Seems like a prime opportunity for specialist and heavily (quality) moderated marketplaces to take market share.
3 karma · joined May 28, 2010
At time of writing (August is usually quiet) there are around 300 brokered,web-based businesses for sale between $20k and $2M.
Averages are severely deceiving but If you were to look at average multiples alone you would find a typical range between 1.8 and 3.7x annual net profit.
It's an interesting article - I wrote a more indepth version of the same thing three weeks earlier
http://www.flipfilter.com/blog/2012/02/22/lessons-in-fast-gr...
Flippa has good and bad, but I doubt it would be any other way anywhere else. It goes back to the idea of what's value for one person isn't necessarily value for another.
We run the A-List Newsletter which reviews sales of web businesses both from Flippa and from private brokers (http://www.flipfilter.com/a-list) with a value generally above $10K. Each month I look at the top five sellers for that month (in terms of sale price) and the most active (in terms of bids). The top five can vary wildly; in February it seemed they were all Clickbank Sites that sold products in the MMO niche and followed the same formula of launch to a pre-established list, marketing the hell out of upsells and downsells, selling the business then using the initial list (now much larger post launch) to do it again.
The most active however are pretty much always sites that sell Internet Marketing Services - for example, a site which sells Facebook likes or one which offers Social Bookmarking services. Their final selling price is always around the $1 - $2K mark and they often end with in excess of 50 bids despite only being a few months old and having no real barrier to entry (ironically, the same sellers will often sell the same templated site again under a different banner a few weeks later). IMO, the sad part is the people who buy these sites tend to be new to the industry and no real information to tell them that this isn't a the easiest way to get a return on their investment.
There's going to be good and bad at every price range, and likewise types of sites which tend to do well (Adsense with earnings history, Clickbank affiliate sites, Email Newsletters, anything with a big list in the MMO industry) and things that don't (Web Apps with complex backends, Ecommerce with physical products, News sites which require 'real' journalism) but that doesn't mean the sites which don't sell well aren't worth something to the right buyer.
This isn't defending the truly bad stuff or the sometimes fraudulent sellers that you occasionally see on there - it's going to happen for reasons that probably boil down to resources, but if even 10% of Flippa listings based on the 1,000s it has are 'good' then it still has more to offer than a site with 80% good but only 15 listings.
Reading the listing you can usually get a sense of problems, but there were only a few places that my BS alarm was triggered (one being that the seller claimed he made an average of $9 per day from Adsense ads that he set up just the other day. The screen shot for Adsense shows 19K impressions in three days, which seems a little off based on 2,242 Page Views Per month, with 1 Adsense block in place.)
There's no hard and fast rule to prevent things like this, but if you were to do it again, I'd advise
1) Either asking for access, or a video walkthrough of the adsense and paypal account as this is more difficult to fake.
2) Do a common sense check based on the numbers. Look at the traffic they are likely to receive from Organic Search (SEM Rush), look at the product and see if it's been sold elsewhere and look at the conversion rate you would need to achieve to justify the revenue figures quoted. As a rule of thumb, if product A costs $10 and the adword CPC is $1, I'll know that other advertisers need a conversion rate of 10% to break even. If your calculations shows this site needs more than that to produce the quoted figures approach with extreme caution.
Hope this helps
Justin
I've seen mid - high end (+ $10,000) sites in evergreen niches selling for an average rev multiple of 10.2x (current average is 7.6x) with web apps that have good proprietary software and some proof of concept (revenue) selling for much more.
If you do sell your App, remember that whilst buyers may be technical, they still appreciate clear English. Here's an example of an app listing gone slightly wrong
https://flippa.com/auctions/115892/
The guys seems like an incredible developer, but certainly not one to be let loose on marketing!
I'm working on a new project to manage outsourced web marketing and ultimately semi automate the process of building traffic and revenue to a site. Flipping is, at the moment, only sustainable if you know how many sites you can personally manage (or even how many people you can manage if others are managing the sites for you).