Hey, guys today I am happy to introduce you George. I met him through mastermind group, and we were talking about how to replicate websites selling on Flippa or Empire Flippers and does it worth to buy a website or just build yourself.
And after some research George offer decided to make a case study about this topic on my website.
I am happy to introduce George to you. He is a website investor and writes about website investing, due diligence, and earnings optimization at WiredInvestors.com. In a past life, he was a trader at an investment bank, but nowadays he spends most of his time in coffee shops browsing Reddit while he should be working.
The following is a guest post from George, who writes about the process of website investing at Wired Investors.
Building vs Buying Websites
This is a question that has been hanging over the online business community for some time. Does it make more sense financially to build a site from scratch, or does it make more sense to buy a site and make improvements?
Today, I’m going to go over a hypothetical case study where I try and tally the costs of replicating a specific site that was sold on Flippa. Hopefully, this will provide some clarity into how much it actually costs in terms of time/money to replicate a successful site.
Before we get started, I just want to note that while I personally believe that there is great opportunity in website investing (you can read my thoughts on this here), I do not believe that people should stretch themselves financially to buy websites. Investing in websites is inherently risky, and I believe strongly that it is irresponsible to in invest money that you can’t afford to lose. If you’re someone who’s not on firm financial footing, building a website from scratch is definitely the better option here, because your costs will be gradual rather than in one lump-sum.
We Did the Math
I’m going to perform an analysis of a previously listed Flippa site to try and estimate roughly what the money and time cost of replicating a site is – this is a relatively straightforward method of determining whether or not buying is more or less attractive than buying. This method of valuation is known as replacement value or replacement cost in the ‘traditional’ business world. In this analysis, I’ll try my best to approximate the replacement cost of a website (e.g how much it would cost to replicate it), factor in the time costs, and see how the cost of building a site from scratch might compare to the price that the listing was sold at.
The site I’ll be using for this analysis is sensualappealblog.com. This site was listed on Flippa and ended up selling for $6200. The listing claims that the site was making approximately $700 a month, although earnings had declined to about $400-$500 in the 4 or 5 months before the sale.
Please note that I purposely chose a site that wasn’t an Amazon Affiliate site (e.g bestbluewidgets.com). I don’t really believe that buying Amazon affiliate review-style sites are worth it unless you can get them at extremely low multiples because I don’t believe that these types of sites are long term assets. I deliberately chose a site that I believe would work as a long-term investment.
Also, note that I’ve not had a chance to examine the analytics data on this site – I’m going to take the claims on the site at face value. Obviously, if I were looking to purchase potentially a site like this, I would do full due diligence before doing so – this analysis is meant to be a kind of thought experiment rather than a detailed case study.
Traffic: ~40K unique visitors a month, 35% organic, 35% social, 30% from direct/referral (some of which is probably referral spam and some of which is from the email list).
3k Email subscribers
2.5k Twitter followers
3.8k Facebook page likes
2.8k Pinterest followers
Monetized primarily via ads:
$100 from Adsense
$250 from Other Ad Networks
$30 from Amazon Affiliates
$150 from Sponsored Posts
My Thoughts on the Site
The backlink profile is pretty strong – there are links from huge sites like Buzzfeed and Greatist, and while there are a lot of comment links, all of them seem to be in the same niche (food, health, lifestyle) so they’re alright in my book.
This is pretty much a typical food/lifestyle blog – these kinds of blogs typically rely less on SEO and focus more on building strong social followings. Outreach and dialogue with other bloggers in the niche eventually help build authority, and SEO improves naturally – but typically, the primary traffic acquisition strategy doesn’t revolve around SEO and sites like these usually don’t use blackhat link building techniques (in fact, it’s not uncommon for people who start these kinds of blogs to be unaware of SEO altogether).
This is reflected in the SEMRush report – the site doesn’t actually rank well for any large KWs. Most of the organic traffic probably comes from extremely long tail KWs.
By far, the largest cost of replicating this site would be the cost of content. Typically, bloggers who start sites in this niche are passionate about food and have no plans for monetization (at least at the start). For online business folks, however, the goal is to replicate as quickly and efficiently as possible – the assumption is that you don’t want to spend two years putting work into a site with no little to no return (the site was started in mid 2012). For this reason, I’m going to assume all content is outsourced.
I checked the google index for the site, and there are 1310 pages of content. Some of these will be archive pages (category/date/author pages, etc.). I’ll assume that 300 or so of the indexed pages don’t have unique content – that leaves us with 1000 pages/posts. I inspected about ten posts, and from what I’ve gathered, longer posts on the blog tend to be 500-600 words, and shorter posts are about 200-300. I’ll assume that the typical post is about 400 words.
My rough estimation of the amount of written content on the blog is 400K words.
Most of the posts on the blog also have custom featured images and photos sprinkled throughout. I’m going to ignore the photos (difficult to replicate) and just take the featured images into account. The featured images tend to be a photo overlaid with some basic text – I assume that a competent VA who knows the process already will be able to create 5 of these images an hour (this includes finding the photos, applying filters, entering and formatting the text correctly, and uploading the images into the backend of the website).
Assuming a below market rate of $8 per 1000 words (assuming a bulk discount) and about $5 per VA hour
$8 x 400K/1000 = $3200
1000 posts / 5 = 200 hours * $5 = $1000
- Total cost of content = approximately $4200
Social Media Costs
Again, I am assuming that we want to replicate this website as quickly as possible. Theoretically, you could spend many hours building followers on FB/twitter/Pinterest organically for ‘free’, but this wouldn’t take into account the cost of your time. For comparison purposes, it’s easier to assume that we will use paid methods to replicate social followings.
The common term that is used amongst marketing folks for this kind of calculation is ‘customer acquisition cost’ – this is basically the marketing cost per new customer acquired. In this case, it is the cost per Facebook Like or Twitter/Pinterest Follower.
Keep in mind, I’m assuming that the social follows for the site are genuine – and thus, the replication cost I’m trying to work out is the cost of getting genuine socialfollows from interested, engaged users – not the cost of getting fake/low quality follows/likes from Fiverr.
Various sources around the web put the average acquisition cost of a Facebook like at around $1. I’m going to assume that the cost per like for this site is lower than that, since a lot of the content is inherently ‘viral’ and it should therefore be relatively easier to get likes for (i.e as opposed to getting likes for a trucking company or something). This industry report puts the cost per page like at about $0.35 for the food & beverage industry, so I’ll use this figure.
I’ll apply this figure across the other social networks that the site uses – I couldn’t find any really reliable data about the true cost per follower for Twitter/Pinterest.
I’m also going to assume that we’d only need to jumpstart the social followings (e.g that some amount of the likes/follows will be organic). Let’s say that we kickstart the social follows by paying for 1/3 of the likes/followers that the site actually has, and the rest we will assume will happen organically.
2.5K Twitter + 3.8K FB Likes +2.8k Pinterest followers = 9.1K Social followers
9.1K x 1/3 x $0.35 = $1061.6 – We’ll just call it $1050
I already mentioned that the site isn’t using any grey hat SEO techniques. The site’s SEO has basically come from commenting on relevant blogs and outreach. A couple of large viral type sites (Buzzfeed, Greatist) have also linked back to the site.
Links from viral sites can’t be outsourced easily, so I’m going to discount these in this analysis.
I’ve split the links into dofollow and nofollow links. I’m assuming that all nofollow links are comment links.
There are 2760 nofollow links to the site. If we outsourced all of these to a VA, assuming that a trained VA can write about 30 comments per hour:
2760/30= 92 hours * $5 = $460
There are 2079 dofollow links back to the site.
About 237 of these are from a site called Tasteologie, which is a pinterest style site that allows anybody to submit links. A VA could probably submit 30 links per hour to the site. 237/30 = ~8 hours
The remaining 1842 links are split between dofollow comment links, list-style roundups by other bloggers, links from content curation sites (e.g mode.com), and just generic mentions by other bloggers.
It’s pretty difficult to breakdown exactly how much time it would take to get these links by having a VA doing outreach. The method I used is by no means accurate – at best, it’s an educated guess, so bear with me.
There are 238 unique domains with dofollow links to the site. I’ll assume that outreach is required to 1/2 of these sites, and that the rest will occur organically. I assume that it takes about an hour’s worth off back and forth via email or social media to build a relationship with another blogger, and that once this relationship is built, that the outreached blogger will be happy to include links to your site is the form of roundup lists or shoutouts.
238 domains / 2 = 119 sites to outreach to.
1 hour per domain = 119 hours * $5 = $595 à $600.
So, my very rough approximation of SEO costs in terms of VA hours spent is:
$600 + $460 = $1060.
Summary of Costs of the Website
Content Cost: $4200
Social Media Cost: $1050
SEO Outreach & Comment Costs: $1060
Total cost = $4200 + $1050 + $1060 = $6310
Compare this to the price that the site ended up selling for – $6200. In this case, given the complexities of building a site from scratch and the associated cost, buying actually comes out looking like the better option.
If you want to calculate if it’s worth to build website or just buy it then check it out the website calculator below:
There three main ways to alter this calculation. If you can spend less time completing any of the work that’s required to replicate the site (e.g you’re a social media expert who can build followers really quickly), then the costs of replication will be lower. Alternatively, if you have access to VAs or writers that are cheaper than in my estimates, the cost of building will be lowered. Lastly, if you value your time at lower than the numbers that we’ve put out – or if the site that your building is a hobby or interest of yours and thus doesn’t feel like work at all – then the cost of building will be lower.
Obviously, buying a site is riskier than building from scratch – if you buy a site from someone else, you don’t have full control or knowledge over what tactics the site has used (e.g buying cheap fiverr social media followers, using grey/blackhat SEO etc). Also, building a site from scratch allows you to tailor the site to your own interests and hobbies, whereas if you buy a site, you have less freedom.
On the other hand, buying a site can be a huge time-saver, and you get to see the effects of any improvements that you make immediately. On a new site with little traffic, there’s often simply not enough data to draw conclusions from the changes you make. Buying a site also means that you can see income right away – whereas if you invest time and money into a new site, there’s no guarantee that the site will be able to make money. Also, if you buy a site, you can skip the Google Sandbox, whereas if you build a site from scratch, it’s likely your SEO efforts won’t yield returns for a good 3 to 6 months.
Now that I’ve gone over the likely costs of buying vs building, I’m going to lay out what I think the advantages of each path are:
Why You Should Buy
- Building from scratch is time consuming – buying a site allows you to get your hands on an income generating asset immediately.
- Improvements that you make on a site that you bought will yield immediate results, whereas changing stuff on a site with little traffic will often lead to inconclusive results.
- The upside of a bought site is typically greater than on a site that you’re building – buying a $5k site and making improvements to get it to a $10K valuation often takes the same amount of work as building a $2k site from scratch.
- Sites that are already established and have authority will rank for relevant KWs much more quickly than newer sites.
- You can leverage specialist knowledge much more easily on a site that you’ve bought. For example, if you’re know a lot about conversion optimization, you can put that to work on an established site, but your skills will be less relevant to a site that doesn’t have much traffic.
- White hat SEO tactics are much easier to use on a site that already has authority in its niche. It’s easier to get other people to link back to you if they see that your site already has a following – it’s much more difficult to do outreach on a brand new site that nobody’s heard of.
Why You Should Build
- Building a site from scratch will help you learn all aspects of online business, whereas if you buy a site, chances are that you’ll neglect certain aspects of the site that are already well developed.
- Building a site from scratch is less risky than buying a site – on a site you’re building, you have control over the risk profile (e.g you can choose to use white hat or blackhat SEO). On a site that you’ve bought, the most you can do is try to understand the risk profile – you can’t actually go back in time and change the tactic that the sellers used.
- Building a site from scratch allows you to pursue a subject or a niche that you’re passionate about. This can make a huge difference to how enjoyable working on a site is, and typically you’ll be more productive if you’re working on a site that you’re passionate about.
- It’s much easier to lose focus on a site that you’ve bought – if you’ve built a site from scratch, you’re typically emotionally invested in the site, whereas normally you’ll view a site that you’ve bought as just an asset.
- Building a site from scratch has extremely low barriers to entry – while there are certainly costs involved (especially if you’re looking to grow a site rapidly), there are no real upfront costs other than hosting and domain registration. Website investing is only an option for those who can afford it.
Hopefully this case study gives you some idea of what it would take to replicate a successful website versus just buying it. In the case study, I assumed that you would be trying to replicate a site as quickly as possible, and I tried to translate all time spent into a $ figure for the sake of comparison. However, if you’re willing to put a significant amount of time into a site, then the monetary costs would be drastically lower. For people who don’t mind putting the time in, building sites from scratch is probably the better option. On the other hand, people who are looking to minimize their time spent working on their online businesses should look towards buying sites.
Learn More about Buying Websites
If you liked this post, you can learn more about website investing and due diligence at WiredInvestors.
We will be also happy to know your thought about buying vs building websites below in comments!