Psst…Wanna Buy a Website?

Websites Can Be Attractive Alternative Investments

Have you ever yearned to buy a website? Someone 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 websites, selling, and trading, right? Sure enough, some businesses 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

Buying an operating website package that includes

• a domain name
• content
• verifiable revenue and
• a history of profitability

might be a good deal at the right price.

Whether buying or selling a website, keeping one running is a bigger challenge than remodeling a house. Websites, by their nature, are dynamic. They are affected by market forces, competition, changes in technology, security threats, and more. What’s more, the shelf-life of a website can 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 are purchasing 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 dot 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, but though WordPress is open-source software, the site may not be free of add-on expenses. Under the visible website purchase 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.

• Flippa —the most popular online digital property marketplace. A high volume of websites, mobile apps, and other digital assets. It’s easy to join as a buyer, seller, or both. Verification services help buyers with due diligence.
• Empire Flippers — sites that have been vetted and verified. Empire Flippers have a podcast.
• FE International — another broker that vets their listings. FE International has a network of global investors looking to buy high-quality websites.
• MicroAcquire — services for buyers and sellers of business startups. They offer verification, business advice and support, and a blog with virtual real estate tips.
• BuySellEmpire: This broker offers services for buyers and sellers, as well as an appraisal service that will allow you to verify the worth of your site, and command a fair asking price.
• BizQuest: A simple online listing service featuring franchises and businesses of all kinds including brick-and-mortar companies with their websites included.

There are websites for sale out there. Some need work and others are turn-key. If alternative assets seem attractive, an adventurous investor might do well to explore digital flipping and buy a website. Or a few.

We think you’ll also like:

1. Investing Basics for Beginners
2. Purchase Agreement Essentials – Boilerplate Provisions Terminology
3. Determining Value – Choosing a Business Appraiser

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

1. Investing in Commercial Property 2022
2. Due Diligence Before Investing
3. Buying a Business 101 – 2022

©2022. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.]