Why Acquiring or Buying a Business Is More Difficult Than It May Seem

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I’ll quickly share with you what I’ve been working on for the past 7 months and that is: acquiring web-only business assets that produce positive net income to add to my collection of side-hustles.

I wish I can say that this is similar to simply picking up a distressed piece of real-estate on the cheap, fix it up, and resell it for profit.  But it’s not.  Far from it, you will need a certain level of technical expertise to start.  First, you need to know how websites operate and how it can transition from one domain owner to the next.  Then, you will need to determine what the site is worth and what metrics to use to determine it.  There are a few more detailed guides available online, some are relevant, some are outdated, most use intimidating technical terms (if you don’t know what they mean or stand for).

My most recent acquisition is a niche site.  As of this writing, I am still within the escrow rescission period and as I am digging deeper and deeper into what I purchased, I am beginning to feel that I made a mistake on it.  Let me explain further.  This online asset boasts nearly 100,000 followers on Facebook alone.  It has other social media accounts, but the main traffic source to the website is from Facebook and its fans.  The website monetizes traffic through ads and clicks that come from the Facebook traffic.  There are other sources of traffic, but Facebook accounts for a whopping 98.46% of the nearly 200,000 page views per month.  That’s tremendous considering Social sources should only account for about 20-30% of traffic on content sites.

So what do I look for when acquiring a content-based website asset?  Here are the top 5 things to consider when buying a blog.

  1.  What’s the Organic Traffic Source percentage?  Organic search is basically the “warm” leads that come in from search engines to your site.  These users know what they’re looking for and your site is serving it to them.  Organic traffic is also a key metric when advertisers are determining the value of your ad space, which in turn determines your income.  My criteria is to find one with over 50% organic traffic.
  2. What’s the Bounce Rate on your site?  This is another important metric when determining the value of a website.  You see, authentic web visitors will tend to spend time on your site, reading, downloading, engaging with your content in one way or another.  When your site’s bounce rate is high (above 75%) that means users are finding your site, but they are quickly leaving because it is serving them wrong content.  Now, if your bounce rate is REALLY high (90% and above) it may mean traffic is spam or it was purchased.  Camtrading has a low bounce rate at 42.21% currently but we are slowly building this up to reduce that amount further.  My criteria is find a site with 50% and below bounce rate.
  3. How much time commitment will the site require AFTER acquisition?  This one, I’m flexible with because being a Stay-at-Home Dad, I can make time to pursue the challenges I want.  I’m not really bound by time constraints.  However, I do consider my time to be very valueable, with that said, I will spend an inordinate amount of time in the beginning to get things working seamlessly so that when I want to drop everything to travel, I can do that WHILE still earning income PASSIVELY.  My criteria for the amount of time is 1 hour per week.
  4. Know what is included in the sale.  Purchasing web assets is like buying an abandoned barn.  You know you’re getting a barn and everything as far as you can see.  But when you settle in and open this barn, you might uncover a variety of OTHER properties that weren’t mentioned prior to the sale.  I recently found out that when going through the accounts of my recent purchase, that there is a Myspace account still active with users, a Tumblr (what is that?), a few miscellaneous stand-alone forums, and a couple of other connections that may or may not have violated the terms of discovery (that’s attorney speak for due diligence).  So, spend more time in the research phase.  This is easier said than done, I know there’s a finite amount of time because there are others who may buy it before you and the opportunity is lost forever.
  5. Verify the revenue from ALL sources at least 20 times.  Now, this won’t apply if you’re buying a starter site, with no traffic because there won’t be any income.  With my recent purchase, I knew going in that I’m willing to pay a premium for a more mature, established site, generating healthy traffic.  Once I gained control and were able to see the source codes and ad scripts, I realized quickly that there were more sources of revenue.  There were embed referral links that would need to be converted to my referral accounts because if left undone, the previous owners would reap post sale benefits from my hard work.  That should have been disclosed in the beginning!  I realize this now, but when you only have screenshots of revenue sources to go off on as part of the pre-negotiation research, I wouldn’t have known to ask if there are OTHER sources of revenue they’re not disclosing.  Why would I think the seller is withholding income information, that only hurts their asking price and perceived value in the marketplace, right?  But, now I know there are other angles to it.  Be sure you ask if there are additional sources of income (and other hidden expenses) being produced by the website property.

This new website asset I’ve purchased is really putting my technical experience to the test.  How?  I’ve discovered that this website property is part of a Private Blog Network (or PBN).  Basically, this is a network of websites (possibly owned by the same person or company) that feeds content and traffic to each other.  So say, I bought Site B, well, Site B’s content is being fed by Site A, which I don’t own.  At any moment, Site A could STOP feeding Site B’s content and that’s when traffic will quickly die, and Site B becomes irrelevant to Google.  This explains why this site’s organic traffic is non-existent.  Google penalized it for having duplicate, unoriginal content.  So to drive traffic on the site, it uses Facebook.  Unfortunately, the Facebook posts and content ALSO comes from Site A (which isn’t part of the sale).  As for the claimed revenue sources?  I discovered that they’re in violation of the ad network’s placement policies.  I have also confirmed my suspicion that the revenue is in recent decline.  I know how to turn that around, but it would require an enormous amount of more work.  Work that I didn’t anticipate on doing from the price I paid to acquire this in the first place!

Had I known all these problems existed PRIOR to the sale, I would have valued the site to be something in the $2,000 range.  The Facebook fans, to me is what’s keeping this web asset from being worthless.

Good luck out there, and feel free to reach out to us here or on our Facebook page.

 

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About Brandon Foster 19 Articles
Brandon Foster writes about stock and options trading for Camtrading.com. He also writes product reviews for a prominent online publisher. Previously he managed an equity fund and daytraded full-time in Seattle. He currently lives in Portland, Oregon, and spends his free time thinking of new ventures to start.