Psst…Wanna Buy a Website?

Websites Can Be Attractive Alternative Investments

Have you ever yearned to buy a website? Someone once suggested you can flip a website like a house. I guess there are some similarities — there is a market for pre-owned websites, just like pre-owned homes. But that’s where the similarities end.

Domains and Websites

A domain name and a website are two different things. A domain name is just an alphanumeric label, registered with the Internet Corporation for Assigned Names and Numbers (ICANN). Buying or selling a domain name is pretty simple. Most web hosting companies provide a service anyone can use to search for and register a domain name. Some web hosting companies list registered domain names for sale on behalf of the owners, and some owners offer their registered domain names for sale on the open market. Although a domain name may be included with the purchase of an established website, domain names are a different ballgame.

The Pre-owned Website Marketplace

With that out of the way, what about buying and selling established websites? The Internet, being the cornucopia that it is, should be a goldmine for buying and/or selling websites and trading, right? Sure enough, some businesses do specialize in buying and selling websites. Others list all types of businesses for sale — which may include websites. Even eBay has a category for websites and digital assets.

Flipping a Website?

If you think flipping a website is like flipping a house, be aware there are some very important differences. When flipping websites, there are no regulations protecting the interests of buyers or sellers. A website that produces revenue is a business. The buyer must perform due diligence, a process that requires business expertise that may involve consultants, lawyers, business advisors, and so forth. Most home buyers only need the help of a real estate agent, a title insurance company, and maybe a home inspector.

One company, flippa.com, offers a suite of services designed to perform due diligence tasks. These come at a cost but disclose verifiable facts unique to websites and other digital properties. Other companies provide fewer verification services or none at all.

Operating a Website

When looking at buying an operating website, there are certain aspects to that purchase you want to make sure come with the website. Some of these might include:

• A Domain Name
• Content
• Verifiable Revenue
• A History of Profitability

Whether buying or selling a website, keeping one running is the bigger challenge. Websites, by their nature, are dynamic. They are affected by market forces, competition, changes in technology, security threats, and more. The shelf-life of a website can also be short if the owner doesn‘t have the resources to keep it up to date. Maintenance is an ongoing expense beyond the initial purchase price.

What’s Included?

If you purchase a pre-owned website as an investment, you need to know exactly what you’re getting for your money.

The primary objective of buying a digital property is, in most cases, revenue and potential profit. The new owners may continue operating the site as-is, covering expenses, and collecting the profit. But there are other options. Sometimes, individual parts of a website have stand-alone value.

A savvy buyer may make a purchase primarily to obtain the database, because databases may contain customer lists, lists of advertisers, and other worthwhile information. Consider that extracting raw data from a database requires technical knowledge and possibly additional costs like tech support and software fees.

A domain name, as we talked about before, might be the company brand name. A recognized brand is a profitable business asset. The domains in highest demand are short, easily recognizable words, like mywebsite.com. There are other extensions — terms that appear after the dot — but .com is the prize. For those reasons, a buyer may scoop up an entire business website just for the branded domain.

SaaS

Software as a Service (SaaS) is a platform that connects users with cloud-based apps like email, project management, or calendars. Well-known examples include:

• TurboTax
• Zoom
• Salesforce
• Shopify
• Gmail

Of course, the average buyer may not be negotiating for these any time soon. But lesser-known SaaS products could contain proprietary code with investment value. A knowledgeable programmer might adapt the code for another purpose or fit it into an existing website’s system as an extension.

WordPress

For decades, WordPress has been the pre-eminent website platform. WordPress is an open-source content management system (CMS). A CMS bundles visual appearance, administration, and content editing. Chances are a buyer shopping for a complete website will run across WordPress installations for sale.

Some may be profitable turn-key operations. Though WordPress is open-source software, the site may not be free of add-on expenses. Under the visible website, there might be ongoing costs for custom themes, plug-ins, or custom code, which may affect the profitability of the purchase.

Buyers need to be aware that website platforms’ underlying code changes often, sometimes daily. It’s up to the site owner to install or implement those changes so the site remains viable. Due diligence includes a site analysis to determine what’s happening under the pretty images.

Buying or Selling a Website

The marketplace is populated by website brokers who facilitate buying and selling sites. A few notable brokers include:

• Flippa
• Empire Flippers 
• FE International
• MicroAcquire
• BuySellEmpire
• BizQuest

There are websites for sale out there. Some need work, and others are turn-key. If you’re an adventurous investor looking for an alternative asset, you might want to explore digital flipping and buy a website. Or a few.

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Digital Assets as Equity Shares and Securities
2. Digital Assets and Bankruptcy
3. Digital Assets as Collateral: UCC Article 12

This is an updated version of an article originally published on November 15, 2022.]

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