Newbie Buying an Established Web Business?

9 years ago

One type of tool is a "statcounter", which can be placed on any page and you see what the visits are.

Google traffic counters, tons of stuff out there, and double check the numbers.

WHERE is the traffic coming from?

I'd be very careful..

gjabiz

Originally Posted by crosley

New to the forum, I did some searching but couldn't find what I was looking for.

I wanted to know if people could point me in the right direction about how to fairly value an online business that I was interested in purchasing.

It's a web forum, the revenue is almost exclusively online ads, and wanted to see :

A) How do you confirm the numbers the seller is giving you are honest?
B) How do you verify the web traffic numbers?

The asking price is fair IF (a big if) the numbers I'm being quoted are truthful.

Some of the popular 3rd party sites that give estimates on traffic and ad revenue are seriously under what the owner is saying it generates in gross revenue.

I wanted to do as much legwork as possible before I get an attorney involved as I'm still in the due dilligence stage.

Thanks for the help

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eugenedm

9 years ago

Well as a rule of thumb I use Alexa Rank alexa.com...

If a company/site is serious they have a good rank on Alexa...

Gene

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mrgoe

9 years ago

Originally Posted by eugenedm

Well as a rule of thumb I use Alexa Rank alexa.com...

If a company/site is serious they have a good rank on Alexa...

Gene

You did not just say that you use alexa for your due dilligence.. really man, you didn`t.. alexa rankings can be faked pretty easily..

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Steve B

9 years ago

Originally Posted by mrgoe

You did not just say that you use alexa for your due dilligence.. really man, you didn`t.. alexa rankings can be faked pretty easily..

Not only can they be faked, but Alexa rankings are based on those sites that have the Alexa toolbar in place so they can be tracked. I don't know what percentage of the total online sites have the Alexa toolbar installed, but I have heard the number is very small. So if you believe in the Alexa number, it is based on a tiny percentage of all the Internet sites.

Steve

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kk075

9 years ago

Originally Posted by Steve B

Not only can they be faked, but Alexa rankings are based on those sites that have the Alexa toolbar in place so they can be tracked. I don't know what percentage of the total online sites have the Alexa toolbar installed, but I have heard the number is very small. So if you believe in the Alexa number, it is based on a tiny percentage of all the Internet sites.

Steve

When I first posted Making My Fist Million Online, my website was 10 weeks old with 7 backlinks and not ranked at all in Alexa. Three weeks later, I was at 992k worldwide and 450k US....all from generating lots of traffic without a single online sale. Heck, I think I made $42 total from Adsense.

So even though my Alexa ratings were completely legitimate, the stats meant nothing at all. Never, ever ever trust Alexa unless it's a top 1k site with verified metrics.

And you can appear on Alexa without the toolbar....you pay $200 a month to have your site verified by them (which means they integrate your webmaster tools and then laugh at you for paying $200 a month for it). I doubt many go that route though unless they're in the process of selling the site.

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Tom Addams

9 years ago

A little strapped for time, so here's some quick information.

Valuation: How to value a website: 5 popular methods | Flippa Blog

Traffic: Website Traffic & Mobile App Analytics | SimilarWeb

Forums are a little tricky when it comes to buying. Quite often the loss of the owner means the loss of a great deal of quality members. Not always the case, but certainly a consideration. Having grown very large forum communities in the past, I can tell you to be prepared for a big job on your hands in terms of moderation. If the revenue or traffic supports it, offer either of those as incentives for moderation.

- Tom

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crosley

9 years ago

So is there a reliable way to use something like Alexa or Google analytics as a 3rd party verification if he does not use these tools already?

Let's say he no longer uses either of these services (or simply never did) Is there the equivalent of an Alexa or Google"audit" where I can see for myself? Would there be any reason for him to refuse such a service if I asked for it?

Also, regarding his ad revenue, my first action was going to be for my CPA send a letter to his CPA and ask for financial statements, is there any additional way to check those numbers to make sure they are realistic?

Thanks again, just trying to do the first steps before proceeding and want to protect myself.

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kk075

9 years ago

Originally Posted by crosley

So is there a reliable way to use something like Alexa or Google analytics as a 3rd party verification if he does not use these tools already?

Here's the thing, if he's making money through the website, then he's tracking it somehow. His ads are tracking clicks and opt-ins too, so if he's telling you otherwise then it's time to walk away. Modern forums are also very good at tracking visits and members right out of the box, so nothing here adds up.

There's only one reason he won't show you his true stats- he's lying. So find another opportunity, my friend.

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kilgore

9 years ago

Originally Posted by kk075

Here's the thing, if he's making money through the website, then he's tracking it somehow. His ads are tracking clicks and opt-ins too, so if he's telling you otherwise then it's time to walk away. Modern forums are also very good at tracking visits and members right out of the box, so nothing here adds up.

There's only one reason he won't show you his true stats- he's lying. So find another opportunity, my friend.

^^ This exactly.

Moreover, if he's truly not tracking his data, then that in itself is a huuuuuuuuuuge knock against the site. How are you supposed to grow the site, figure out what's working (and what's not), and understand your customers without this sort of data? To me, buying a site is more than just the website itself -- it's buying the business of which the website is just a part. It has to include the analytics, social media platforms, email lists etc. And if those don't exist -- or if he doesn't want to give those to you as part of the deal -- I'd be very wary of buying the site. Without those you'll have a hard time replicating his success let alone growing beyond it.

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crosley

9 years ago

Originally Posted by kk075

Here's the thing, if he's making money through the website, then he's tracking it somehow. His ads are tracking clicks and opt-ins too, so if he's telling you otherwise then it's time to walk away. Modern forums are also very good at tracking visits and members right out of the box, so nothing here adds up.

There's only one reason he won't show you his true stats- he's lying. So find another opportunity, my friend.

He hasn't refused to show me this data, I just want a 3rd party verification. It would just be very easy to doctor something like that and show it to a buyer, that is my fear without some sort of outside audit.

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kk075

9 years ago

Originally Posted by crosley

He hasn't refused to show me this data, I just want a 3rd party verification. It would just be very easy to doctor something like that and show it to a buyer, that is my fear without some sort of outside audit.

Okay, then just ask him to see the Google Webmaster Tools account for the site. Those stats can't be faked so you'll know the true traffic. Now, you can contact a research company to independently verify this if you choose, but you're going to spend a grand on a statistic that can't be faked if he shows you on Google.

For revenue, you'll want to see his adsense and affiliate accounts...specifically the payouts, the overall conversion rates and the number of clicks. This will tell you whether or not the ads are performing optimally or if you can possibly earn even better revenue with some tweaks.

I do have a question though- it sounds like you're going to pay a fair amount to take over this forum. With that exact same investment amount, could you not build a better forum from scratch in the same niche?

I mean, 5-10k development costs, another few thousand in sponsored ads and you have the beginning of a brand new community with no prejudices or headaches. While the income aspect would require some time, you're into the project for very little and you can ensure that everything is done the right way. Just some food for thought.

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crosley

9 years ago

Originally Posted by kk075

Okay, then just ask him to see the Google Webmaster Tools account for the site. Those stats can't be faked so you'll know the true traffic. Now, you can contact a research company to independently verify this if you choose, but you're going to spend a grand on a statistic that can't be faked if he shows you on Google.

For revenue, you'll want to see his adsense and affiliate accounts...specifically the payouts, the overall conversion rates and the number of clicks. This will tell you whether or not the ads are performing optimally or if you can possibly earn even better revenue with some tweaks.

I do have a question though- it sounds like you're going to pay a fair amount to take over this forum. With that exact same investment amount, could you not build a better forum from scratch in the same niche?

I mean, 5-10k development costs, another few thousand in sponsored ads and you have the beginning of a brand new community with no prejudices or headaches. While the income aspect would require some time, you're into the project for very little and you can ensure that everything is done the right way. Just some food for thought.

Okay, that helps. thanks

Yes, I could easily build the same site for a fraction but the cash flows could take a decade to get there and not every forum "takes" even if you put the work and money in. This forum has achieved a certain critical mass and brand awareness that would be difficult to duplicate.

My view is even if the revenue stays static or goes down, it will still be a far better investment than most real estate and stocks that I have owned over the years when you look at the price paid vs cash flow payout. The site has solid history, over 10 years, and I've been a member of it for a while.

I definitely though want all input, both good and bad.

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kk075

9 years ago

Originally Posted by crosley

Okay, that helps. thanks

Yes, I could easily build the same site for a fraction but the cash flows could take a decade to get there and not every forum "takes" even if you put the work and money in. This forum has achieved a certain critical mass and brand awareness that would be difficult to duplicate.

My view is even if the revenue stays static or goes down, it will still be a far better investment than most real estate and stocks that I have owned over the years when you look at the price paid vs cash flow payout. The site has solid history, over 10 years, and I've been a member of it for a while.

I definitely though want all input, both good and bad.

This is what I'd personally think about (provided the numbers do in fact look good after they're verified)-

- Is the niche something that goes up and down in popularity over time, or will the readers generally participate year round? For instance, an NFL fan forum is very seasonal and produces 90% of its income over three months. So make sure the numbers you see are annual and not just a great month.

- Is is something that's heavily effected by the economy? For example, if its a stock trading site, then the majority disappear when all is well and they come rushing back when it's doom and gloom. Only, when stocks are down they're not spending money, so the traffic doesn't correlate with sales.

- Off the top of your head, are there 300+ regular, everyday users? In general, those are going to be your long-term customers, so you want a forum where people are active daily. The people who post one thing a month (or nothing at all) are harder to count as potential income streams. So you don't only want to look at traffic but how many of them feel like they're part of that community.

- Is this a "dangerous" category that could potentially bring lawsuits? For example, adult topics that could have pics/info that could get you sued, or credit hack sites that offer shady ways to boost your credit score. Think about the overall liability involved and make sure the risk is minimal.

- How well is the forum moderated? If threads turn into arguments that often get out of hand, then it chases away potential new members. So make sure the mods are doing a good job. Likewise, are most of the members nice to others and helpful? That's the biggest aspect of community growth.

- Is this forum more or less popular than three years ago? You want to buy something that's on its way up; not flattened off or on a downward spiral.

Again, just some food for thought on things I'd look at if it were my investment. If it seems like you're answering all the above questions correctly though and the numbers are legitimate, then go for it.

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okosh

9 years ago

Originally Posted by crosley

It's a web forum, the revenue is almost exclusively online ads, and wanted to see :

A) How do you confirm the numbers the seller is giving you are honest?
B) How do you verify the web traffic numbers?

The asking price is fair IF (a big if) the numbers I'm being quoted are truthful.

Unless you have been a member of the forum you looking to buy for some time there is no way to know for sure....Real easy to be scammed...

It's real easy for an admin to get a bunch of mates to post daily and make a forum look busy...then once sold the bunch of mates vanish and you left with a morgue...

About the only way to check advertising revenue is through proof of payments....For example if forum advertising is paid for by paypal then ask to see last 6 months transactions of the paypal account...
Without that proof you don't know if all the adds are real paid for adds or if it's just banners posted by admin which nobody pays for...

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Charles E. White

9 years ago

Alexa is the last place I would look if I was buying a business site.

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Mehdib

9 years ago

Purchasing a business whether online or not and evaluating the market value of it is not as easy as you think it is. Business evaluation is a big deal, especially for online businesses you need not to only worry about the current website ranks and visitors and conversions but future value of the company. Take a look at the book values, conversions and actual earnings and you have to anticipate future value as well since that is when you will be winning you money back. I suggest to use a professional to do that. I personally do not know one who can do it cheap but if you keep looking you might find one.
Good luck

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Newbie Buying an Established Web Business?

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