Website Investing: Your Guide To Profitable Digital Assets

Who Should Get Started With Website Investing?

Website investing is for you if you are…

• Looking for a long term online business
• Looking for a cool side hustle and possibly make some extra income
• NOT looking for a get rich quick scheme. Do not get involved in website investing if you need to get out of debt or make money quickly. There are no guarantees in investing and website investments are more exposed to risks you cannot control such as Google updates

Investing in websites is a serious business model and / or investment strategy and requires focus and determination to succeed.

What is website investing?

Website investing is the act of buying, selling and renting out digital properties with the purpose of getting a positive return on your investment. 

Why website investing is a good idea

For the past hundred years, investing in physical real estate has proven to be extremely profitable. Unless the sun turns black and the world collapses, real estate investing will probably still continue to be profitable for the next hundred years. However, I also expect digital real estate to become an important assent in every savvy investors portfolio. 

Except that websites aren’t physical investment objects like buildings, digital real estate have many similarities to traditional real estate. 

Here are some benefits of adding websites to your investment assets:

• Possibly higher ROI than other traditional investment vehicles, including real estate 
• Website investing is open to all budgets, unlike real estate which requires (often) a lot of upfront cash or difficult financing strategies
• Several exit strategies, comparable to real estate
• No property tax! No regulations. No application papers to local authorities
• Relatively few big players in the website investment field as it is still considered an “alternative investment” which makes room for some good investments if you know what you are doing

Bear in mind that website investing is still in its infancy and it is a bit “wild west” for good and bad. It’s more or less unregulated and it can be difficult to verify income claims, traffic claims and to audit all the other bits and pieces which makes a website transaction profitable. 

Therefore, if it is your first time investing in a website I recommend you either start small, or buy through an established broker that will vet the website on your behalf and handle the monetary transactions.

Important auditing tools include Ahrefs for traffic-, backlink- and technical website audits and preferably access to Google Analytics prior to purchase.

• Moved to a much faster hosting provider, WPX. That alone increased site speed with nearly 45%.
• She added an about us page, got a real address, added a WhatsApp phone number, google map and set up social profiles on Facebook and twitter. She also got around 250 citation links from SeoButler.com
• She installed nitropack.io with CDN and used Ahrefs to run a website audit. She then moved on to improve the site according to the feedback from the Ahrefs report with main focus on website speed. Overall she managed to increase speed by 84%!
• She cleaned up the silo structure, and moved some articles to a different silo. 
• She took a chance and removed thin content and re-directed the old pages to relevant pages with better content.
• She hired a writer off Elance to add more content, rewrite old content and  to create a “Healthy Fitness Guide.” Around 25000 words were written at a total cost of $2500. She focused more on health and fitness instead of health and beauty. 
• Removed Adsense and replaced it with Mediavine. She also added affiliate products from Clickbank.com
• She added a lead catcher form and wrote a short follow-up series.
• Only when her site was healthy and loaded fast, did she move on to get backlinks.

Excluding her own time, she spent $5975 on content and backlinks over the first three months. She spent approximately $150 a month on content for the rest of the period (until the end of 2020). No additional backlinks were necessary.  

Results Mid-December 2020:

Income generated total from 2016-2019: $10863

Income generated in 2020: $7187.5

Profit / Loss total 2016- end of 2020: $1725

Average monthly visitors 2020: ~45000

Now you might be thinking: “Huh, that’s not much?”

Well, here’s the kicker:

By mid-december 2020 the site is generating $625 in monthly income on average from Mediavine and affiliate offers. With some better CRO optimization it could probably be even more.

The monthly expense is only a little under $200, meaning she is making $425 in pure profit. The website is now listed for sale through a broker and should the transaction go through, she will pocket $17000 in pure profits. Not too shabby considering she only started with an initial investment of $1350. 

Is Website Investing High Risk?

Investing is always risky and website investments are no different. Some of the risks associated with website investments are a bit different than other investments, though:

• Unlike real estate, but similar to stocks, websites can rarely be insured
• Your investment can lose its value because of changes in the way the search engines weight the importance and ranking of websites
• Hackers and negative SEO can hurt your website
• It’s difficult to know how changes and improvements to your website will improve its ranking in the search engines. Even if you follow best practices, you can find your top pages thrown out of the search results when you wake up the next morning
• Your website may crash, requiring immediate action to get it back up and running to avoid losing search engine rankings. It’s not fun when it happens at 8 o'clock on x-mas eve! 

Despite the risks, I refuse to label it high risk. Why? Because there are many ways you can mitigate risk. When you consider the risk / ROI ratio, website investments tend to come out pretty good when you know what you are doing.

Different ways to invest in websites

Every investor has their own strategy and approach. In the following, I will focus on some of the most common paths you can take:

1. You can create a website from scratch using a brand new domain name or get an aged, quality domain from Odys Global to skip the Google sandbox period. Add quality content, get backlinks and wait for the search engines to organically rank your website and send you traffic. Over time, you should start seeing the income surpassing your expenses and you can eventually sell the site for 25-40x net monthly revenue.

2. You can buy an underperforming website (similar to the ROI example further up this blog post). Fix the website, multiply its revenue and flip it (“Website Flipping”). You can of course also choose to keep it for recurring revenue instead of selling it.

3. You can create a website catering a local market or buy an (local) underperforming website and rank it in the search engines. Once it is getting solid traffic, you can start collecting leads which you sell to local businesses. This method is often called “rank’n’rent” as you basically create an information site for lead generation purposes. For instance, you create “plumbinginaustin.com” and sell the leads generated from that website to one or more local plumbing companies. 

4. A fourth method, which is for serious high-net worth investors, is to buy a successful, cash generating website and have a third-party operator handle the day to day operations of the website. I recently spoke to an investor who bought a site from Alpha Investors for two million dollars. He has an operator handling all the maintenance, while he pockets the money. Successful, income generating websites, from a broker, usually starts around the $20k mark for a site generating +/- $500 monthly profits. 

All the methods above, except for #4, require you to have knowledge of due diligence (similar to if  you were buying a business),  search engine optimization experience, knowledge of conversion rate optimization (CRO) etc which is not something you just learn overnight. 

As a result, you are left with two options:

1. Learn as you go along. Expect to pay a premium for learning and failing as you move forward

2. Hire someone to do most of the work for you, or a coach to steer you in the right direction. A coach or mentor is cheaper than paying someone to do all the work for you, and their fee will often be worth it when you consider expenses and time you will save

What is the right method for you?

It pretty much depends on your investment budget.

If you have less than $2500 to start with, your best bet is probably to start a site from scratch and learn as you go. To slash your learning curve and avoid costly mistakes, and also get help with techie stuff, you can hire me (Martin Sand) as your coach and mentor (or any other coach with relevant experience). If you hire me to help you out, I will be guiding you step by step and even help with some tech stuff, seo etc. I am an affiliate SEO with 20x years of search engine optimization experience. 

If you have $2500-5000 your best bet would probably to buy a new ready made site or invest in a website already making a little bit of money through a website broker. You can still hire a mentor like myself or someone else to short-cut your learning curve.

If you have  $5000-20000+ to invest your options are more open. You can buy a premium site already making solid income through a broker and do the work yourself or you can become a completely hands-off investor by buying through a broker and hand the newly bought site over to a website management company (aka website operator) who will run your site and take care of everything, including selling it at a (hopefully-) premium price down the line. 

Where To Buy Websites

Depending on your budget and how much you want to be involved in the selection process, there are plenty of options.

The most common one is Flippa. Unfortunately, many unscrupulous sellers prey on new investors so this place is riddled with scammers. Tread carefully. 

If you have a bit higher budget ($15k+) your best bet would be to get involved with one of the established brokers such as FE International, Empire Flippers or Investors Club / Alpha Investors.

A serious broker is vetting the sites they sell. They vet backlinks, sellers, income claims, the whole shebang.  This should help you avoid buying “lemons.” 

Unfortunately, since the brokers need to make money from the website sales they typically only take on sites selling for $15k or more.

So, as a new investor with limited budgets you could start with Flippa or facebook groups such as Flipping Websites or other private groups. Just make sure you do your due diligence properly.

How Are Websites Valued?

A pretty standard method is to determine the price of a website based on a 25-40x net monthly profit multiplier, plus/minus benefits and drawbacks of a website.

Brokers also add other parts to the equation, but this is roughly how it's done.

Example:

A website / online business has a $60,000/mo revenue, with a $35,000/ mo net profit.

Evaluation would then be $1,400,000 using the 40x multiplier.

Website Investing: Step-By-Step [Quick Guide]

[1a]

Find a website for sale according to your budget, as described above.

[1b]

If you are using a broker, skip to step 2. If you are doing the deal making yourself, this is what you need to do:

Find a site through Flippa, or the Flipping Websites Facebook group from Investors Club. Sites not making money yet but which are out of the google sandbox could be a good starting point if you are short on cash. 

Make a best-guess estimated value based on available information and do a website analysis with a tool like Ahrefs or SEMRush.

To make a valuation for a site not yet making any money, you should NOT buy based on “potential!”

You should buy it based on the following factors:

• Quality content. If the site has quality content, you can take word count and multiply it by an average price per word for content in your niche. Let’s say you can get quality content for $0.05/word. If you have a site with 25000 words of content, excluding about us pages, tos etc, you get a price of $1200
• Domain age and domain authority, This one is a bit tricky. You will have to consider the time and money it would take you to bring the domain up to its current authority level. The most common authority indicators are Ahrefs Domain Rating (DR) and Moz’ Domain Authority (DA). It could take anywhere from three to nine months for a site to get out of the sandbox so consider the value of time. 
• Current backlinks. Does the site have any backlinks? If so, what’s the quality of these links and how much would it cost you to get these links on your own? If it has links from sites such as Forbes, Visa and Techcrunch they are going to be harder (and more expensive) to get than shitty links from thousands of web2.0 properties.  Quality of quantity.

Find gems with good quality content not making any money and approach the seller. 

How to reach out to the website owner?

Be short, serious and polite. It’s not that difficult.

Once they respond positively, ask to see proof of everything, preferably live access to stats or statements certified by an accountant.

Ask for a live video meeting with the seller and ask for an ID like drivers license.

If you don’t feel good about the answers they give you, move on to another seller.

Obviously, you want to buy at the lowest price possible and the seller wants the maximum price. However, for a deal to feel good for both parties it is important that you both feel good about the price. This is also crucial if you agree on receiving support from the seller after the sale.

[2]

Using a broker, you can scan the marketplace and do your initial due diligence by looking at the provided information. You can then approach the broker for more information or make a bid. 

You can even ask the broker to find a good deal for you based on your interests and skills.

[3]

Structuring the deal. Regardless of where you buy your site, you could agree on an earnout period. However, this is most common for the sale of higher priced websites.

Use an escrow service to handle the transaction.

[4]

Aftersale support. Agree on what kind of the support or service the seller should provide after the sale. Should the seller offer support via chat, email, telephone? Response time? A hand-over period where the seller helps out with the transfer of the website and is replying to your enquiries could typically be from days to three months. '

Website Investing - Final Thoughts

Investing in websites can be a challenging and fun way to earn extra income on the side. It can also be a part of a bigger investment strategy to diversify your investment portfolio.

While there is a learning curve, anyone already possessing parts of the skills needed can outsource the other parts to leverage the time of others, more experienced staff.

In my view, investing in websites will continue to grow as a way to diversify investment portfolios big and small. Remember, the best time to invest was years ago. The second best time is now. So start learning and take action today.