I spend a fair amount of time writing and talking about strategy – what to do once you’ve bought a site and decided it’s time to improve its value or increase income.
Having a clear plan and direction makes sense with most purchases, but occasionally, it makes sense to do nothing – no monetisation changes, no maintenance SEO, no redesign – just sit, wait and recoup – I’ll explain why shortly. The chances are, if you’ve ever bought a site and found yourself hitting a plateau regardless of what you seem to do, then following the advice below could be the solution to your dilemma.
Picture this
You’ve just purchased an Adsense site for $90,000 that contains articles and discussions on everything related to curing some disease or condition. The site generates $8k in monthly revenue and receives around 100,000 monthly visitors. The site ranks 1 – 4 for nearly all its main keyword terms only falling behind sites like the NHS or Wikipedia. Consider your options:
You could try to increase rankings, but the effort required to go from 4 to 1 in some keyword terms (and to outrank the likes of Wikipedia) doesn’t justify the return.
You could try to rank for a broader range of keywords and attract more visitors but this would require more content and more seo both of which require an investment likely to exceed the return based on the volume those terms attract.
With an RPU of $0.08, this is probably as good it’s going to get btw of Advertising revenue for a health condition based site. There are usually very few products available to purchase online and hence few advertisers, which means your choice of Ad platforms become limited to Google and a select few others that use retargeting. The subject of the site also makes it difficult to re-monetize. People arrive at the site looking for (free) written solutions and spend little time once they’ve seen or not seen the answer. This, combined with having few products to sell within the niche, rules out most go-to options like memberships, premium content, product sales or CPA.
It’s not that any of the above wouldn’t work in generating value, but in some cases the amount of work we would personally need to commit to do or manage the project doesn’t justify the return.
This is where it’s often better to look at the investment from a different perspective and consider the value in doing nothing.
Changing your Due Diligence Profile
If we decide to buy a site with the intention of doing nothing and simply recouping cash flow, then our valuation becomes less about opportunity and more about risk.
Using our fictional example, in the first instance we might consider what other sites in the niche that are better monetised currently earn (RPU), and then apply this to the existing traffic this site receives to give us an idea of earning potential.
However, if we’re looking at doing nothing, we’re more likely to look at the amount of time it would take to see break even, and what the risk is of current situations changing. In this case, payback at current profit levels would take just under 1 year, and you would start to see a return in excess of 20% in less than 18 months (based on cash flow alone and not factoring in the residual value of the site itself, that arguably can be easily reduced to nothing after an algorithm change).
But choosing this strategy before you buy doesn’t just affect how you value the site, but it should also influence the due diligence that you perform. In other words, whether or not I would buy is now entirely dependent on this sites risk of losing traffic.
Your due diligence should now be heavily focussed on
- The site’s backlink profile and what % of links are in bad neighbourhoods (target would be less than 20% to be safe – more on this here)
- The site’s historical performance in the SERPs over the last x years. The more consistent data, the better
- Results of a site audit, looking for potential Adsense violations like placement issues or ‘bad content’
- The amount of competition in the niche and the likelihood of strong new competitors (e.g. getting rid of some highly technical medical condition … safe. Celebrity gossip … not so safe)
In this example we used Adsense, but where the site is setup to use smaller advertisers or affiliate networks, I would also focus on the likelihood of a change in their terms (for example lower affiliate payouts) or the possibility the program would cease to exist.
This is a crucial aspect of performing due diligence that’s all too often overlooked. It’s not so much a case of having a list and inspecting everything, but more a case of knowing what to look for prioritised by your plans for that site and looking at these first and foremost.
In an ideal world, we’ll request all the information we need, get all that information back in the knowledge it’s correct and have plenty of time to make a purchase once we’ve made an informed decision. In the real world however, when you find yourself juggling the DD on seven different deals, where most of the sellers don’t have access to all the information you need and there are other offers on the table, knowing what to prioritise can be the difference between getting that lucrative deal and losing out.