Part 2: Monetizing a Domain Portfolio with Justin Gilchrist from FlipFilter

Aug 17 2011

Here’s part 2 to yesterday’s guest post from Justin Gilchrist.  Justin Gilchrist is from FlipFilter.com, an application that pulls data from various online sources of established websites for sale and aged domains for sale, and allows you to browse, compare and analyze the results all in one place. I talked about how much I liked the site in a post the other day and asked Justin if he minded doing a guest post. Here’s the rest of the article.

What do buyers look for?
Some people choose to answer this question with a complex list of needs and requirements, but the answer can be greatly simplified. Buyers of established sites look for at least one of three things
1) Traffic
If they’re already in this space then it’s likely they’ll know the value of a targeted visitor. In buying a site that has or can send targeted hits to their product (or pageviews to advertising) potential buyers can work out the value of a site to them personally.
If you decide to create and sell a site based on traffic being its biggest asset, remember that not all buyers will have the same value for your site, so you should always target those who will put the highest value on it first. Consider this; a site generates motor insurance leads and currently creates around 10 leads per month. Buyer A has a portfolio of lead gen sites in the finance industry and receives $25 for each lead. Buyer B is an online comparison engine and receives the same amount per lead, but also sells travel insurance, home insurance, utility discounts etc. Their average lifetime value of a customer is $300 after they’ve followed up with offers by email, Facebook etc. The site will be worth (in monetary terms) much more to buyer B as they can better monetise the traffic it generates.
If you choose to build a site and your primary selling proposition is traffic (i.e. no or little revenue) try to diversify your traffic sources as this will reduce the risk for potential buyers.

Sites that sell for the highest multiples always have a good mix of organic search traffic, referrals and direct traffic (social media, email marketing etc) to provide a fallback should one method fail (…Panda anyone?).

2) Revenue
Naturally, revenue is the most coveted quality and responsible for generating the highest multiples. You also have the added advantage of being able to use the revenue to grow the site. On average, established sites on Flippa sell for approximately 6.4X their claimed monthly gross revenue, but some sites can easily exceed this as not all sites are created equal.
● Buyers will pay more for sites that have consistent sustainable revenue. If you can show at least six months of steadily increasing (or even constant) revenue this will work in your favour.

● It’s easier to make money with certain types of sites. The effort to attract one visitor is the same regardless of how you monetise them once they reach your site, so ideally aim to generate as much per converted visitor as possible. The best methods inevitably take extra resource and hard work but over the mid-long term will always be worthwhile.

The following table shows, for 72 hand chosen sites, how much revenue each different strategy generates on average for each unique visitor (RPU = Revenue per unique user). Remember that this shows revenue, not profit and so whilst Ecommerce may be at the top it can ultimately lose out to Digital Products in the long run. RPU (revenue per user)
Type of Site / Niche Average RPU (USD)
Ecommerce $1.49
Digital Product Creators and Sellers $1.18
Affiliate and Lead Gen $0.62
Web Applications, Scripts and Software $0.24
Marketplaces, Directories and Listings $0.20
Forums $0.13
Adsense and Advertising Only $0.06

● Having proof of revenue is also important in the fact that some buyers will be put off if your records aren’t airtight. Bank statements are ideal if you have a separate account, however failing that be prepared to give access to your paypal / merchant records to potential buyers. Try to keep everything associated with the site separate from your other projects (i.e. separate Adsense channels, Clickbank Accounts etc) for a hassle free sale.

● Buyers pay a premium for scalable sites. If your site generates revenue purely from organic traffic this isn’t as scalable as another site that generates a proportion from pay per click or display advertising. Potential buyers will find it harder realise a site’s full potential, so experiment with PPC and Ad buys early on and see what works for your site.

3) Exclusivity / Ranking
One of the main motivations for people to buy is out of fear, and unsurprisingly fear sells a lot of websites.
Picture this; you work as a professional in a specific local niche and currently receive a proportion of your leads from the web. Someone offers you yourtown-yourniche.com which currently ranks number 1-3 for a good number of your chosen terms. In this situation, your potential buyer’s motives are less about the site’s traffic and more about fear. If their competitor (who they’ve been fighting for top PPC spots with) buys the site, they’ll almost certainly have the competitive advantage, owning a lions-share of all the organic searches.
This is probably closer to grass roots domaining than selling sites, but is different in that it relies on the domain being developed for a buyer to see its full potential (and in most cases to actually rank). ‘Civilian’ buyers will usually pay a premium for a developed site over that of just a domain especially when they can see how it would integrate into their existing marketing without them having to do any work.

Regardless of your overall strategy for your portfolio, it’s highly likely that you can extract significant value by developing domains that no longer fit with your plans. There’s no guarantee that you’ll sell for the price you want, but by following other sellers who frequently achieve the highest value for their online properties, you’ll increase your chances and the value of your portfolio with it.
You can stay up to date with what’s currently working by following me on my blog, or through subscribing to Flippa’s A-list for a quick weekly analysis of high value sites for sale.

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Outsmarting the Dumb, Outworking the Smart

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