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WEB/DIGITAL Buying Existing Websites

LightHouse

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My recent revelation to sell off domain names i no longer use to raise capital for my company brought me to sedo.com and a few other sites, i notice alot of these passive income type sites are for sale in alot of diffrent variations. two questions

#1 How volitle are these sites and would they be strong investments?

#2 isnt the genreal rule of thumb 3 months revenue etc a proper valuation as opposed to 12 months or even 3 years like a B&M business??
 

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bflash98

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Aug 28, 2007
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They are pretty volitle hence the reason they usually sell for 6 to 10 times earnings per month.
 

FT1

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A couple of years ago, A guy reportedly sold his 38 sites for $5,000,000. They were bringing in $50K monthly. So that's a little over 8x's annual.

Another guy sold a site that grossed $100K monthly and netted $57K/mo., for $357,000 about a year ago, so I don't know that there is a general rule of thumb...
 
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LightHouse

LightHouse

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got ya, seems like when reading the ups and downs on various sites, its more fitted with someone a bit more experienced than I.
 

tbsells

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A couple of years ago, A guy reportedly sold his 38 sites for $5,000,000. They were bringing in $50K monthly. So that's a little over 8x's annual.

Another guy sold a site that grossed $100K monthly and netted $57K/mo., for $357,000 about a year ago, so I don't know that there is a general rule of thumb...

Why on earth would anybody sell anything for a little over 6X the monthly NET? He got about .5x's annual.:confused:
 

MJ DeMarco

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They are pretty volitle hence the reason they usually sell for 6 to 10 times earnings per month.
Valuation depends on the source of the cash-flow. A membership site might sell at higher valuations than say a ebusiness that is heavily involved in PPC.

Generally, I see Ebiznesses valued in the 2-5X net annual earnings range.

If the Ebiz makes $100k/yr, it should be valued in the 200K - 500K range. Again, there are a lot of variables to consider. For example, if 95% of the revenue is generated via SEO, the valuation would be LOWER simply because a simple Google algorithm change would destroy 95% of the revenue.

Do due diligence -- only that uncovers the true valuation.
 

Luke12321

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I see people buying up websites that rely only on PPC and I cringe at the thought of this! They are tons of variables to consider in buying a business and MJ said it...do your due dilgence. I am very interested in buying a website business but have not pulled the trigger yet. Where can you find listing of sites up for sale? Has anyone every purchased an established site?
 

aptohosting

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I would stay away from Sedo, I have done alot with sitepoint.com and they work great!
 

cantwait2

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Hey MJ, when you refer to net earnings are you refering to net profit or turnover (sales).

I believe a lot of sites are valued on a multiple of EBITA but again, so many variables.
 

Andrew

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You absolutely have to know what you are buying, and should have plenty of previous experience building and running profitable web sites.

95%+ of developed sites I have seen for sale have one or more of the following problems:

-no visitors, its just a template

-completely relies on free search engine traffic, often from a handful of terms. As MJ points out, a few small changes at Google and you now own something throwing off only 5% of its revenue.

-content violates trademarks and copyrights, often user unloading the site quickly after receiving a C&D.

-revenue source extremely volatile. Example: Last year there were guys raking in $50k+ a month because they used Yahoo's new PPC ads with images placed next to them. This meant ads would bring in over $1 a click in revenue when the traffic was worth around 1-5 cents. After getting kicked out of Yahoo's program a lot of guys tried unloading their sites to novice buyers, in some cases for six figures.

-market is volatile. The "backbone" of internet profits for the last 10 years -- porn, pharmaceuticals, and gambling have all undergone significant declines. Just this year we've seen two very mainstream revenue pillars, dating & mortgages take a massive hit as well. Many people are shocked to see how quickly a market can turn around. If you buy into a website operating in a single industry your investment can disappear very quickly.

I would suggest having a solid understanding of the market you are going to become involved with, presuming its a sizable purchase.

-Site is labor intensive and low revenue. From what I've seen, most sites that are worth money fall into this category.

If you are buying a website, there are two big things that often make the purchase worthwhile -- the domain name (generic dot com) and the existing user base. Truth is, most sites for sale can be easily replicated. You need to look at that possible purchase and ask yourself why you need to own that specific site rather than copy the idea.
 

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Peter2

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Great information Andrew.

Speed +++
 

MJ DeMarco

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Hey MJ, when you refer to net earnings are you refering to net profit or turnover (sales).

I believe a lot of sites are valued on a multiple of EBITA but again, so many variables.
I'm referring to EBITDA

(Novices: EBITDA...Earnings Before Interest Taxes Depreciation Amortization)
 
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LightHouse

LightHouse

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Excellent, i appreciate the direction. Like I said id be better off sticking to my industry and gathering domains to push twords my ecommerce site that compliments my B&M business.

Meanwhile I was qouting out SEO stuff for my site to get more traffic, I had heard that alot of info was free on the open market these guys want 8-20k to work on my site. Is this something i can do or find someone local with less experiance and still see results? or is that money really worth it?
 

FT1

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Why on earth would anybody sell anything for a little over 6X the monthly NET? He got about .5x's annual.:confused:
Yeah, the guy claimed he had bigger fish to fry so he just wanted to get rid of the site. The site was a review site selling ebooks. Imo, he got in early on the whole review site thing and sold off the site as people began to flood in with similar sites.
 

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