’s better to avoid the site because it’s quite frustrating to not get any support from a seller whom you’ve just paid a large sum of money.
6. Niche aligned with your interests
Should your personal interests, expertise, or hobbies play a role in deciding what kind of websites you acquire?
Definitely yes (but only if you’re looking to keep the site for a longer period of time. If you’re looking to buy->improve->flip, then it doesn’t matter).
Running a business, online or offline, is hard work.
As an investor, you’d want to acquire businesses that are under-performing but have the potential for growth.
To increase the value of a site, you’ll need to improve its content, user experience, and several other aspects.
It’s much easier to do that when the site is closer to your interests or professional experience.
That doesn’t mean you can’t invest in a site from a completely new niche.
Of course, you can.
You can invest in a site and let us manage everything from content creation and design enhancements to SEO and general site management.
But generally, if you’re planning to manage everything yourself, it’s best to invest in a site that’s closely aligned with your interests.
Thankfully, there are so many sites listed on different marketplaces, plus many that you can approach directly, that it’s never a problem to find a high potential website in any niche.
So why invest in something that you’re not sure about?
7. A growing market with rising interest
That’s obvious, isn’t it?
You invest money to make more money which is why it makes sense to purchase a site that’s in a growing niche with an upward interest trend.
But you’ll be surprised how many investors get this wrong.
Instead of putting their money in a growing site, they prefer to play safe and invest in businesses that have already been milked by the previous owners.
As a result, the returns aren’t too impressive.
This is why it’s always a good idea to check the interest level of a niche before diving deeper into it.
You can do that by using Google Trends, a free tool that shows the search trends for different keywords, topics, and niches.
Suppose there’s a really good niche site up for sale that primarily sells different fidget spinners and also has great content about the product.
The price is also tempting and you’ve almost made up your mind about buying it.
Let’s see what Google Trends tells us about the interest in the site’s topic.
Looks like no one is interested in the topic anymore
It would’ve been a great acquisition in 2016 (for a quick flip) but today acquiring a site that solely about fidget spinners is a waste of money.
In contrast, look at the interest graph for the topic “vegan recipes”
You can see a steady rise in interest over the last 5 years and it appears to be going further up.
This is the kind of niche you should be looking to invest in.
Something that’ll still be relevant in a year’s time so that you can sell it for a much higher price.
8. Potential for income diversification
The more money a business makes, the more valuable it is for prospective buyers.
When evaluating sites for investment, always keep an eye on their potential for income diversification.
If a site has the potential to make more money than it is making today, that’s great news because it means you can buy it for a low price, add new income streams and sell it for a higher price tag.
Pro Tip: Look for authority sites that are created around problems and target niches that can be expanded when needed.
Micro niche sites or sites created around products should (almost) always be avoided.
The reason is simple.
There’s little room for income diversification in product-focused sites.
For example, here’s a site called BestShaverForLadies.com
There’s nothing but shaver reviews on this site and Amazon Associates is the site’s only income source.
How many new income streams can you add to this site?
Google Adsense may be.
But there’s not much room for anything else.
Plus, the site is so narrowly focused that it can’t transition into any other niches.
Don’t invest in such sites. You can, if you’re on a budget, but, generally, stick to something that’s ‘expandable.’
They have short lives, limited growth potential, and can go out of business easily.
In comparison, here’s an authority site that also promotes shavers for women.
But because it addresses a broader niche (beauty and skincare) it is not limited to promoting shavers only.
It has a huge social media following plus a fat email list because of which it can add new income streams like
- Sponsored content
- Training courses
- Merchandise sale
And so many others.
Naturally, such sites are also more expensive.
But this one’s already well developed and living up to its potential.
You should look for a site that’s currently under-performing but can be grown into an authority site that targets multiple closely related niches and makes money in a number of different ways.
When you find such a site, work on it for a few months, grow it into an attractive brand, and sell it for a much higher amount than your initial investment.
9. Consistent and diversified traffic
Traffic is the life-blood of a website and without consistent traffic from stable and reliable sources, no online business can prosper.
This is why it’s imperative that you closely monitor the traffic trend of the site you’re interested in acquiring.
If you’re in direct negotiations with a seller and plan to buy a site yourself (not recommended) ask for Google Analytics reports for the last 12 months.
If you’re evaluating a site on Investors Club or any other platform, you’ll already have this information at your disposal on the site’s listing page.
Once you start negotiating, you can ask for older traffic reports as well.
There are a couple of things you need to see here.
Is there an upward, downward, or stable trend to the site’s traffic or is it going up one month and down the next month?
A high potential site has an upward or at least a stable traffic graph.
It shows that the site is getting traffic from stable sources which is crucial because stability allows you to plan for the future.
Here’s the traffic snapshot of a site listed on Flippa:
You can see that not only is the site getting consistent traffic, the other important metrics like Avg. Session Duration and Bounce Rate are also quite impressive.
This is the kind of stability you should look for in a site because it will allow you to build for the future.
The number of monthly visitors is important.
But the sources from where the traffic originates are even more important.
A site that’s overly dependent on one traffic source is always at risk.
Here’s the traffic distribution of the same site listing that we shared in the last point.
That’s a better traffic break up than most sites.
Still, the site gets almost 70% of its traffic from search engines. Search is the top traffic source for most sites but ideally a site should be converting search traffic into email and social media subscribers.
This particular traffic distribution offers a great opportunity for anyone who invests in this site. The site already gets 10K+ visitors from email and more than 30% of its overall traffic from sources other than search engines.
Anyone who invests in this site should ideally look to grow the other traffic sources while maintaining (or even increasing) volume of search traffic.
Email traffic, in particular, is crucial.
A site with a large email list immediately attracts investors.
The reason is simple.
Email subscribers are your assets. It’s a traffic source that you own and can leverage whenever you want. Nobody can take away your subscribers.
In comparison, search traffic is great but can vary depending on the number of keywords you’re ranking for.
Plus, any dramatic changes to Google’s algorithms can also impact your business badly if it is overly dependent on search traffic.
In short, as an investor, look for a site that has good search traffic but also has room for further diversification.
Once you’re able to grow other traffic channels, your site will become much more valuable and will give you a significantly higher ROI when you decide to sell it.
10. White-hat SEO and genuine backlink profile
A site’s history with search engines, particularly its backlink profile, is one of the most important things to evaluate before investing your money.
A site with a tainted past or a shady backlink profile is always at the risk of being penalized. Plus, if you invest in such a site, every future buyer will point out its shady past.
Here are the things you need to see in a site’s search profile:
We’ve already touched upon this point in an earlier section. But checking domain history is also important from an SEO perspective.
Make sure the domain of the site you’re investing in hasn’t been associated with any dubious businesses in the past.
Domain Authority (DA) is another important thing to check about the site you’re acquiring.
DA has no direct relation with Google’s search algorithms but it is a metric created by Moz which measures the strength of a domain name based on its backlink profile and a few other factors.
A high DA score usually means the domain is credible and can be used. It can be manipulated, but that’s not the point here.
For example, in the screenshot above, the searched domain has a DA score of 43 which is decent.
Plus, it has a Spam Score of 8% which isn’t great but acceptable.
Spam Score indicates the number of dubious or spammy sites linking to a domain.
You should avoid domain with a high spam score.
Another thing that you need to check while evaluating a domain is Trust Flow (TF).
TF indicates the number of referral clicks a site gets from other trusted domains.
Again, this has nothing to do with Google’s search algorithms but its a metric introduced by Majestic that is widely accepted in the SEO industry for evaluating domain names.
This one is hard to manipulate.
The other score in the screenshot is Citation Flow which indicates the number/frequency of times a URL has been linked from other sites.
As you can see, the URL we searched doesn’t have great scores for either metric.
Overall, checking all these scores will give you a pretty good idea about the quality of a site’s domain name and whether it is safe to acquire it or not.
This is a crucial point.
Unless you’re an experienced SEO who knows what he’s doing, investing in a site that has been penalized in the past is not a great idea.
How do find if a site has been previously penalized?
First of all, you could ask the owner to share the site’s Analytics data with you so that you can see if there are any abnormal traffic dips anywhere on the graph.
A sudden loss of traffic usually a good indicator of a site getting penalized.
You could also ask for Google Search Console access to see if there are any manual penalty notifications in it.
Or you could use a free penalty checker tool which will give you the approx traffic stats for a domain name.
As you can see in the screenshot, this tool gives you a detailed timeline of all the different Google Penalties and your site’s traffic numbers for the corresponding dates.
If you see any abnormal traffic dips, that’s usually a bad indicator.
If not, everything’s fine.
This is another very important aspect of evaluating a site’s SEO profile.
Countless studies (and our own experience) including this one by SEMRush shows that backlinks are among the top factors Google considers while ranking sites in its search results..
But not every backlink is good for your site.
Which is why it’s important to carefully look at the backlink profile of the site you’re planning to invest in.
Ahrefs is the best tool for backlink analysis in our opinion. Log in to Ahrefs, search for the site’s URL and go to the “Referring Domains” section get the list of all the unique backlinks pointing to the site.
What exactly are you looking for in this list?
Low quality and spammy backlinks coming from dubious and unrelated sites (look for DR score 0-10)
It’s best to avoid a site that has the majority of its links coming from one-page niche sites or from sites with copied or low-quality content.
Too many links from low-quality sites is also a strong indicator that the site might be using PBN links (a grey/black hat SEO technique). But it’s hard to claim that with certainty.
PBN links are effective if used properly. We, at Alpha Investors, don’t have issues with them. However, if you’re purchasing these ‘Private’ Blog Network links from different vendors, you’re shooting yourself in the foot, because you’re opening your new investment to a whole world of trouble.
What is certain, however, is that a strong backlink profile is made up of a combination of follow and no-follow links and a diverse anchor text profile from websites in relevant niches.
Plus, editorial links placed in the content body are more valuable than links in author bios or comments section.
Spend a good portion of your time analyzing the backlink profile of the sites you’re interested in.
Because backlinks alone can make or break your business.
Additional assets associated with the business
Other than the URL, design, traffic, revenue, and email subscribers, see if the site you’re evaluating has any additional assets that can come handy.
These could be social media profiles, dedicated Facebook groups, or any other online community that the site has.
Depending on a site’s business model, social media profiles with large and engaged audiences can be a real game-changer.
Plus, many blogs rely on their Facebook Groups to drive traffic to their new content.
All of these are useful and can come handy in growing the site you acquire.
Plus, once you eventually sell the site to someone else, these assets will help you get a better deal.
WEBSITE FLIPPING: WHO SHOULD INVEST IN WEBSITES?
We’ve described the fundamentals of website flipping in this article and we’re sure you can now see the potential that this business model offers.
But is it for everyone?
Unlike starting a blog or offering freelance services online, website flipping is not for beginner marketers with empty pockets.
It is also not the right business for someone who’s short on cash and cannot hold onto an investment for at least a year.
If you want to uncover the true potential of this business model, you must be patient and prepared to invest money upfront.
It might appear risky from the outside but as we’ve described in detail, there are fixed parameters to evaluate websites for investment.
Any website that meets the required criteria is not only safe to invest but also has a strong probability of giving you a very high ROI.
You need to do a couple of things.
First of all, seek professional advice and don’t jump into this business without carefully analyzing all the points we’ve shared so far.
With professional website investors and experienced marketers on your side, you’ll be able to make all the right moves that are required to buy, grow, and sell a profitable website.
Secondly, you must be prepared to play the long game and have an overall budget of at least $15K-$20K per annum to successfully run and improve the site.
If you currently lack the funds to do this, we suggest that you wait till you have the required budget.
However, if you think you’re ready, there’s no better time to invest in an online business.
ARE YOU READY TO INVEST IN A WEBSITE?
If you’ve read this far, you already have more knowledge about investing in online businesses and flipping websites than most people.
As we’ve repeatedly said, investing in websites has a lot of similarities with real estate investments.
The fundamentals of both models are almost the same – buy a site, improve it, sell it for a profit
However, as we’ve shown you with examples, it is a much more flexible and low-risk investment model that not only promises much higher returns in quicker time but also allows you to make money with several different methods while you own the site.
Your job is to identify under-performing sites that have all the right basics and potential to grow. For this, you should seek professional help that we offer here at Alpha Investors.
If you make the right moves, there’s no reason why you can’t benefit from this hugely profitable and emerging business model.
Website Investing Guide – Frequently Asked Questions (FAQs)
What are online assets or digital real estate?
Any online platform that you fully or partially own, has a regular audience, and can be monetized is an online asset (also called digital real estate).
What are the popular digital assets that are bought and sold?
Websites, domain names, blogs, mobile apps are all popular digital assets that are frequently traded online.
Are websites an asset?
Yes, all website types like blogs, eCommerce stores, magazines, niche sites, affiliate sites, etc. are popular digital assets.
Where can I buy and sell websites?
There are many popular marketplace sites and brokerage companies where you can find sites to invest or list your site to sell. We have launched Investors Club as an exclusive community where website investors and sellers can trade high-quality sites and online businesses in a secure environment.
What is the initial investment amount in a website?
It really depends on the nature of the business you’re investing in. But website investments can start for as low as $10,000.
What is the typical return on investment (ROI) for websites?
Depending on several factors (like the business model, niche, site age, revenue, etc.) a website can sell for anywhere between 20x to 60x of its monthly profits.
How long does it take to buy, grow, and sell a website?
Again, it depends on the condition of the site at the time of acquisition. But generally, investors should be prepared to hold on to sites for at least a year.
Is it more profitable, from an investor’s perspective, to buy an existing website or start a new one?
Buying an existing website with a proven revenue model and consistent traffic is much more profitable becuase such sites can be grown and sold faster.
What website types are ideal for investment?
Websites that are in an evergreen niche, generate most of their income through passive sources and require minimal management.
What website types should investors avoid?
Websites with no proven revenue model, websites that have been around for less than a year, or sites that generate money primarily from services aren’t ideal for investment.
What are the major red flags for investors while evaluating a site?
Low-quality content, sudden traffic drops, a dubious backlink profile, frequent ownership changes in a short time are major red flags that indicate there’s something wrong with the site.
What are the most popular website monetization methods among investors?
Amazon Associates, Google Adsense, Lead Generation Sites, and Shopify Dropshipping stores are among the most popular monetization methods among investors.
Is it wise to reinvest your money in websites?
If you plan to generate a regular income from website flipping, it’s always better to use your profits from a website deal to reinvest in more websites. Gradually, this will allow you to build a portfolio of sites that you can leverage any time you want.
Let us know if you have any questions in the comments section.