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How To Make Money Online with Flippa

written by Guest Blogger on April 15, 2010

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I’m sure you have all heard of Flippa. If you were selling a website 4 or 5 years ago you would write the sales pitch for your website and post the copy in the marketplace room of over a dozen or so webmaster related forums. One of the best places to do this was the SitePoint Marketplace, which was rebranded as Flippa a year or so ago.

Today Flippa is recognised as the number 1 place to buy and sell websites online (domains are sold too but domain trading is more active elsewhere). Dozens of new websites are listed for sale everyday, from small turnkey websites with duplicate content to businesses which sell products and make tens of thousands a month.

Unfortunately, there are a lot of sellers on Flippa who will do anything to increase the value of their site for sale, ranging from those who bend the truth a little to scammers who will lie about their sites income and traffic. Though if you do your research and get proof of traffic and income you’ll be OK.

Unrealistic Website Valuations

FlippaFlippa is fast becoming a great place to sell a website but a terrible place to purchase one, largely part to it’s own popularity (a victim of it’s own success if you will). It really is hard to find a good website at a realistic price on there now and the few websites that are priced well are snapped up very quickly.

The main problem is valuation. Many sellers become too attached to their websites and therefore have unrealistic valuations of them. Unfortunately, this tends to happen with medium to large sized sites as sellers at the lower end of the market are usually happy to take anything they’re offered. This can be very frustrating as a buyer, particularly when a site comes along that’s perfect for your portfolio.

I had a discussion about this subject two months ago with Chris Beasley, a webmaster I admired greatly 10 years ago when he was an active moderator at SitePoint. Chris was selling one of his coupon websites on Flippa in February. Years ago this site was making over $1,000 a day, however competition and lack of updates over the years had dropped the income to around $200 a month, which was generated through the sites 120 unique visitors per day.

This kind of thing is common on the web i.e. the income for some websites are really high at the start because they were the first to enter the niche however competition from other sites (and changes in the way people browse and shop the web etc) starts to reduce income over time, particularly if the site isn’t maintained. Though you can’t let the fact a site used to make money skew your valuation of the site or you’ll never sell it (I once sold a discussion forum for $40,000, even though a few years earlier it was making $20,000 a month).

Which is why I was really shocked and surprised to hear that Chris wanted at least $50,000 for the site. Chris isn’t a fool. He has made good money on the web for over 10 years, but clearly he has an attachment to the site if he thinks a site making $200 a month is worth over $50k.

When talking about another site he owned he stated:

I would sell it for 25x yearly revenue, (the multiple AOL paid for WebLogs Inc, which didnÕt have much more traffic), but not 25x monthly revenue.

I don’t believe that there is an exact way to value a website. It depends on lots of factors such as the domain name, age of domain, search engine traffic, brand name, current income, past income, operating costs, future growth potential, time needed to run the site and much more.

Which is why I don’t agree with the consensus that every website should be priced at between 8 to 24 months income. Generally speaking, the more stable a sites income and the less time I need to spend updating the site, the more I would pay for it. However, 300 times monthly income is insane. It would be safer and more prudent to simply place $60,000 in a bank account and scrape off the interest, or even just set up an annuity.

Again, I remind you that Chris is an experienced webmaster and not some new kid to the block. And he is not alone in his thinking. Many webmasters who sell sites which they have owned for more than 5 years are pricing themselves out of a sale.

What do websites sell for on Flippa?

The price of a website is somewhat subjective. What’s worthless to you might be perfect for me, which is why you see some websites sell for more than what you think they are worth. Whilst we won’t all agree on what sites should sell for, we can look at at what websites are actually selling for on Flippa.

And that’s exactly what Kevin Eklund did this week in his article ‘How Much Is Your WordPress Blog Worth, Really?‘. Kevin looked at a number of auctions on Flippa and noted what they sold for. He also looked at the PR of the site, it’s traffic, and it’s monthly income.

He found that the average site sold for around 13 times the monthly income however a site sold for as low as 2.27 times monthly income and another sold for 63.06 times. Clearly these figures tell you nothing without seeing the site in question, though the average sale price does suggest that most sites sell for around a years income. It would be interesting to see what the average sale price was for sites under $1,000, sites under $10,000 and sites over $10,000.

Regardless of the average sales prices, it’s important to remember that every website is different, which is why some sites sell for just a few times the monthly income whilst others sell for over 50 times the monthly income.

The Opportunity Cost of Buying a Website on Flippa

It’s easy to get into a bidding war when you find your ideal website on Flippa. However, you should really set a cut off point for how much you are going to spend. Do some research and look into how much time and how much money it would cost to develop a similar site yourself (if it’s even possible to do so).

This is very simple to do with cheaper websites as they take the seller so little time to build. I stay away from most of these sites as I could build them myself and fill them with good content within 4 or 5 hours. They usually sell for a few hundred dollars and their monthly income is low so it takes a long time to get your investment back too. More importantly, the seller values on the site on 1 or 2 months income, which isn’t long enough to indicate whether this was a fluke or a sign of things to come.

It’s harder to do this with established sites as it takes a lot longer to develop them plus there are other factors you need to consider.

Here are some things which you should look into before buying a site:

  • Could you build the site yourself?: Do you have the skills/knowledge to build such a site. Could you hire someone to design such a site and/or write the content? If not, you may be willing to pay a little more for the site.
  • Time: How much time would it take to develop a site to the same level of income? Do you need this site now or would you be happy to wait and develop one yourself?
  • Traffic: Has the sites traffic been increasing or decreasing? You may be willing to pay a little more if traffic is increasing steadily every month whereas a site with decreasing traffic suggests you may need to spend some time updating it, therefore your valuation of the site should be less.
  • Income: How long would it take you to develop a site with the same level of income? Does their income come from many sources or from one particularly source (e.g. only advertising or only product sales). Could you purchase the site and diversify income?
  • Search Engine Presence: Are the sites incoming links organic or do they come from other sites the seller owns. If so, will these links be kept? You may have to spend a little more for a website which has thousands of organic links, though it could be worth it.
  • Domain Name: Does the site have a great domain name? Has the domain been registered for years? The site will cost more if this is the case. How much would it cost you to purchase a domain name of a similar quality?
  • Brand Name: It’s difficult to put an exact value on the brand name of any business, but you cannot disregard it. Established sites within a niche will be successful for years to come. This is why many established sites sell for a premium.

Put simply, is the website for sale worth the sales price or would you better developing a site of your own from scratch or even investing the money into a website you already own.

Overview

I am not trying to discourage anyone from buying a website on Flippa. It’s a great place to sell a website but there are still some bargains to be found for the shrewd buyer as well.

Though I do think that in many cases it’s cheaper and better to build a similar site of your own from scratch and develop it yourself, particularly when the site being sold is overvalued by the owner. My advice to you all is to take your time when placing any bid. Do your research and see if the site traffic and income is real, determine whether the price the seller wants is justified, and look at the alternative option of building a website on your own.

Remember, it’s a buyers market. So don’t rush into anything you will regret or let anyone pull the wool over your eyes.

Good luck,
Kevin

Kevin Muldoon is a webmaster and blogger who lives in Central Scotland. His latest project is WordPress Mods; a blog which focuses on WordPress Themes, Plugins, Tutorials, News and Modifications.

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{ 46 comments }

Charles April 15, 2010 at 10:21 am

Thanks for the post, I was actually making a list of places where I can sell one of my sites that I do not need.

ZK @ Web Marketing Blog April 16, 2010 at 7:11 am

So I am sure flippa is at no 1 for that.

What other names in your list ?

Profit Addiction April 15, 2010 at 11:00 am

You claim it’s great to buy but terrible to sell.

If the valuations are messed up, wouldn’t it be a bad marketplace overall?

Profit Addiction April 15, 2010 at 11:00 am

I mis-read. It’s great to sell because of high valuations, but bad to buy due to the same reason.

Need more coffee :)

ZK @ Web Marketing Blog April 16, 2010 at 7:13 am

Flippa is certainly growing.

Since the owner have past experience with sitepoint so I am sure he will be able to keep this site balanced.

Jacob April 15, 2010 at 11:30 am

As a person who has sold several sites on Flippa. It’s an ok place to sell. I actually think it functioned better as SitePoint Marketplace.

Things seemed to go smoother, and it was sectioned off better to keep the quality sites from non-quality. I stopped searching for site very often because it’s too much trouble wading through everything to find the few gems.

Anyway, if I’m in a bind and need to sell a site quickly that’s where I go. They’ve still got a long ways to go improving the site though.

ZK @ Web Marketing Blog April 16, 2010 at 7:23 am

So according to you which kind of website a person should build so that it can sell fast.

Matt Mickiewicz April 20, 2010 at 4:37 pm

Have you had a chance to check out all the changes we’ve been making to make it easier to find websites to buy? Besides one-click access to “High-End”, “Mid-Range” and “Most Active” auctions, we also have a very easy to use filtering system now in place:

http://flippa.com/buy-websites

As a result, our sell-through rate has gone from about 40% to 60%, with over $2 million in transactions occurring every month. We had 1250 websites sold in March alone.

Chris Guthrie April 15, 2010 at 12:08 pm

If you have a website that you want to sell for 6 figures and up I’d never turn to Flippa.com

I’m in the process of a 6 figure sale now (hoping for 200k) and I’ve teamed up with an investment banker group to help sell it.

Also, the fact that the guy had a website earning 1,000 a day and he let it fall apart to just 200 a month to me says he made a huge mistake by not selling when the going was good…

Will April 16, 2010 at 12:01 am

Indeed, sell high, buy low. And stop quoting ridiculous statements about Weblogs Inc. in your sales pitch on Flippa. The 25x yearly revenue stat was just grandstanding by a certain founder of the site….

It presumably sold for 25-30 million (if that’s true, there’s no actual way to verify that outside of anecdotes) because a.) the blogging platform was a piece of technology that pre-dated wordpress so AOL thought it was awesome and b.) it had liquidation preferences and therefore couldn’t give its investors a return unless it was sold for a certain number.

The coupon website on Flippa didn’t have any liquidation preferences…so invoking Weblogs Inc. wasn’t that relevant.

NYThemes.com April 15, 2010 at 12:58 pm

yes if you’re selling a high value website you might want to consider other options as well.

Also be careful with showing proof of earnings, or other analytical data of your site, as Flippa will archive it for the whole world to see even after the conclusion of the sale.

Your Data is Valuable Don’t Give it Away for NOTHING

http://www.seobook.com/how-to-give-competitors-your-business-data-for-nothing

Stocks on Wall Street April 15, 2010 at 1:44 pm

So many ways to make money on the internet hard to choose which one is the best.

ZK @ Web Marketing Blog April 16, 2010 at 7:21 am

I would prefer that way in which you are expert.

Keep earning through that way and in the background develop other skill as well.

College To Careers April 15, 2010 at 3:14 pm

I actually stopped following and going to sitepoint after the re-branding…

ZK @ Web Marketing Blog April 16, 2010 at 7:25 am

Well Flippa is the best place to sell website and there is no doubt about this.

And sitepoint and flippa is now two entity.

One is forum which was earlier market place as well and flippa is full marketplace.

Kevin Muldoon April 15, 2010 at 4:36 pm

@Profit Addiction – Yeah I still think it’s the best marketplace out there. My original title for this article was ‘Why buying a site at Flippa isn’t always the best idea’.

@Jacob – I think it’s the best place to sell websites, certainly for websites under $50k anyways. Larger sites do sell there though they are not as common.

@Chris – I think you’ve done the right thing as there are not as many high priced websites there (Retweet.com was their highest successful auction). The audience is more targeted towards the lower to medium end of the market. Best of luck with the sale.

Luke Moulton April 15, 2010 at 8:47 pm

Some sellers do have unrealistic expectations, and who can blame them when they’ve spent a couple of years building content and traffic. But for every inflated Buy It Now price, there’s an undervalued site.

We’re seeing more and more legitimate online businesses being sold on Flippa – take a look at the Just Sold section over the last couple of weeks and you’ll see some good examples: http://flippa.com/buy/listings/sold

Overall I think the index is pretty good particularly when compared to bricks and mortar business.

ZK @ Web Marketing Blog April 16, 2010 at 7:33 am

I think those sellers who build their website like a baby is demanding more money compare to those who have this selling website business.

Ivan Walsh April 15, 2010 at 10:09 pm

Hi Kevin,

The valuation increases in proportion to the sites Gross Profit. I worked with one of the big 5 consultants and we’d value sites at 7-10 times their annual gross profit – if the site was earning over 250k pa. Otherwise, we didn’t touch it.

I’ve broken out the steps involved in this process at
http://www.ivanwalsh.com/web-business-plan/how-to-sell-a-website-how-much-is-your-web-business-website-domain-name-worth/4286/

I hope you don’t mind my including the link as I think your readers will appreciate it.

I would also add that the # of email subscribers is valued more higher than RSS subscribers. This is because you have greater opportunities to up-sell, cross-sell and segment your list which is very difficult to do (impossible?) with, for example, Feedburner.

Ivan

ZK @ Web Marketing Blog April 16, 2010 at 7:42 am

Yes we will really appreciate for your post. Although this one is really long but yes covered everything. :)

d3so April 15, 2010 at 10:57 pm

My cousin actually sold his blog two years ago for about $10,000. I’m thinking about selling one of my sites but I’m not so sure if it will sell because I let it dull out.

ZK @ Web Marketing Blog April 16, 2010 at 7:45 am

What was the URL of your cousin blog ?

Free Picks April 17, 2010 at 5:49 am

$10,000 wow, may be he had good content

Entrepreneur Key April 16, 2010 at 1:39 am

who cares if they overprice it.. people might bite the bullet!

paul | entertainment tonight April 16, 2010 at 3:56 am

I did buya site before but I got tired since I found out that I am not yet ready for expanding. Maybe I should reconsider after 2 years, maybe by that Itime I am ready to expand.

Sachin Bisaani April 16, 2010 at 5:14 am

Designer get ready to boost your online income with flippa,Thanks John for sharing and reminding flippa.

ZK @ Web Marketing Blog April 16, 2010 at 7:46 am

Only designing is not good enough because that is the market place of websites. Not of designs.

Ganesh Iyer April 16, 2010 at 5:39 am

Thanks for the insightful post, Kevin. i am not too conversant with all this yet since I am only starting- I am a ‘newbie’ :). The post, and more so the above comments, have been really informative.
Thanks again!

ZK @ Web Marketing Blog April 16, 2010 at 7:50 am

This one is certainly a great post on flippa and selling website business.

But however I think you should add which kind of websites are hot cake at there.

Kevin Muldoon April 16, 2010 at 12:21 pm

@Ivan – Great post. Yes generally speaking email subscribers are worth more (and rightly so). 7-10 times seems low for some businesses, I still think it depends on the site though.

@Ganesh – Glad you liked the post.

Ivan Walsh April 29, 2010 at 1:14 am

Hey Kevin,

I think it’s the opportunity to segment and upsell that gives the newsletter the edge. Something I cant do with FeedBurner, for example.

Hear what you say about valuation.

Sometimes it’s a beauty contest. In the eye of the beholder :)

jtGraphic April 16, 2010 at 12:24 pm

I’ve been doing the Sitepoint/Flippa thing for about 3 years, and I’ve definitely seen the quality dip, but a little bit of luck and patience will get you exactly what you want/need. You do need to be wary of false advertising though. I’ve been burned a few times.

Kevin Muldoon April 16, 2010 at 8:11 pm

Quite a lot of people are inflating their traffic stats, which is why you need to do your homework.

fas April 16, 2010 at 12:52 pm

Simply push your site to the best design before you sell it.

ZK @ Web Marketing Blog April 16, 2010 at 7:48 pm

Not agreed as I think people see three main factors –

1) Traffic
2) Earning
3) PR

Kevin Muldoon April 18, 2010 at 6:13 am

I don’t think PageRank is a major issue with most sales. More about content, design, earnings and traffic.

ZK @ Web Marketing Blog April 19, 2010 at 4:03 am

I have asked few buyers and they said that traffic and earning is vital because this is tough to achieve and time taking as well.

About design you can easily get it with many premium templates.

Migraine Causes April 17, 2010 at 4:32 am

Telling us that we should not buy but selling still good there will make selling goes bad after those who were going to buy won’t buy.

laptop cases April 17, 2010 at 11:04 pm

Everyone has their own niche and business model, but personally I think it’s silly to sell a website for 1x annual income. Have the confidence to hold onto those sites!

Internetsalsa April 18, 2010 at 8:07 pm

zk…You commented 11 times in this single post…:)

ZK @ Web Marketing Blog April 19, 2010 at 4:04 am

And all meaningful.

Thank you :)

George185 April 18, 2010 at 8:18 pm

This is a really great insight from someone who has the experience and bankroll to be in the market to buy an expensive site. Being that I am still a newbie to the whole make money online game, this post really provides some motivation because you can see just how much your hard work is worth.

Irish Garden Home April 19, 2010 at 12:04 pm

I think a great domain name plus domain age are two very valuable factors when considering buying a website, on Flippa or elsewhere. It is relatively easy to re-vive a dormant website by adding new content and links, but you can’t fake domain age and keywords in domain in Google’s eyes, just my 2 cents, SY

pandora jewelry April 19, 2010 at 9:14 pm

Yes i agree with you. There are 2 main issues. First is that many sellers try to give the fake reports and some of them produce the artificial traffic to show good results in analytics. for example they may go to Google and type some phrase there and click many times.

Second issue is unfair price from the sellers. Most sellers want too much money for their websites.

Other than that it is a good place.

Net Age | Web Design April 25, 2010 at 11:11 am

Great post Kevin! I haven’t seen you guest post here before, but I like what you’ve got to say, and am heading over to your blog to go have a good look at your work. Cheers man!

Kevin Muldoon May 13, 2010 at 7:58 pm

Apologies in the very late reply to this. I appreciate all the feedback guys. I’ll try and do another guest post here sometime in the future (with Johns blessing) :)