Buying Sites On Flippa – Build v.s. Buy

Nothing against Flippa – we love it.  We get a lot of ideas from Flippa, which fuels our growth in niche site development.  But one of the biggest questions you need to ask yourself BEFORE you bid and buy a site on Flippa is should you build the site yourself?  Also you want to look at the sale details carefully.  Very carefully.

First thing when you look at any site for sale (or domain only sale) is look past any bonuses that are being offered.  They are FLUFF and more often than not you can find those bonuses on the web for free (one way or another).

Most of the bonuses offered are old.  In many cases the prices shown are over inflated.  For example one auction we were looking at offered free domain hosting, valued at $199.00 — excuse me?!  If you are really paying that much you are stupid.  Hostgator offers one of the cheapest web hosting around and you will pay less than $100.00 per year if you decide to go month-to-month.

Another over inflated bonus we see many times is the after-sales support for 1, 3, 9 or 12 months – this can be worth anything from $ to $$$$.  While your time is valuable, it’s only worth as much as someone is willing to pay for it.  When we’ve looked at buying a retail business, after-sales support is part of the sales contract.  Buying a virtual property should be no different.

On one posting we read that 3-months support was included as a bonus worth $997.00 and in another posting (from the same seller) 3-months support was included as a bonus worth $150.00 — WTF?!

In short the value that is attached to the bonuses is crap.  I can sell you 13,000 unique visitors to your website for $50.00 — but advertise its value at $197.00 — how the hell would you know?  Also what is 13,000 unique visitors to your site anyways?  There is no guarantee that they will buy anything, or click on your links (if Adsense or other advertising).  These kinds of practices are just used to mask the real value of the site/domainLOOK PAST IT!

Something else to consider, but look past is all the Google keyword analysis provided in the postings.  This is very common on high CPC keywords specifically in the auto insurance, or health insurance categories.

You’ll see a posting that states the CPC is $25.00 – $35.00 range.  If you are a newbie the first thing you think is “WOW – if someone clicks on an advertisement, I make $25.00 per lick.  If I get 10 clicks per day… I’m RICH”.

Ummm.  No.  You’re not.

First off, click-through rates can be miserable unless you’re using some very stealthy techniques but those are generally frowned upon by Google (and most other companies).  If you’re “caught” your account is shut down.  Forever.

Using Adsense you could make $10.00 – $20.00 per day, but not everyone gets there as it is hard work to make this from one site.

Next thing to consider is that it takes A LOT of work to rank high for those keyword terms.  Go ahead and do a Google search for something like temporary health insurance, short term health insurance, cheapest car insurance and you’ll see what we mean.

What you need to do is rank for the l-o-n-g tail keywords in the niche, not something you are going to be told on the listing (and not something we’re going to talk about in this post).

The phrases rare domain, rare find, one-of-a-kind very rare are potentially postings you want to avoid.  SO what if there are 20,000,000 global searches for that keyword combination – CAN YOU RANK FOR THAT COMBINATION?  That is the key on these types of listings.

Then there are some type of listings you simply want to avoid at all costs.  Specifically in the travel category unless that site is in a very specific niche (you really need to do some good research and dig for long-tail keywords and get into specific niches – I’m thinking along the lines of same-sex travel vacations, same-sex adventure travel, adventure travel for people with physical challenges, disabilities travel vacations – you get the idea).

There are dozens of cheap hotel, cheap room, cheap cruise, cheap travel sites for sale.  All automated, but the industry is so mature that the companies that are behind those domains (the owners are probably pimping… I mean affiliate of some travel industry affiliate program) provide phenomenal tools to fully automate websites.  Everything from articles and information, down to highly developed tools to allow visitors to search for very specific details of a vacation.

There is a lot of competition in the travel industry – every wonder why there was so much consolidation going on with travel agencies over the last 10-15 years?  When we did a search on Flippa for travel – there were 70 hits.

Don’t get me wrong – there are some good listings in there, but the good ones are expensive and unless you are willing to spend the money and WORK AT IT even spending $5,000 on a profitable site will result in a loss if you do not continue to manage and maintain the site.

That’s something else to keep in mind, the profitable businesses that are selling are profitable because they are being managed.  If you buy something that is profitable and don’t do anything – it will suffer.

So what are you to do?

Something else you need to consider is whether to build versus buy.  Years ago when we looked at a IT consulting business that was selling in the 6-figures, we put together our own business plan on what it would take to build the business from scratch: pick our own name, establish ourselves, find our own clients, etc., after all that we needed to determine how long it would take to become profitable.  This type of analysis can be carried onto any type of business bricks-n-mortar, or virtual.

Sometimes it is worth to buy a site just for the technology behind it and sources of information.  For example we saw a couple of great sites that had a fully automated custom developed shopping cart solution integrated with PayPal and several others.  The site was selling for $100.00 — a GREAT deal even though we didn’t care much for the site itself.  We’ve seen many off-the-shelf solutions that sell for well into the hundreds of dollars for such integration, and here we could pick something up for much, much less!  The bonus was that the way it was developed, we could take the code and drop it into a number of sites and it would work.  That means we could potentially package the code, add additional custom work around it and resell the script for 4x what we paid for the site.

You are probably wondering if we bought it.  Yes, we did.  But no, we decided not to re-package the shopping cart solution and no, we’re not interested in selling it right now.

Flippa and other sites like it offer a great service, and for someone that has little experience in website development it may be the ideal way to start your virtual business empire; however approach the sellers with caution and ask questions before you bid and possibly buy the site.

Hopefully the advice and information provided in this article will help you in making the right decision.  If you have questions, ask away!  Simply leave us a comment and we will reply.

About Rob 'n Mo

I'm a man of mystery. I like anonymity, but on the WWW there is not much of it...
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