Building a Web Business: How to Tell if a Website is Worth Buying

If you’re considering starting a new web business, or, in my case, purchasing an existing one, you’re going to want to do a little research first. Buying an existing site (either the domain name or the business that goes with it) is an investment you don’t want to just jump into. A site may seem to have a lot of value, when it turns out it’s crap. Or it may turn out that the idea is good but there’s just no market for it right now. So how do you figure out what a site is worth?

Talk to the Owner

If you’re able to contact the owner directly, ask for information on traffic and advertising revenue. Chances are they’ll give you that data if they think it’s going to help them sell the site. It’s important to know how much traffic the site gets, where it’s coming from (direct links from other sites, bookmarks, search engines), and what pages on the site seem to be most popular. Any half-decent website analytics package will track that data for you (like awStat and Google Analytics).

If the owner claims to be making $X/month in revenue, ask for proof. If the site generates revenue by selling things on eBay, ask for a screenshot of PayPal payment receipts. If it makes its money from affiliate marketing, see if they’ll send you a screenshot or earnings report for each site they’re affiliated with.

Trust, But Verify

Believe it or not, some people might try to cheat you out of your money over the internet. I realize that’s hard to believe in this day and age, but it’s true. People can lie, screenshots can be Photoshopped, and just about any site can be made out to look good. That’s why you need to check some third party sources.

In my case, the site’s host only kept traffic data for two months. For a site called SnowConditions, August and September traffic data didn’t really help. In this case, I had to look to third-party sources to get some data. I started with Compete.com’s Site Analytics. I can’t say for sure how accurate it is, but as you can see it shows a seasonal trend that would be consistent with a site about winter sports:

For a site localized purely around northern Wisconsin, I was pretty impressed that it was getting as many as 17,000 unique visitors in peak months.

As for revenue, the site has banner ads for local sponsors and charges an annual fee. Once it was established that I was a serious buyer, the seller provided me with contact information for some of the businesses that were advertising and I contacted a few of them directly (after verifying on Google that the names and numbers matched those particular businesses) to verify that they were sponsoring the site at the rate he claimed.

Domain Names and Search Rankings

Search rankings and search engine optimization are terribly complex topics that I couldn’t possibly cover in a few paragraphs. There are countless blogs and numerous books dedicated purely to this topic. Jerri Ledford’s SEO: Search Engine Optimization Bible is a great resource for anyone just getting started with the topic.

I started running some searches on Google to see how well SnowConditions.com ranked for different keywords. I was shocked to find that it was the #1 result when I searched “snow conditions,” and the #2 result for “snowmobile conditions” and “snowmobile trail conditions.”

Ranking #1 out of over 7 million sites is fairly impressive, and a top three ranking across several different search terms definitely got my attention. This prominent listing on Google probably accounts for much of the 17,000+ unique visitors/month, as people are looking for ski resorts, snowboarding, snowmobiling, and even winter weather and come across this site at the top of the results. That’s gotta be worth something, right?

The domain name itself is almost certainly worth something. Domain flipping and auctioning is becoming more and more popular, and generic domains are going for big money. Check out Sedo and Sitepint Marketplace to get an idea what a typical domain might sell for, you might be surprised… Dominik Mueller explains the value of a generic domain on his blog, which also mentions some impressive sales figures for other generic domains. I considered purchasing the domain only to turn around and sell it, but felt I could get more out of it through other channels.

Verdict: A Domain Worth Buying

After this preliminary research, I decided this domain had some real potential. After some negotiation, we settled on a four-figure price tag which would pay itself off in under two years purely with the advertising currently on the site. With a nice facelift and some aggressive marketing, it has the potential for exponential growth. We’ll see if it pans out…

I was going to talk about market research in this post as well, but I think this post is getting long enough already. Tune in later this week for the thrilling conclusion of part one of the Building a Web Business series. And to make sure you don’t miss it, why not subscribe?

One Response to “Building a Web Business: How to Tell if a Website is Worth Buying”

1. George
   

   I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

   
   January 27th, 2009 at 10:41 am

Leave a Reply