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How To Purchase or Sell a developed Web Site. Tips and due diligence procedures to insure you know all the facts.
By Detective Thomas Shilling

The Internet is filled with folks trying to sell or buy developed web sites. Unfortunately, many of these deals are either fraudulent or filled with so many untruths it makes you want to scream.

Dispelling Myths

Their is absolutely nothing wrong or improper about a person creating a site for resale. Often referred to as "cookie cutter" or "knock off" sites, eBay is full of them. This type of commerce has been used in Real Estate for decades and millions of stock shares change hands every single day via folks buying and then selling to turn a profit. What you should pay for these kinds of sites is another issue.

Another myth which is perpetuated is the reason for selling. Specifically, that the deal is somehow fishy or false because the seller is tired of running the site, has other issues in their life which take precedence, or needs funds for other purposes. All of these reasons are appropriate and mean very little in a sale since their is no way to verify them. On the other hand, a statement like, "I'm selling all my sites to devote more time to basket weaving." can and should be verified and sometimes sends up red flags.

Fact or Fiction?

We strongly recommend a healthy dose of skepticism if you are the buyer. All sales have pluses and minuses so try and focus on a combination of many factors. Many "statistics" which sellers offer can either be manipulated or represent half truths. For example:

A great Alexa ranking like 50,000 - This may be artificially created by using their tool bar. The reviews are not "vented" and are often filled with the site owners glowing praise or competitors/malcontents tossing slander and lies. The "Other sites that link to this site" data should be examined.

My PageRank with Google is 8 - First, PageRank is a minor consideration in the value of a site. Second, lot's of sites can "manipulate" their sites PR with the Google Toolbar and or other sites or doorway pages.

My site gets 1 million hits per day - First, hits mean absolutely nothing when evaluating a site. Second, you are concerned with unique visitors and Page Views, and perhaps more importantly, the source of this traffic. Some sellers have other sites which drive traffic to another site or they use "bots" to artificially inflate traffic.

My site has high rankings in the major search engines - First, how long have the rankings been in place, how many unique visitors do they generate, and were these rankings obtained in an honest and ethical manner.

I have great content - This is a big issue and always involves Intellectual Property issues. Some sites have unique content which they created and own, manny other sites have either stolen their content from another site or simply can't or won't answer the question.

My site makes $2,000.00 per month - Another big issue and very prevalent in site sales. Make sure we are talking about gross revenue per month. Fortunately, it's easy to pierce this pitch. Require bank statements, deposit slips, and tax returns. We have found this requirement to always be a deal breaker. We don't care who or what the seller is or what they say, show me proof or we walk. Screen captures and or Admin rights can and often are manipulated. Be very careful if the seller has more than one site since they often lump income together in an effort to enhance the sale. You can solve this pitch, require a separate CC Gateway account and copies of the checks for the site you are purchasing as a condition of escrow. This usually involves a period of months for you to evaluate the flow.

My expenses are low - This can and should be used as a cross check. How much bandwidth do you consume in a month? Answer from a site that claims to deliver 1 million page views: about 5 gigs per month. Red flags should go up. This doesn't make sense.

I bought the site but never got what I paid for

All sales over $1,000 should be handled via Escrow. Both parties should agree on the designated Escrow company. The seller should open the escrow as an act of good faith and then negotiate the cost. This always separates the serious sellers from those who often say yes, we have a deal, and then they change their mind.

You also need to consult with your attorney and tax person. Listen to what they say. All communications between the seller and buyer should contain a "kill/expire date". Again, this has been used for decades in the real estate industry and helps move things along in a faster manner and often insures that either party will respond in a timely manner. Something like: "The offer contained in this email expires at 10:00 AM (PST) on January, 23, 2003.

I'm scarred to buy. Where or how do I verify these seller statements

Relax. We don't mince words and intentionally painted a fraud filled web site sale to gain your attention.

1. Start with Whois. Is the data accurate and are you dealing with the owner or an authorized agent. Business names should be verified. Additional Reading & Resources: The Whois Records | Business Name - Traffic

2. Carefully examine the site. Continue to do this for at least a week. Examine the HTML code. Does all the content look original? Do you see other sites names in the Meta tags.

3. Spend a significant amount of time in Google. Including the Images and Groups search feature. Sellers often preach with "I have 25,000 back links" At face value this means absolutely nothing and can and often is manipulated. Spot check 20 or more sites per day to see how they are linking or even if they still have the link up and who owns the site. Ask for keywords from the seller and run your own searches to determine rankings. Additional Reading & Resources: Google Search Engine Research

4. Traffic statistics should always be examined via access to Admin. Screen captures and HTML documents can and often are manipulated. Next, you need to understand what you are looking at. Many of the major stat packages are very hard to understand. We always look at the keyword traffic and referrer sources first. Then Page Views and unique visitors. These procedures often expose the sellers other sites driving traffic to the single site you are buying or "bot traffic". We often cross check this data with Admin rights to the script which serves adverts. In this case, we are talking about "impressions" and remember, a single page with 2 banner regions generates 2 impressions every time the page loads.

How much should I pay or sell my site for?

That's a difficult question to answer. First, if you are a buyer, perform your due diligence in this article. Next, the final price is always subjective and only involves the buyer and seller. We do have some hot spots which always raise the price and provide a high level of comfort which insures the deal is legitimate. Many of these hot spots are impossible for a fraudster to manipulate.

1. How long has the seller owned the site and how long has it been online. Longer is always better. Use the WayBackMachine for confirmation.

2. Is the site a strong "brand" and one which can not be easily replicated in a reasonable length of time. It can take years and thousands of hours to establish a brand. Other sites can be replicated in hours and have no brand.

3. What technology and rights are included in the price and will the seller help with training and or migration. Some scripts are free and other cost lots of money and require extensive training.

4. How much money would it cost me to replicate the sellers site and traffic? Time is money gang. Some sites take hours and others can take years.

5. Does the buyer see "potential" in the site? Many sellers often preach "great potential" which is sometimes true but often a statement which should be ignored.

6. Be realistic in your initial sales price or your first offer. We are currently in a buyers market for most sites. An acceptable ball park formula for a starting price is:

Monthly Gross Revenue x 12 months. Example: Verified gross revenue of $2,000 per month x 12 months equals a starting price of $24,000

Notes to this formula: Lower the starting price for developed sites which have been online less than one year and raise the starting price for sites with three or more years of a verifiable track record.

7. Evaluate the domain name. Dot com is best. Carefully examine the sites neighbors for problems. For example, a registered trademark on funkyduck.com and the site for sale is funkyduck.net Is the domain name reasonably short and brandable or key word rich with hyphens. Lower the value for "typos" like a developed site named geekvillages.com or gooolf.com.

Final thoughts

Insure that all your communication is respectful and civil. Especially in public Forums like our own geek/talk Forums. Read these communications at least twice and consult with others more experienced in these issues for help. Don't waste your time responding to communication full of street slang, profanity, or unrealistic offers.

Sellers should carefully prepare some fact filled "boiler plate" text to use for the first response. This will save you a huge amount of time and significantly help narrow the field of offers to those that look realistic and legitimate. For example, my ask price is $25,000 and email number 1 arrives from a buyer who doesn't have all the facts but offers $6,000. Ignore the dollar offer and respond with your boiler plate email for $25,000 which also includes all the facts which a seller is likely to need and most importantly, verify.


This article is ©2003 by Free-Webmaster-Tools.com/Published Perfection. All rights reserved. Reproduction in any form is prohibited. Print this article.

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