Why Would Anyone Pay Top Prices For An SEO'd Site?

Tom Addams

9 years ago

They know more the the person selling the website.

Tom

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nik0

Banned 9 years ago

Originally Posted by Get Rich Methods

They know more the the person selling the website.

Tom

That depends quite a bit.

If they know so much they wouldn't buy sites but build and rank sites their selves.

I know some people leave gaps in terms of conversions, me one of them, but still, I would never spend 20* monthly on a site when I can accomplish the same results for 3* monthly.

That's a huge price difference.

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Tom Addams

9 years ago

Originally Posted by nik0

That depends quite a bit.

On this, we agree.

Speaking with my website developer hat on for a moment, I'm interested in buying websites for 6 primary reasons:

1. To Flip.
2. To Develop and Flip
3. To Develop and Hold Long-Term
4. To Increase the Ranking of a Network, Group, or Website.
5. To Acquire the Domain
6. To Acquire the Brand.

If I purchase a website for 20 times monthly income, or 100 times, I do so because the website will be to my benefit. And that benefit can come in different forms; either one or a couple or many.

Tom

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nik0

Banned 9 years ago

Originally Posted by Get Rich Methods

On this, we agree.

Speaking with my website developer hat on for a moment, I'm interested in buying websites for 6 primary reasons:

1. To Flip.
2. To Develop and Flip
3. To Develop and Hold Long-Term
4. To Increase the Ranking of a Network, Group, or Website.
5. To Acquire the Domain
6. To Acquire the Brand.

If I purchase a website for 20 times monthly income, or 100 times, I do so because the website will be to my benefit. And that benefit can come in different forms; either one or a couple or many.

Tom

Let me redefine SEO'd site in WF terms lol.

A site ranked with either a bunch of spam or private blog network links.

More important, it seems Empire Flippers has a bunch of regular buyers, that don't seem to mind these type of sites (at least that's what I picked up in one of those podcasts).

I used their valuation tool and one of my sites is worth $12.000,-

I spend $150,- on that site, content + link building included, OMG.

Ok I admit I was lucky with that niche but still.... it was just 1 out of 20 sites, and those 20 sites including link buidling cost me $6500,- and makes me $2000/month in total, in other words combined (to take away the luck) it would have a value of $40.000,-

I really can't imagine how these people can justify these costs when it can be created for a fraction of the price.

If we're talking about ROI, it's quite an ROI to go from $150 to $12.000,- then it's to go from $12.000 to let's say $50.000,-

Anyway, everyone has a different point to step in of course, millionaires might like to step in at $12k while I like to step in at $150,-

However I don't expect to make 20* monthly with my sites when they already rank at the first position in Google, much more interesting to buy a site that ranks at the bottom of page one so I suppose that plays a large role as well.

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kilgore 9 years ago

Originally Posted by nik0

I used their valuation tool and one of my sites is worth $12.000,-

And you believe their tool? They're trying to get you to sell your site through them -- of course, they're going to tell you it's worth a lot.
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- nik0 Banned 9 years ago
  
  Originally Posted by kilgore
  
  And you believe their tool? They're trying to get you to sell your site through them -- of course, they're going to tell you it's worth a lot.
  
  It's not about that, their tool is real basic, it just looks at the monthly income (that you have to input yourself) and it multiplies it by factor 20 (which I already knew). I was just curious to try out that valuation tool.
  
  Maybe it takes some other factors into account as the site makes $500/month and that's what I inserted, so based on 20* monthly it would be $10k instead of $12k. Maybe the fact that the site is 1 year old increased the price a bit, though the seasonal aspect (which they ask about as well) should have lowered it in fact, but well....
  
  Point is that they claim to get 20* monthly and after fees you end up with about 15-16* monthly.
  
  Heck I would be happy if I received 12* monthly (after fees) for that crappy site lol., I'm sure I wouldn't get that at Flippa.
  
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larryboy03

9 years ago

Iv sold a few site on Flippa over the past 2 years now and I have to admit, quite a lot of the buyers didn't have a clue how to transfer a website over.

Some didn't even know how to use Wordpress properly. The way I see it, is that some people are resorting to buying online properties with lack of knowledge on how to run them right.

A lot of people know nothing about Google updates etc. Some people are just jumping in and buying them without doing real research on how to run an online business.

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Tom Addams

9 years ago

Originally Posted by larryboy03

Iv sold a few site on Flippa over the past 2 years now and I have to admit, quite a lot of the buyers didn't have a clue how to transfer a website over.

Some didn't even know how to use Wordpress properly. The way I see it, is that some people are resorting to buying online properties with lack of knowledge on how to run them right.

A lot of people know nothing about Google updates etc. Some people are just jumping in and buying them without doing real research on how to run an online business.

This is the flip side (pun intended) to my initial comment.

We call it the "greater fool theory of pricing." How do we determine price? The price at which the greater fool will pay. Now, of course, anyone who knows this theory will understand the word "fool" is a misnomer; the theory states that price is not determined by intrinsic value (scripts, for instance), but by the expectations of potential buyers in the market. You describe the situation accurately in your post.

So, in general, then, there are 2 types of buyer:

1. A Buyer with intelligent expectations;
2. The inverse: a buyer with unintelligent expectations.

Regarding the latter: I could sell a dating website to a person for 20 times monthly income, and he may believe such a website is going for a song and has the potential to have him sitting on the beach and sipping Mai Ties within 2 years.

Tom

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James.N

9 years ago

I'd like to think that the buyers have done their due dilligence. Hopefully they looked at the complete backlink profile and the analytics of the site to see where the traffic is coming from. They hopefully looked to see how those links were obtained. If everything is authentic and organic why wouldn't you pay for a properly SEOed site?

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sirspray

9 years ago

I feel like the best reason why someone would do it, is as an investment. If it is SEO'd then it is most likely receiving traffic which means ads, conversions, and money.

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kilgore 9 years ago
What you're talking about -- that they're a Google update away from "tanking into oblivion" -- isn't unique to sites dependent on SEO traffic. There really is no such thing as a site that you could stop working on and expect it to make the same amount of money in a year as it does today. So given that, why would anyone buy any site at all, no matter whether it got its traffic from SEO, email marketing, PPC or handing out fliers on the street?

GRM nailed it of course:
1. In the case of buyers with "intelligent expectations" because they think they can make even more with it.
2. In the case of "buyers with unintelligent expectations" -- well, who knows what they're thinking?
As to intelligent buyers, one thing to consider is that business growth isn't linear. Generally, it follows an S-curve which means that it starts off slowly, accelerates rapidly and then tails off again at the end. So let's say that the site you're talking about makes $5,000/month and sold for $100,000. Maybe it took one year of hard work to get that site up to the $5,000/month mark. One thing you can be assured of is that it won't take another year to get to $10,000. If it's near the very bottom of the S-curve, it might only be 11 months. If it's near the middle of the S-curve, it might be only 6 months and if it's near the very end of the S-curve, it might be 2 years or never at all.

The point is, that it's the site's future prospects that determine the value of a site, not it's past performance. It's past earnings are helpful in gauging what it's future prospects might be, but there is certainly no precise way to look at a business to figure out where it likes on its growth curve.

Moreover, as businesses saturate different methods, a smart businessperson might be able to find new methods to continue growing at a fast rate. For instance, with my business I've noticed that while our Facebook page is still growing quickly numerically, as we've begun to approach a million fans, its growth rate is lower than before. My guess is that this is partly due to internal Facebook changes, but also partly due to us begining to saturate our potential in Facebook.

Given our slowing Facebook growth rate, would our site be a good buy at 12x or even 20x monthly earnings? I'm obviously biased, but I think the answer is still a resounding yes as (1) we're still growing fast (2) we have a fantastic brand and (3) (and most importantly) there are lots of things that we haven't done outside of Facebook that would help to keep that growth rate up.

Website and business valuation is far from a science because to be able to acccurately value a site, you'd have to be able to accurately predict the future. Moreover, the same website in the hands of one team might be worth significantly different than a site in the hands of another team. As with so much in online business the right answer to how much a website is worth depends largely on the person asking the question.
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SEO-Dave

9 years ago

I understand your argument Nik0, but if it's so easy to build and rank sites why aren't you a multi-millionaire and retired?

I can easily make money from a 1,000 webpage site that's filled with unique high quality content targeting high traffic niches. It's easy to do. Where do I get 1,000 pages of unique high quality content from at reasonable cost to rank?

Some aspects of what you are discussing are easy, but as a whole it's not that easy, there are bottlenecks in the system that limit scaling up/growth.

Most places I've looked at to buy sites and bought sites from use 12 times monthly revenue. To pay more than 12* there has to be a good reason, but we are talking about relatively low earning sites not sites worth hundreds of thousands of $$$s.

David

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Mike Anthony 9 years ago

Originally Posted by SEO-Dave

I understand your argument Nik0, but if it's so easy to build and rank sites why aren't you a multi-millionaire and retired?

His domain broker didn't cover that part with him?
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nik0

Banned 9 years ago

Originally Posted by SEO-Dave

I understand your argument Nik0, but if it's so easy to build and rank sites why aren't you a multi-millionaire and retired?

I can easily make money from a 1,000 webpage site that's filled with unique high quality content targeting high traffic niches. It's easy to do. Where do I get 1,000 pages of unique high quality content from at reasonable cost to rank?

Some aspects of what you are discussing are easy, but as a whole it's not that easy, there are bottlenecks in the system that limit scaling up/growth.

Most places I've looked at to buy sites and bought sites from use 12 times monthly revenue. To pay more than 12* there has to be a good reason, but we are talking about relatively low earning sites not sites worth hundreds of thousands of $$.

David

Fair point, scaling ain't too easy, I struggle with that myself as well.

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TryBPO

9 years ago

Originally Posted by nik0

Some sites go for 20* monthly and only rank cause links are build, often from private blog networks.

Why are people prepared to pay 20* monthly for such site when it's known that there will be 3-4 large Google updates in such time stack? In other words 3-4 chances to tank to oblivion.

Can't get my head around that.

Hey nik0,

There are plenty of reasons - some of which won't make sense to you as you're strictly in the "builder" camp. (NEVER thinking to purchase, knowing you can build from scratch for much less!)

1. Backlink profile is clean (not spammy, doesn't use PBN links, etc.)
2. Newbie looking to learn with minimal investment (Not as concerned with long-term ROI...wants to play around and learn with the site)
3. Strategic purchase - wants the product or something else that comes with the site.
4. Diversifying away from owning mostly paid traffic sites
5. Site has lived through many Penguin/Panda updates (so far)
6. Many, many more

Originally Posted by nik0

That depends quite a bit.

If they know so much they wouldn't buy sites but build and rank sites their selves.

I know some people leave gaps in terms of conversions, me one of them, but still, I would never spend 20* monthly on a site when I can accomplish the same results for 3* monthly.

That's a huge price difference.

This is a long-standing debate and a complicated one. Those in the "build" camp can't BELIEVE people are willing to pay for sites that can so easily be built, ranked, and monetized so easily (and cheaply).

Those in the "buy" camp can't FATHOM doing all of the grunt and low-end front work required to get sites up, having to deal with the failure rate that inevitably comes with building sites from scratch, etc.

You already get the "builder" arguments and understand that side, so let me share with you some of the convincing buy-side arguments to see if that makes a bit more sense. I'll use some hypothetical numbers just to make the point...

-----

Let's say I have a high-paying job (or I'm doing well already online) and value my time $100/hour at a minimum. I don't have a huge staff of people churning out sites and don't do it all the time, so I'd have to spend at least 200 hours cranking out 10 sites, one of which finally cracks the $500/month mark.

Sure, I could sell that $500/month site for $10K...but with the 200 hours I put in, I'm not exactly stoked about my ROI doing things I absolutely HATE to do.

On the other hand, I'm a master at paid traffic strategies. It appeals to me, is scalable, and I've got the skillset and bankroll to stop messing about and really knock it out.

I spend $60K on a $3K/month site. I spend 200 hours the next 6 months improving the site to double the earnings with scaled traffic - getting it up to $6K/month.

THOSE 200 hours of my time have brought in an additional $3K per month - $60K worth of value in a sale! I'm now making $300/hour ROI on my time doing something I like to do.

Sure, I could have spent MUCH less money upfront and built out some sites from scratch over that 6 months, but my time is really valuable to me. If I'm going to spend 200 hours working on a project, I'd like to do it at the highest value possible.

-----

I had a situation like this many years ago. I was dropshipping a product that cost me $5 to purchase and was selling for $20-$25 on eBay. Awesome margins! Unfortunately, all of the questions, emails, concerns, etc. that came in (+ ebay fees) was taking up a crazy amount of my time. I didn't have systems in place and was just fumbling through it - I was making like $8/hour even with those crazy margins.

Originally Posted by nik0

More important, it seems Empire Flippers has a bunch of regular buyers, that don't seem to mind these type of sites (at least that's what I picked up in one of those podcasts).

I used their valuation tool and one of my sites is worth $12.000,-

I spend $150,- on that site, content + link building included, OMG.

Ok I admit I was lucky with that niche but still.... it was just 1 out of 20 sites, and those 20 sites including link buidling cost me $6500,- and makes me $2000/month in total, in other words combined (to take away the luck) it would have a value of $40.000,-

I really can't imagine how these people can justify these costs when it can be created for a fraction of the price.

If we're talking about ROI, it's quite an ROI to go from $150 to $12.000,- then it's to go from $12.000 to let's say $50.000,-

Anyway, everyone has a different point to step in of course, millionaires might like to step in at $12k while I like to step in at $150,-

However I don't expect to make 20* monthly with my sites when they already rank at the first position in Google, much more interesting to buy a site that ranks at the bottom of page one so I suppose that plays a large role as well.

Please see the point above about ROI again.

Yes, $1,500 to $12K sounds better than $12K to $50K in terms of ROI.

But...If I spent 200 hours to make that happen, you'll see it's actually worse. ($52.5/hour Vs. $190/hour)

It's not always about margins - you have to account for your time. (And opportunity costs as well)

Lastly - we don't have an army of brain-dead buyers looking to purchase whatever sites you throw at them - that's definitely a mis-characterization! :-) A larger portion of our buying audience won't touch PBN's with a 10 foot pole, but our audience is large enough to where some will, assuming other things in place make sense.

Originally Posted by kilgore

And you believe their tool? They're trying to get you to sell your site through them -- of course, they're going to tell you it's worth a lot.

Those things aren't mutually exclusive! Yes, we're trying to get sellers to sell their websites through us, but that doesn't mean we didn't put a ton of work/care into the tool.

It's currently in beta, but we plan to use this as an objective measuring stick from which we'll price (and sell) listings in 2015.

This isn't a pipe-dream - we're selling $150K+ worth of sites per month and planning to ramp that up significantly in 2015. Our sell-through rate is high at 97%+, so I'd say we're pretty on with our pricing/valuations.

Originally Posted by nik0

Fair point, scaling ain't too easy, I struggle with that myself as well.

I hear ya, nik0 - scaling ain't as easy as it sounds! Definitely a learning experience too, eh? We've scaled some things successfully. Other? Not so much...

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Why Would Anyone Pay Top Prices For An SEO'd Site?

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