Advice for Buyers


#1

When it comes to my investments, I always do my homework.
- Haddon (Contact)

This thread is for folks to list their methods for researching website auctions and sales.
Feel free to add any tips and tricks you know of that isn't listed here already!

There already exists a PDF guide for buyers on SitePoint so READ THAT FIRST!

Google is your friend

  • Make liberal use of google. If the site has a 1800 number google it, maybe there are duplicates.
  • Select a bunch of text from the site and google it to check for unique content.
  • Google the sellers name and email address.
  • Google the site name plus the word 'scam' to see if the site has a bad reputation.
  • Google info:www.<thesitename>.com to gain further information such as inbound links, number of indexed pages etc.

Use online tools

  • www.domaintools.com provides volumes of information about a site and its registrant. You can get a lot free information here as well as pay for even more detailed reports.
  • www.aboutus.org gives more information. Check the 'related domains' section to see if there are any identical sites out there.
  • www.myipneighbors.com will tell you what other sites are hosted on the same server.
  • use www.compete.com and www.alexa.com to see traffic details in comparison to competitors.

Be realistic

  • Don't expect unique content in the turnkey section. If you want unique content look in established sites and premium listings and have a budget greater than $1000.
  • Don't assume a site's value is soley based on some arbitrary calculation of the monthly revenue. Consider traffic, indexed pages, SERP, page rank, name, age of the site, etc.

If you have any doubt about the seller's ownership of the site ask them to place a unique meta tag in the home page to verify ownership.

Each marketplace section has a column title 'Comments' telling you the total number of comments people have placed in that listing.
If the number of comments does not match the number you see in the listing you know the seller has been deleting comments.
There's nothing unusual about a couple of missing comments but if a sale is missing a dozen or more this may be cause for further investigation.

I was pretty sure I had more tips but that's about all that comes to mind right now.. oh yeah.. did I tell you to -
READ THE PDF GUIDE!


#2

Here's another tip..... don't buy or sell sites using Paypal. And, absolutely don't use Paypal if it's an amount of money you can't afford to loose. I do use Paypal when buying and selling, but only if it's a very small amount of money. Typically $1000 is my threshold. Decide your own threshold and for any amount above it don't use Paypal, use Escrow.com or Sedo.com.

Paypal absolutely will not be helpful to you when there's a fraud involved. They'll help themselves. The only time the Paypal dispute resolution is successful is when you have two honest parties who have encountered a difficultly along the way and it needs to be arbitrated. If you're ripped off, chances are the money is long gone by the time Paypal gets around to investigate, and Paypal isn't going to make you whole out of their own pockets.


#3

Excellent list and links. I'll add three more:

  • Check archive.org. This will tell you how the site has evolved over time. Has the major focus of the site shifted during its history? Were certain ad networks used in the past (i.e. AdSense) that are no longer there, potentially indiciating that they didn't generate revenue or the site got banned?

  • Copyscape.com is also excellent for checking on the uniqueness of content.

  • Run a search of the site name, sellers username, sellers real name on technorati.com, blogsearch.google.com to see if bloggers have written good or bad things about it.


#4

This is great news. To be honest I've given up keeping an eye on the marketplace because it has become too tedious sorting through the rubbish, scammers, cloned sites that claim to be original, etc. Investment is a lot about the time it takes to research the investment, so if 95% of the sites I research end up being dodgy or useless, it makes the remaining 5% a lot less economical to hunt down.

I would actually be willing to pay a subscription fee to join a marketplace where all listings were manually vetted for fraud and substandard websites. My time is money - if you can save me time I'll pay you.

Good luck with the improvements, I look forward to the results.


#5

With sites that claim to have a lot of traffic, make sure you know which countries the users come from. Lots of proxies get sold with 10,000 uniques a month, all of whom are from Iran or China, countries you cannot break even with.

The latest hit now is social network related traffic from Brazil. It is very easy to get a high number of unique users from Brazil for sites that are proxy, image upload or warez upload related. All of that traffic is completely useless. All the high traffic sites with Brazil traffic claim that you can become rich making money from all that traffic, yet are curiously unmonetized. Some sellers will even go to great lengths to make claims like Brazil is not a 3rd world country, Brazil traffic is profitable, Orkut traffic is profitable, etc, all of these are FALSE. I am yet to see a Brazil traffic site that was not a business based in Brazil succesfully monetized, but I do know a proxy owner who ended up discarding 1 million pageviews a day from Brazil because he could only break even and all that traffic was more trouble than it was worth.


#6

if the site has a decent history ..Alexa will show you where most of the traffic is.....

Thanks for the tip about Brazil etc. I would not have thought of that...


#7

Only for those users who have Alexa's toolbar coughspyware*cough* installed.

Server logs are FAR, FAR more accurate.


#8

Dan, if server logs are more accurate, then why are scripts like awstats looked down upon for not being accurate?


#9

Because webmasters like higher numbers. And they can see where numbers come from. They don't like the lower numbers from third party providers, and can't see where they come from, so they inherently distrust them.


#10

That used to be true, up until a week or two ago. After Alexa adjusted the way they scored sites, pretty much every site I know of that has a heavily webmaster demographic has dropped significantly in Alexa, including Sitepoint.


#11

It's very widespread. And permanent. The new method if vastly superior, and puts it on par with Quantcast and Compete in terms of data accuracy (ie: as accurate as third party data can be).


#12

if the site has a decent history ..Alexa will show you where most of the traffic is.....

It is extremely innacurate! For just one site, which averages 1 million uniques a month (10k alexa), my second highest country is Kuwait! Whaaaat? I get 27k uniques a month from Kuwait (2,7% of total), and it is #11 in Google Analytics. Its just an example. Yes, it is improving, but its still grossly inaccurate.

THAT SAID, Alexa is capable of alerting you of a problem. If you check alexa, and the top countries are a few of Brazil, India, China, Iran, it warrants a deeper look into the source of traffic through a proper tracking system, like Google Analytics. If Alexa is reporting 25% Brazilian traffic, reality may very well be that 80% of traffic is from Brazil.


#13

Log files from the server are very accurate at showing exactly what happened and when, but log files can be "cooked" so I can see where some buyers might not take them seriously. Also, there is way too much information in log files.

Third-party on-page tracking services can be good. I use StatCounter, which shows me a wealth of information while hiding junk like search engine spider activity. They might mess up and hide a few humans too, but I haven't tested their numbers against my server's log files to try to get an idea of what percent might be hidden.

There are many free or low-cost tracking services. Maybe people could post a few they use or like.

I've been looking to create my own to replace StatCounter, partly because I want to integrate it with my site's signup system as one of the data feeds for a Turing test to keep spam bots from signing up.

Alexa and similar services only work because people install the toolbar on their browser. You can start up a new site, build to 10,000 page loads, and it could be that none of those were from folks with Alexa's toolbar--so you end up with no Alexa rank. On the other hand it only takes a few Alexa users to visit your tiny-traffic site to make its importance swell far beyond that of the next guy's tiny-traffic site. Alexa results only make sense when you have a lot of traffic.

A site I'm building up shows, for the past 30 days (according to StatCounter), 1,323 page loads from 572 visitors. On Alexa I'm 22-millionth or so, which is down from 9-millionth or so of a few months ago--which doesn't seem right to me.


#14

Log files from the server are very accurate at showing exactly what happened and when

Interesting discussion


#15

INSIST upon access to their merchant accounts etc, this is critical to protect yourself. I am a broker dealing strictly in internet businesses and I too have been burned with listings. Before I will list anyone, I want access, not just screenshots. Screenshots can be cooked/faked etc. If the seller has nothing to hide, then this should not be a problem, absolutely insist upon login access.

When you are selling your site, use a broker, most reputable brokers will not charge anything until your site/business is sold (unless you misrepresent your information) AND they filter through the BS, the tire kickers etc before bringing you an offer to think about. Keep in mind almost all brokers charge about 10% of the final selling price. For smaller priced businesses/sites, that charge may be higher and it would be cheaper more cost effective to use SitePoint. I recommend SP at least 2-3x a week.

Just some thoughts to share....PM if you have additional questions/concerns.


#16

Fellas -- stumbled on this site a couple weeks ago, and have enjoyed poking around at the possibility of buying a site (or two). First a little background: I own a subscriber-based content site, and had another site that drove sales for a live event (sold that one). Im not tech savvy, but would like to think I'm an astute businessman who could do well with an acquisition. My general questions and comments are:

  1. There seems to be quite a bit of concern among buyers about getting scammed. How often does this happen? Judging by the posts on each listing, every other listing is sited as a "scam." I've already noticed a couple in the marketplace forums that completely disappeared after a couple days. Were they removed because they were scams?

  2. It also seems that the basic valuation of a website business is about 10 x monthly profits. Why so low? If someone offered me 10x monthly profit for my business, I would laugh at him. What's the rationale for such a low valuation?

  3. Why are sellers allowed to delete posts? Ive seen potential buyers have their posts deleted for asking very legitimate questions, which makes me think most of the sellers are...well, read point #1 above.

  4. Would it help for me to engage the services of someone more educated in web site marketing and some web development expertise to help value a company?

Anyone with any thoughts that can help would be much appreciated! Thanks in advance! cool


#17

There are a lot of scams out there, it's simply the nature of the beast. You're dealing with a virtual property where stats can easily be faked, combined with an int'l element that makes prosecuting fraud almost impossible.

  1. It also seems that the basic valuation of a website business is about 10 x monthly profits. Why so low? If someone offered me 10x monthly profit for my business, I would laugh at him. What's the rationale for such a low valuation?

The Internet world is rapidly changing, a site that relies on SERPs today cannot guarantee that they won't be banned in two days, and ad revenues can drop tomorrow as well (get banned from adsense for example) therefore the valuations are lower due to the higher risks involved. Some sites (such as membership sites) can get higher valuations due to the less risky nature of their business models (not reliant on SERPS or ad revenues).

  1. Why are sellers allowed to delete posts? Ive seen people have their posts deleted for asking very legitimate questions, which makes me think most of the sellers are...well, read point #1 above.

IMHO at the end of the day the Sitepoint marketplace exists to make money for SP. Therefore they need to cater to the people who pay the bills and those are the sellers.

  1. Would it help for me to engage the services of someone more educated in web site marketing and some web development expertise to help value a company?

It would, but such services are often expensive and thus only worthwhile if the site value is sufficient to make it cost-effective.


#18

Tke and Dippingtoe, thanks for taking the time to reply... Is the following a decent guideline for a half-wite like me?:

  1. Seek an "established" (more than 15 hours old! smile ) site, perhaps an e-commerce site with a tangible product or a fee-based subscriber site so as to be more comfortable with the stability of the business.

  2. Pay as close to 10x monthly net

  3. Trust, but verify all the information?

  4. Do things by escrow and set up a face-to-face closing at the sellers attorney's office if possible (or am I dreaming on this count?)

  5. Hire some help.

  6. Threaten to cut off the nuts of anyone who would rip me off?

  7. Is a broker a better option?

Thanks again for your input.


#19

I would greatly prefer a subscriber site over an e-commerce one, but that's my preference.

  1. Pay as close to 10x monthly net

As a businessman, I have to say pay as little as you can.

  1. Trust, but verify all the information?

Don't trust, and verify the information.

  1. Do things by escrow and set up a face-to-face closing at the sellers attorney's office if possible (or am I dreaming on this count?)

For most sites sold on here you're probably dreaming. Very few of them even have real contracts signed, it's just ship the cash in unmarked bills and get a site out the back of someone's trunk.

My statement applies to the run of the mill site on here, not the 25k+ ones.

  1. Hire some help.

Like a gardener?

  1. Threaten to cut off the nuts of anyone who would rip me off?

Maybe your gardener could do that.

  1. Is a broker a better option?

For larger purchases, I would generally say yes.

Hmmm, maybe I should become a web site broker, I really want to switch careers. Anyone companies who are hiring should shoot me a pm wink


#20

Cosmos, regards your first questions
2. There is no such thing as a basic valuation. Sites sell for anywhere from 1x to 100x. See valuation article.

  1. Because comments aren't restricted to buyers a lot of tomato frogs think it's the best place to display for a mate. Serious buyers contact the seller by PM generally.

  2. No it wouldn't be worth engaging anyone's services. There are only a very few people who can do it competently and all of them are doing it for themselves. Yes, the only people who can help you are your competitors. The author of that article on valuation above, for example, is an active buyer/seller here.

Your second set of questions
3. Be stingy with your trust and dish it out based on what you can find out about the seller including his feedback, research about him on the net etc. There is no substitute for proper due diligence.

  1. Face to face meetings hardly ever happen for sites sold here. Also, escrow is no guarantee of safety - a LOT of things can go wrong with escrow.

  2. Broker?! Hmm. Post a thread about this and they'll come running to you. Due diligence done by a broker is only as good as the disclaimer in his contract and his insurance cover for liability. That's if they even have either of those!