Website Flipping – An Unsustainable Business Model?

By Mark / December 17, 2010

Over the past few years there has been a lot of talk and a fair amount of hype about Website Flipping. On paper it looks like a good business model, build a nice looking site then sell it for a small profit, or build a site promote it until it gets income then sell it.

Is Website Flipping a Viable Long term Business?

There are some very basic flaws with website flipping

The average sale price for an established site with income is around 6 to 8 months of the income. So a site with $50 a month income will get $300 to $400 if sold on a site like Flippa. This is income that will be quite quickly recouped and with a bit of work and promotion the income will increase.

From the sellers point of view this is very short sighted, why sell a site that is earning you good money? (obviously there are some times non business reasons for selling)

On the other hand if you look through the listings of flippa you see hundreds of sites a few days old with no income for sale. Over the past 60 days Β over 75% of the sites have been like this. Many of these are sites that are poorly researched, autogenerated using content from amazon and elsewhere and will never make money without major work.

You’ll find most of these with titles that emphasise “Potential” and usually a figure of $1500 or more. I’ve been in this business almost 6 years and have yet to see an autogenerated site make $1500 a month!

These sites do get buyers but I just wonder who they are, has anyone reading this made money from these?? Buying sites like these seems to have more in common with gambling than good business practices

The Flipping Experiment

Over the past 6 months myself and 4 other members have been conducting a flipping experiment to see if flipping sites is a sustainable business model. The original plan was to buy 1 site for about $500 then spend $500 promoting and upgrading it and see if could make a good profit.

As things went we couldn’t find any suitable sites so we created our own sites, added unique content and promoted it until we were getting around 150-200 visitors a day. The income was around $60 per month from adsense, we also tried clickbank and Amazon with no sales.

We sold it for 10 times the income and made a good profit from it. But the problem is if we had done a bit more promotion it would have probably earned what we sold it for in another 3 months.

So on one hand the experiment worked well but on the other we could have earned a lot more in the long term by not selling.

Does anyone Make An Income Flipping Sites?


I’ve spend several hours on a superb site called FlipFilter today going through the stats they have for Flippa and they make interesting reading.

The first thing I wanted to look at was what it took to make $5000 a month selling websites, so I checked out the most active sellers over the last 60 days to find any that averaged over $5000 per month. (In this period there have been over (5750 listings)

I only found 4 people who fulfilled this criteria, what was really surprising was the number of sites they had to sell to make that money.

Looking through the figures I would say that only 1 person has it anywhere close to right and he still had to sell over 1 site a day.

Total Revenue: $24,502 Sites Sold: 85

Average Winning Bid: $288
Average Buy it Now Price: $328 (only for listings where a BIN is set)

Average Number of Bids: 9
Average Claimed Revenue: $0 (only for listings where a gross revenue is listed)

Sold Listings Rate: 42.6 sites sold per month
Seller Clearance Rate: 94% (percentage of total listings that end sold)

Total Revenue: $15,222 Sites Sold: 80

Average Winning Bid: $191
Average Buy it Now Price: $199 (only for listings where a BIN is set)

Average Number of Bids: 2
Average Claimed Revenue: $0 (only for listings where a gross revenue is listed)

Sold Listings Rate: 39.1 sites sold per month
Seller Clearance Rate: 91% (percentage of total listings that end sold)

Total Revenue: $11,045 Sites Sold: 160

Average Winning Bid: $69
Average Buy it Now Price: $174 (only for listings where a BIN is set)

Average Number of Bids: 4
Average Claimed Revenue: $0 (only for listings where a gross revenue is listed)

Sold Listings Rate: 80.3 sites sold per month
Seller Clearance Rate: 96% (percentage of total listings that end sold)

Total Revenue: $10,514 Sites Sold: 52

Average Winning Bid: $202
Average Buy it Now Price: $416 (only for listings where a BIN is set)

Average Number of Bids: 6
Average Claimed Revenue: $0 (only for listings where a gross revenue is listed)

Sold Listings Rate: 26.1 sites sold per month
Seller Clearance Rate: 85% (percentage of total listings that end sold)

From those figures alone it seems that it would be very difficult to make a good income solely from flipping sites.

How Do You Make Money From Website Flipping?


It seems that there is one way for making a sustainable income from Flipping sites.

Don’t flip them…. Buy them

The most obvious way is to pick up established sites that are being sold with income for about 6-8 times that income. They should have room for improvement in the rankings. They need to be fundamentally good sites and have room for expanding the keywords that are being targeted.

Set your buying limit and stick to it, If I am bidding on a site I really like and lose it I’ll often go and build a similar site for myself… don’t forget you always have that option.

Avoid new sites selling on potential

Conclusions

I am sure there are several people actually making an income from selling sites but the whole point about making money online is that you should be able to continue making that money while you are on the beach or taking a holiday. Building 2 or 3 websites a day and selling them doesn’t really fall into this category.

Flipping can be a good way to enhance your income but I am not convinced that it’s sustainable…

If you know different please tell me!!

About the author

Mark

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12 comments
Paul Forcey

What if instead of selling lots of small sites you only sold established sites. Spend time getting decent income going and then sell.

Also some people have sold sites for a lot more than the usual 8-10 times monthly income.

I wonder if the guys who sell a load of sites would do better if they did even a little work on each of them to build some income. Although maybe potential sells better than reality.

Paul

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Rita

As a member of the ‘flipping syndicate’, I agree that it’s just not worth selling.

I would have loved to personally keep the site we sold for $600, but because this was an experiment, and because I was selling the site under my Flippa account, I had to ‘let it go’.

I’ve bought and sold several sites off of Flippa. I don’t think selling is worth it, unless you have sites that you don’t plan on working on or ones that are not performing. I’ve however had some killer buys on Flippa . There are definite deals to be found!

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Jennifer

That makes sense…I’ve often wondered why people would sell established websites that are making great income. But, on the other side, sometimes it can help to buy a site that’s set up so you don’t have to worry about design, layout, content, etc. All you have to do is promote it!

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Chris Guthrie

Hey Mark,

First off some feedback on your blog: Please add a comment button at the bottom of your blog post. People have to scroll back up to the top of the article and click the comments to be able to comment (perhaps this results in too much effort and in turn less comments / conversation)

In any case – yes I agree I would never even bother listing a site for sale that I couldn’t sell for at least $10k or more because selling for anything less than that isn’t really worth the effort. I do think there is this really murky low end market where people are somehow able to trick others into buying a site with “real potential” for $500 or so that cost them $20 and a few hours to make. So I think that’s part of what has contributed to the crap that’s on Flippa these days.

I was going to ask if you were coming to Affiliate Summit West, but I see you live in Spain right now. Too bad as it would have been cool to meet up / trade ideas on buying and selling websites.

Talk to you again soon!

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Mark
Twitter:
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Chris,
Well done on your recent sale hopefully that will encourage more people to look for alternative methods of selling their sites (Chris sold a site for over $100,000 via investment bankers)
Just got back from Vegas a few months ago…so i don’t think i could swing another trip so soon πŸ™‚ going to play with some code and see if i can add another comments button. πŸ™‚

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J

Hey Mark,

I noticed that all the stats you showed in the post seemed to average only around $200 or less for the ending bid. This means that all of those people are probably just selling low-end crappy sites with no real value to them which isn’t what “successful” site flipping is all about.

There’s tons of different ways to approach flipping websites and it seems like the first thing people think of when they hear the words “site flipping” is building up these crap sites that take a few hours and selling them for like $100. I fully agree that it’s not a smart business model and isn’t very sustainable at all and it just clutters places like Flippa which makes it harder for the real sites to be seen.

However, if you approach it from a smarter angle and actually build up a good site with traffic, revenue, and real value before flipping, now it becomes a much better business model and is definitely something that can be scaled up. You can also just buy a somewhat established site, increase traffic and revenue a bit which might only take a few slight changes and a couple hours of work, then flip it for a big profit.

I’m sure you probably know this, but from your post it seems sort of like you were generalizing site flipping to just be building a plethora of low quality sites and pawning them off to some unsuspecting buyer for a small amount of money over and over again. There’s much more to it though. I personally build a site or buy one, get it established with steady traffic and revenue (or further increase the traffic/revenue if I bought it), and hold it for a few months while I collect the passive income from the site. Then I flip it for a nice payday and reinvest the money back into building or buying more sites.

It’s been working for me so far.

Let me know what you think.

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Mark
Twitter:
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Hi J thanks for your comment, I’ll be checking your site out.

The problem is it doesn’t matter if you sell a site for $100 or $10,000 on flippa the fact remains that you will usually get 10 times monthly income, if your lucky and people see the potential you might stretch to 20. If you use a broker or investment banker like chris did (comment below) you’ll get 5 years income or even more.

Personally I think you have the right Idea but in the long term you’s still make more from holding you sites rather than from flipping them.

Here is Chris’s post http://www.makemoneyontheinternet.com/how-to-sell-a-website/

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Genesis Davies

This is one of the main reasons I haven’t bothered selling any sites . . . I always start them and then think they’ll make more for me in the long run if I keep them! The result, of course, is that I have an awful lot of sites. πŸ˜€

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Bovic

I love to window shop at Flippa, but I have never bought or sold any sites. I have always assumed that most of the people selling on Flippa know more about what they are doing than I do, so I just look around.
Those low end sites kinda remnd me of the shinny new products that I receive in my email box. Fun to look at, but don’t buy.

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J

Hey Mark,

I see where you’re comin from. I’ve read Chris’ blog and it’s got some real good info on there. If I had a site like Chris’ that I knew was worth close to 6 figures or even more, then yeah I would pursue other avenues besides Flippa to sell it and try to get many years revenue instead of just 1 year.

Like Chris mentioned in that post though, if the site is under 100k, then Flippa is going to be the best place to sell.

The reason why I like to flip certain sites instead of holding them for the long term is just because there’s too many variables to consider. I actually wrote a post about this on my blog. I don’t know if it’s cool to post links or not so I won’t do it here, but if you head to the blog that’s linked to my name and search for the post “Why flipping websites instead of holding for the long term” you can see what I mean.

In short, Google algorithm changes leading to loss of rankings, Adsense banning accounts for no reason (it does happen), vendors products that you were selling as an affiliate being taken off the shelf, etc. are all things that you need to worry about when holding sites for a long time.

Everyone has their own way of doing things of course, I just prefer to get in and get out so to speak and get a lump sum for my sites while I know they are still valuable. I do still build up other streams of passive income at the same time though. They just aren’t ones that rely so much on Google and outside factors.

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Scarab

Site flipping is starting to look just like house flipping. A bubble type of thing that will not be sustainable. It also seems to attract two kinds of people, the sellers of course most of who are out to make a quick buck with very little work and inflated claims. The second type of person is the buyer, most of those types don’t know how to build a profitable website and think this is their way to riches the easy way. I think the best way to do this type of business is to sit on the sideline and watch it. I do think it is going to grow but it will not sustain.

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Paul@sitefurnace.com

Good post, I have written a post about this very same subject on site furnace.com

why we should buy niche sites rather than making them

It talks about looking at this whole thing from an investors point of view. I personally think you are crazy to sell a website earning passive income.

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