The business of buying and selling websites had drawn a lot of comparisons to the real estate industry. And, for the most part I think it’s a fairly accurate comparison. Instead of property we buy and sell domains. Instead of homes or buildings we buy and sell websites. Fortunately for us, there are also a few important differences.
Most notably, there is almost no barrier to entry which means you don’t have nearly the risk factor. Also, unless you’ve been living under a rock for the past year or so, you know the real estate market has taken a beating. Loans are hard to come by, the market is flooded with homes, and prices have plummeted. The “virtual” real estate industry of buying and selling sites, has suffered no such collapse.
Despite those differences, I’m going to use the real estate illustration to explain the 3 types of business models that make up the website industry.
The Quick Flip
We’ve all seen the shows on tv where people buy an old, run down house, fix it up, and sell it off for a huge profit. That’s essentially what the Quick Flip is. You buy a website that could use some work (whether it’s a new design, better content, more traffic, or a way to monetize the traffic that’s already there), make the necessary changes, and sell it for more than your investment. Occasionally you won’t have to do any work other than re-listing the site for sale!
The Mid-Term
No no, don’t worry, I’m not talking about some big test you have to take. I used the name because this model is basically anything in between the Quick Flip and the Long Investment. Often when flipping a website it can be beneficial to hang on to it for a few months to allow your improvements to manifest in higher traffic levels, increased earnings, or more subscribers. For example, if you do some basic search engine optimization (SEO) work on a site, it can take a while for you to see the higher rankings. Also, if you’ve attracted several new links to the website, you may want to wait for Google to update the PageRank score of the site which can increase your sale value as well.
Establishing a longer pattern of your metrics, whether it’s income or traffic can help assure potential buyers that the site will continue to have similar success even after they buy it. No one wants to get duped into buying a one hit wonder and by holding a site a bit longer, you can lay down that track record and demand a higher price when it comes time to sell.
The Long Investment
As the name suggests, this model should be viewed as a longer term investment. Whether you decide to build a site from scratch and need to develop it before selling it off, or you buy a site that requires a longer time-line before selling again, the goal is to increase the site’s value over a much longer period of time than the previous two models. In fact, when working with Investment type sites, you may decide not to sell at all, and instead enjoy the monthly revenue streams the site is generating.
To the experienced site flippers out there, which model is your favorite?
Which do you find makes you the most money?
Feel free to weigh in with your opinion in the comment section below!