Buying a website as an investment can deliver great returns

The following is a guest post from Pauline who blogs over at Reach Financial Independence, and has been expanding her online presence by starting another blog from scratch and buying a third one recently.


how much is an creative 6 master collection license Buying a website

When I tell people I make money blogging, most of the time they are pretty surprised. And for good reason. Making money online is NOT easy. You need to put in a lot of hours to get your website out there, learn how to network, promote, while consistently producing good content. It requires hard work and dedication.

When I started blogging, I had been writing for several travel blogs for four years. I didn’t know the exact income of the blogs who hired me, but I knew what they were paying me. One of them had a dozen writers, and just my share was over $1,000 a month. Which means they must have been generating a solid five figure income to pay all of us on top of the designers, developers, and their marketing team.

 

Is starting a website a good investment?

Does that make starting a website a good investment? It is really hard to tell. I am sure that particular website operated at loss for a while, until they got big enough to generate big bucks. My 3,000+ articles had over three million pageviews the last time I checked, and the growth rate was impressive. But for most of us starting a small personal website, the million pageviews mark is miles away.

There are two approaches to making money online with a website. You can start your own or buy an operating website and try to grow it some more. Having done both, I will try to compare each endeavor.

 

What kind of website should I manage?

First, you need to find a niche you are comfortable in. Having written thousands of travel related posts, I was burned out. I knew I still had content and pictures, but I wasn’t motivated enough to start my own travel website, and the niche had already too many serious competitors to give it a try.

I always had an interest in personal finance, and while I had been reading money blogs for years, I never thought about starting my own until 18 months ago with Reach Financial Independence. It was a work of love, and the money happened to come in after 6 months, after which I consistently made over $2,000 every month.

I know most people will get burned out, or disappointed with the outcome and give up long before that. So it is really important that you find a topic you are truly passionate about, or at least able to write about 2-3 times a week, week after week.

When I realized the income potential of my website, I started another one, called Make Money Your Way. Over there, I talk about different ways one can make money, be it with investing and real estate, freelancing and improving your career, or online projects.

Make Money Your Way is now six months old, and as I learned from trial and error on Reach Financial Independence, I was able to get better results the second time around. After six months, I have made over $3,000, and I am pretty confidents now that the stats and readership are up, that I can keep making over $1,000 per month onward.

 

Starting a website from scratch

Is it worth the time spent taking a blog off the ground? Operating costs are really low when you start a blog, under $100 for a domain and hosting package, and you are good to go. However, what you need to invest is your time. As I wanted to spend less time online with my second blog, I decided to hire a VA from the start, and for a few months, she was costing me more than the website was bringing. However, now that we are up and running, I have made up more than she cost me, and am now making money on top.

 

Buying a website as an investment

If you are not willing to put lots of hours writing content and getting exposure for an unknown website, your next move can be to buy a website that already exists. This is just what I did a couple of months ago, when I bought my third website, The Savvy Scot:

Buying a website - The Savvy Scot

Buying a website is a bit tricky because you don’t know exactly what the owner has been doing with it. If is it a poor quality website, or a “link farm”, it isn’t worth much. You have to do due diligence before you make an offer.

 

How to find a website to buy

How does one go about buying a website? You can use dedicated marketplaces such as Flippa, and look there for a bargain. Or if you are already subscribed to a few blogs, you can be on the lookout for a website owner writing about how they have less time to blog those days, or just figuring it out when their posting frequency drastically decreases, then write to them and make your offer. That is the way I went with Savvy Scot. I had been friends with the owner for a while, and when he reached out saying he was looking for a way out, I jumped in.

 

How much should I pay?

Figuring out the value of a website is quite complicated as well. Buying a website which is well established can make money via several sources:

  • Adsense or other similar ad blocks that pay per click, per 1,000 views, or per action (when you click and subscribe to their offer)
  • Affiliate sales, selling products they recommend on the site for a commission
  • Ad banners who pay a fixed rate instead of a rate per click.
  • Products created by the website, such as ebooks, training courses…
  • Getting customers for your own business. If you are an accountant in “small town”, buying “accountingservicessmalltown.com” can be a great move to get you leads for your business. I use my blog to promote a small guest house that I run in Guatemala, as well as my 90 acres land development. Getting one serious lead for my land development can make me more money than months of Adsense revenue.
  • Link placements, which can be nofollow (rare) or dofollow, thus violating Google’s Terms and Conditions. This is a risky business and you can get penalized by Google for selling links. That said, this is the low hanging fruits many bloggers resort to this day, and as long as you aren’t under G’s radar, you can make money.

Once you have received tangible proof of the past few months’ earnings, you need to attribute a coefficient to each source of income to determine the average recurring income you can get out of it. Adsense revenue is pretty consistent, so unless you delete the current content and revamp the site, you should still be making a similar amount onward. However, getting new banners and ad deals is far from guaranteed. Some people discount direct advertising by as much as 90% when valuating a website.

Same thing for affiliate sales, you will need to keep creating great content to maintain sales level, or it may go down.

Say the website you are targeting gets $100 from Adsense, $100 from affiliate, $100 from ebooks, and $100 from direct advertising, for a total of $400.

You can consider you’ll be making $100 from Adsense onward, $50 from affiliate, $25 from ebooks and $25 from directs ads, for a total of $200.

Websites these days sell for 12 to 36 months worth of revenue, meaning the site you want to buy can be worth anywhere from $2,400 to $7,200. The price can go up depending on pagerank, domain authority, and a number of other metrics. You should also look into readership engagement, number of comments per post, tweets, … For example a site that has a strong owner figure can go down if you take over because people like you less, while an impersonal site should remain pretty much the same.


Using website marketplaces

Marketplaces like Flippa offer you a safe way to transfer the website once you have bought, but they charge a fee. I made my deal based on trust, transferring 2/3 of the money upfront with no guarantee, then the owner gave me all passwords and let me transfer the site with no guarantee on his side that I would come through with the last 1/3 of the money. It is not for everyone, although that person knew a lot of bloggers in our niche so if I hadn’t paid him, he would have had ways to expose me easily. It is funny how online trust works those days. Anyway, all went well and all accounts were settled quickly.

 

Is buying a website easier than starting one?

Now I can compare starting a new website vs buying a website that is already established. Savvy Scot was already generating a similar amount of money to what Make Money Your Way is making after six months. So if I can make up the purchase price in less than six months (we are two months in and I have made back over 50% of the purchase price), it was worth it. It depends on how much of a bargain you can get.

As far as buying a website as an investment is concerned, as I talked about earlier, you should be buying one for 24-36 months worth of income. Meaning you make your money back in 3 years top. That is a huge 33% yearly return, compared to rental property and the stock market, it is pretty solid. However, you have to know what you are getting into, otherwise your income sources can just dry up and you may lose money.

Good luck!

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