Over the years I have purchased close to a dozen websites as investments.
Some of them have done really well and some have done really poorly.
In order to do this profitably, it is important to having buying rules. These rules keep you from wasting money on bad investments.
I have made a fair number of mistakes that have cost me money over the years.
Here are the 3 worst mistakes I made over the years.
1. Building too big of a portfolio of sites
I should have limited the number of sites I owned to a maximum of 5.
In some cases 5 would be too many, depending on the type of business it is. What I found is that you get overwhelmed with too many sites and you can’t focus on making them better. Your efforts are spread out too much.
Rule #1: Limit your portfolio.
2. Getting scammed
There were two sites that I got scammed on. Here is what happened for both of them.
For the first one, it was getting a lot of search traffic from one particular city. This meant a large portion of the visitors was coming from one place. And that is unusual. However, I justified it because I know that Google ranks sites differently depending on the location of the searcher.
I am still not sure how they did this. But after I bought the site the traffic dropped quickly. I should have known better and avoided the site as soon as I saw that unusual activity. I’m still not 100% sure if the guy cheated me on purpose or it just happened to crash after I bought it. But it was probably some kind of a scam.
For the second one, the guy just cheated me. He said that sales were coming from the site when they weren’t. I believe the way he did it was that he made it look like sales were coming from the one website, but in reality they were coming from a group of websites. In order to do this, he was creating a fake referrer to an affiliate site. This scam was planned out.
I confronted him and he confessed that he needed the money and was very apologetic. And so I said for him to pay me back. He said he would try (he didn’t).
This was an international sale so recovering my money would have been a waste of time to try. And yes, I used escrow. But the sales were coming in during the escrow period like normal. So I released the escrow.
For this second one, I am not sure how I would have avoided it. The only answer would be to avoid buying sites that make money from affiliate sales.
Rule #2: If there is something unusual in the stats, don’t buy.
3. Buying a site based on potential
One site I bought was called Lead Drip. It was for a service that sent out leads to people who signed up. The clients paid a monthly fee.
I thought it was a great idea. I still think it is a great idea.
Unfortunately, the business model really didn’t work. They had tested out the idea a little bit and gotten some paying customers. But nobody stuck around for more than a month. So the customer churn was near instant. The problem is that the quality of the leads weren’t turning into sales. The leads were compiled from jobs gathered on job listing sites from Upwork and other freelancing job sites.
The premise of the site was that they were saving the freelancer the time of searching for open contracts.
So, because I had nowhere to go with this, the site died. It had potential, but it didn’t have a working system.
Rule #3: Buy the site for what it is, not for its potential.
Planning an exit strategy
Each mistake I made was also a learning opportunity. The mistakes helped me to understand my investment strategy better.
Now because I am limiting my portfolio to a maximum of 5 sites, I need to plan for an eventual sale of the site. I used to just keep sites forever and never sell them.
So I need to plan an exit strategy for each site which I purchase.
This means that one of my criteria for buying a site is that it must be a sellable site. It is not enough to just be able to make money from a site.
If I think it is hard to justify a good sale price (even when it is profitable) then I shouldn’t buy it. Because it will be hard to sell. If anyone can copy the site’s results in a week then it isn’t a great investment.
It is also a good idea to purchase sites in the same vertical. For instance, if you are buying home design sites it makes it a lot easier to buy a second home design site. You already understand the market and how everything works.
When I buy a site I want to be able to add some form of value to it. For instance, I can do testing to increase conversion rates and email marketing performance. However the biggest leverage point for me is advertising. So right now my focus is on purchasing sites which I can grow with paid advertising.
If I can get the advertising working well, I can recoup my investment much faster.
For you, if you are going to purchase a website, you need to look at what skills you bring to the table. If you are a SEO wizard, then you need to look for sites that are underperforming because of poor SEO. If you are awesome at increasing average order size, then find a site which is underperforming in that area.
The key is to know what skills you bring to the table. Then look for sites that can benefit from your skillset.