Investing in Websites

Investing in websites

Investing in websites is rarely the first thing that people think of when they consider investing. When stocks and real estate dominate investment advice — and even seemingly exotic investments like cryptocurrencies have a familiar analog in real money — investing in a website seems abstract. However, many websites make money for their owners, and some make significant sums. While the big names might dominate the list of website earners, Google makes several thousand dollars every second, for example, there are plenty of smaller websites that generate healthy returns for their owners.

What are the benefits of investing in websites?

In many ways the benefits of investing in websites are the same as investing in an existing business — largely because many websites are businesses. When you buy a website, you benefit from the work that the previous owner or owners have already put in. You have not had to start the website or see it through difficult beginnings, but instead can take ownership when it’s already up and running.

You are likely to buy a good customer base with it. Depending on the type of website these might be literal customers, buying through the website, but in many cases these will be regular visitors, or visitors who find the site through search engines like Google.

And, ideally, you will be buying a website that has existing revenue streams. Again, these might be from physical products like any business, but they might also be from digital sales on that website. Many websites will sell ebooks or subscriptions that provide income for the owner. Others might take advantage of their popularity or search-engine prominence to sell advertising.

One of the key differences between buying a website and a business is that it’s sometimes possible to generate a good passive, or almost passive, income from websites. Many websites will require work, perhaps significant amounts of work, to maintain, but there are some that, once set up, will generate income with relatively little intervention.

How can you make money investing in websites?

Just like any investment there are lots of ways to make money from buying a website, and which approach you take will depend on your preferences, for example your appetite for risk, how quickly you want to generate returns, and how much work you want to put into your investment. The main ways you can make money are by flipping the site or domain, monetizing an existing site or benefiting from existing income, or, finally, using it for your own business.

Flipping websites is difficult and carries risk. Like flipping any asset, you are reliant on the market changing in your favor, or in being able to spot and acquire an underperforming website that is worth more than you will pay to buy it. Doing this is a skill and, because it’s hard to find reliable and independent evidence, you may find you have to rely as much on your instinct as you can on the data you can find.

It’s also possible to make money purely on the domain name. There are plenty of examples of people who bought domain names for a few dollars, often not even as an investment, and then sold them to corporate giants, or more famous namesakes, who wanted them. However, this has become rarer as the internet matured, and new businesses will consider domain availability early in their existence, but the potential for a big return is still there.

When buying sites, most sellers will offer a guide of the current income stream. This might come from things like ebook sales or advertising, and you should research and understand this, so you can consider how sustainable the income is and how much work it will require. You can also buy existing sites to monetize.

Many websites start as a labor of love, a way of sharing their owner’s hobby or passion with the wider world and some grow beyond their owner’s ability, or desire, to maintain them. Chosen well, these sites can become commercial propositions that will generate income. However, monetizing a site requires work and sensitivity — the site’s fans might well disappear if ads, paywalls, or ebooks suddenly start appearing.

Finally, for some sites, it might be possible to use them to increase income elsewhere. If you own a business, for example, you might be able to buy a website that focuses on a related area to drive traffic and customers to your business. In one way this is like buying website advertising, and that provides a useful way to think about the purchase, you have to be sure the website’s traffic is high enough, and is the right type of visitor, for your business to benefit.

Ultimately, however you hope to make money from websites you need to make sure that the investment is the right one for you. Does it match a niche that interests and motivates you enough to work to generate the return? And are you confident from your research that it will make the return you hope to achieve?

Where can you start investing in websites?

There are three main ways to acquire a website.

First is buying through a broker, like FE International or Quiet Light Brokerage. These specialize in brokering deals between sellers and buyers and can help avoid some of the risk inherent in website purchases. The quality of information available will usually be higher through a broker, and you can have more confidence in their valuation.

There are also several website marketplaces. Marketplaces, like Flippa or Empire Brokers, are a little like a Gumtree for websites. However, they carry similar risks to Gumtree. Website sales are largely unregulated and often conducted across national borders. This means that unscrupulous sellers can take advantage of the unwary, either by being dishonest about the site’s performance or even failing to transfer ownership, leaving the buyer with few opportunities for recourse.

Finally, it’s always possible to buy directly from the buyer. It’s usually easy to contact a site owner, contact information is likely to be on the site and, if not, can often be found through the site’s WhoIs listing or a little detective work on social media. If there’s a site you particularly like that you feel might not be getting the love and attention it deserves, reaching out to the owner might prove worthwhile; many website owners never consider that someone might pay them a good price for their site.

How should I be investing in websites?

Investing in websites is not easy. Although there is the potential of a good return, it is not guaranteed, and you will have to be confident of your research. Most sites will need some work to generate a return, and will still be reliant on the wider economy. A recession or pandemic can affect website revenue as much as it does any business.

Websites also carry the additional risk that they are reliant on the wider internet ecosystem. The revenue stream of a site can be destroyed by an adverse change in Google’s ranking algorithm. And technical issues can impact as well, even loading a few milliseconds slower can move your page down Google’s rankings and hurt your income.

When you invest, you should make sure that you have completed your due diligence. Ensuring that you are actually buying what is being advertised, so you know the traffic and revenue is there. And, most importantly, you will know how much work you will be required to put in. If you do not have the required technical skills, or don’t have easy access to them, it might be that the website you’re considering isn’t the one for you.

How much can I make investing in websites?

For all the difficulties, dangers, and disadvantages that might come from investing in websites, if you get it right it can be an incredibly lucrative investment.

Websites tend to be valued at around 40-45 times their monthly revenue. A website that generates $10,000 a month, for example, would be priced in the $450,000 USD range. This offers an excellent return on investment of 35-60%. The typical returns from stocks or the real estate, both around 8-10%, look anemic in comparison.

However, the great return on investment and payback comes at a cost. Sites will need upkeep, a blog, for example, will quickly see its return drop if it does not get regular new content. And even if the site is maintained, most do not have a long lifespan. While it might be hard to imagine stock market giants or real estate disappearing in the next twenty years, the internet is full of sites that were once money-spinners for their owners than are now unvisited or have been snapped up by squatters hoping to make money by re-selling them.

For most people investing in websites is something they should only consider when they have a comfortable portfolio of more traditional investments to provide security. But for those with the research skills to spot a bargain, the technical skills to make it work, and the appetite for risk that comes with it, investing in websites could be the strongest performing part of their portfolio.