Learning with Flippa
Flippa is a marketplace where small websites are bought and sold, typically for $1k–10k.
If you spend some time browsing through recent purchases, you’ll see a few types of sites appearing over and over. In totally non-rigorous order from most to least common:
- Niche content sites (SEO + adwords/affiliate)
- Niche community (retention + adwords)
- Niche dropshipping (SEO + suppliers)
- Language middleman for people & services (e.g. selling eastern european programmers to english-speaking clients and taking a cut)
- Scammy products (“Guaranteed tool to beat the stock market!”)
- Real products (usually with minor recurring revenue and no scalable channel)
The first category (niche content sites) typically sell for 10x monthly revenue. So in theory, you’re out of the red within a year and then it’s pure passive income. Sounds good! But the income from a site like that is just so fragile. You’re 100% dependent on google. If (when) they change the algorithm, you’re kapoot.
I briefly thought you might mitigate the risk by building up a portfolio of several, but they all have the same failure point (the search algorithm). So if one goes down, they likely all do. Which means that even if you have a bunch of them, the safety is an illusion — your eggs are still all in one basket.
I had a bunch of interesting thoughts while flipping through, and I’d encourage you to do the same as a learning/thought exercise. Look through the list of current sales and write down what you’d pay for the ones which catch your eye. Then look through the list of past sales and take a stance on whether the buyer overpaid or got a deal.
It’s like watching a tiny private equity firm doing its thing.
Attention professors and teachers: I think there could be some powerful hands-on assignments for students of entrepreneurship & business in here somewhere (hint hint, Dave). If you’re interested in collaborating on curriculum or assignments around this general idea, drop me a bell.
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Rob:
Last year when I was “out in the wilderness” looking for ideas and opportunities I considered a portfolio of sites on Flippa. My analysis was similar to yours.
I was more interested in the “real businesses” where a service or piece of software was being sold. I found the multiples were more around 15-30X monthly revenue. So similar risk and the only way to make it work was to have a little growth in performance to overcome churn, etc.
In short, I felt the market was a little too efficient or I was too risk averse.
CM
Interesting exercise. Really helps to get a better feel of the numbers behind these sites. I thought some deals looked like a steal, but maybe I wasn’t able to see the problems.
Where would a niche site differ from being fragile and reliant on Google traffic compared to an online startup?
With good quality content/products and good relationships both should see steady growth I’d say, (if growing at all).
I found this post on SeoMoz really interesting, about building a steady foundation of incoming traffic.
http://www.seomoz.org/blog/link-building-for-the-little-guys
Problem with a lot of these Flippa sites is they built their traffic using black/grey hat link building tactics. I’m not sure how to see through that.
Hey Rob – Great post.
One strategy missing from the list is the active trading of sites over the flippa platform. Essentially buying bad sites, fixing them up (add some SEO, uplift design, add some better content) and then selling them for a premium. Much like trading used cars or houses.
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