A Failed Empire Flippers Acquisition — What can go wrong

This is a story of woe with no upside — yet. Basically, it’s a warning out there that all that glitters is not gold, and that not every acquisition is an instant path to riches.

I don’t really like putting direct dollar figures out there, but I think it’s really worthwhile doing so because it gives people a sense of scale of what can go wrong.

I made a US$50,000 ($52,500 actually) acquisition of a website from Empire Flippers (a website / online business broker — see here for a comparison), which in a matter of a few months fell to about $5,000 in value. In that time, I had earned about $5,000 from Amazon. So, it’s a net loss of $40,000, or 80% of my investment value.

How did this happen? What can I learn (and what can you learn) from it? And who’s to blame?

I wanted to share this story because it’s hard to find stories about what can go wrong when buying websites. Many people think maybe Empire Flippers is a scam, and so on. I don’t think this was a scam, per se — much more that I bought a house of cards and it came crumbling down.

But it’s a sign that just because all the metrics look good and just because you bought it on Empire Flippers doesn’t mean it’s something that’s of value.

General caveat — Treat buying websites as risky. I’d put it in the same category as investing in a pre-funding startup, like, not even tech stocks. Buying a website is almost as risky as buying cryptocurrency. In other words, there’s a significant risk that your website’s value will fall to zero.

Background — Why I bought this website

Early in 2020, I decided to buy a website.

I did this basically because of the economics and because I believed I knew how to do due diligence on a website. I still believe those things!

The economics of running a website are very tempting. The payback period for most website acquisitions is 2-4 years. Websites trade for about 3-4x earnings these days, but if you keep working on them and growing them, you should be able to make your money back earlier.

If you have cash to invest, you know how to work on websites, and you value future earnings rather than cash in the bank now, then website investment is a much more tempting acquisition than, say, buying a house or a small business. Particularly as you don’t have to put as much money down. You can spend as little as $25000 to buy a profitable, stable website. And like any business, they go up into the millions in cost.

I’ve been building and working on websites since 2018. I’m still deep in the learning curve, but we have a pretty good track record of building websites that make anything from “hobbyist” to “we could live off this” income. We haven’t sold any yet, but we might in the future if we need more time. For now, we aren’t overwhelmed in managing them, and the income lets us live anywhere in the world.

I also have a background in acquisition due diligence thanks to time with Bain & Co, where other companies would pay us a fortune to look into the nitty gritty of companies they were thinking of buying. Because of this, I had a long list of due diligence items, and went into them in detail.

How I did my due diligence

The target of my acquisition was an Amazon affiliate business.

It had around 40 pages that are all things like “Best solar panels for a garage” or “Best garage door openers — Reviews and Buyers Guide”.

These ranked pretty well (in the top 1-3 for a few big keywords). When readers would read the content, they’d find a detailed overview of products available on Amazon. Then they’d click through and buy them.

When you buy things via clicks to Amazon, website owners earn a commission that comes out of Amazon’s marketing budget. (By the way, there’s no way you can get around this. You always pay full price. The sales margin either goes to an affiliate website, or directly to Amazon. But you can’t save it!)

To do my due diligence, I sliced up the data from a number of angles. I looked at

• Amazon sales data: I analysed products that sold and made sure that they were ones recommended by the site
• Search data: I made sure the website was ranking for keywords related to the products sold
• Traffic: I made sure it was genuine and via search
• Backlink profile: I made sure that it had a good domain rating and domain score and that there were no recent manual actions

Everything added up. The website was earning around 32x earnings and seemed steady and growing, and all content, keywords, and traffic looked like it was solidly related to the business.

So I started to look for reasons why the website might be a scam.

Red flags

Hindsight is always 20-20, so here’s what went wrong for me.

Helping my 20-20 hindsight is the fact that I’ve learned a lot more about websites since then! I’ve got a much more nuanced (and actually very simple) view of SEO — basically, I just make websites and content that’s useful and enjoyable. If it’s not those things, then nobody will read a website and it doesn’t deserve to rank.

This is my concept of “SEO in one sentence“.

Anyway, here are some red flags that I should have taken notice of, from most important to least important.

Firstly, affiliate websites lack unique content.

Whenever I see a website that’s called “BestToolsOnline.com” I shun it immediately and wish I could downvote it off Google. I know the kind of content that’ll be in there — generic drivel written by low-end 2c/word copywriters who mostly use AI tools to generate their content anyway.

Those websites are trash, their recommendations are trash, and they don’t deserve to rank.

So why’d I ignore this red flag? One reason: greed. I wished that I had capitalised on this perceived opportunity and wanted to benefit from someone else’s foresight.

But secondly, ignorance. I thought that the website owner was doing something clever by creating content in this space — which he was (I mean, it worked for a while). He wasn’t trying to scam me. Really, he was just exploiting a temporary (in hindsight) loophole in the way Google rankings work — Google just favoured long-form content on niche topics.

Soon, though, Google figured out better indicators for how to identify quality content, so this started to not work.

Affiliate websites are bad because they don’t provide anything of unique value. For a website to have unique value it has to have some special information, style of presenting data, or something that makes people return to it, seek it out, and share it online.

For example, if you want to write a website about tools, you can be unique by

• Actually physically reviewing every tool, talking about things important to tool owners
• Providing detailed guides on how to identify high quality vs fake tools
• Telling people the brands that are scammy vs the ones that are genuine
• Writing in a funny or particularly easy to digest way
• Showing a lot of data that nobody else has

There are lots of ways of doing it. I haven’t thought too much about tools, so those are just examples.

But if you just regurgitate information about a tool that’s written in sales copy — you may as well just be publishing press releases. And that never ranks.

Secondly, the website had paid for backlinks.

Empire Flippers disclosed this. They caveat it by saying “most websites do, and it goes fine for most.” Empire Flippers prides themselves on being transparent about it, at least.

Again, this is a case of greed. For my other websites, I’ve never paid for backlinks. I’ve never paid for any SEO services. And those websites do OK. Plus, we’ve been linked to by prominent publications in our sector — all naturally.

But I’ve always wondered: are there good backlink services that I just don’t know about? I think the answer is clearly “no”.

This strategy worked for this website for a while, but eventually, Google figured out what was going on.

Thirdly, the website already had lost a lot of traffic in one algo update.

When I first started looking at the site, it was priced around $80-90000 and was making nearly twice as much money.

It was then hit by an algo update. I rationalised that it was hit once and probably wouldn’t be hit again, and may even recover.

In retrospect — hit once means that it’s likely that it’s doing something not very good.

Finally, the website had a manual action in its history. I ignored this because the owner had dealt with it. Sounds stupid, in retrospect.

I knew that it had a manual action against it in Search Console. Empire Flippers discloses this.

Google applies manual actions against websites when it detects that they’ve got an “abnormal” backlink profile, e.g. from buying cheap backlinks or just building backlinks in some other unnatural way.

Google mostly applies ranking algorithms automatically. But sometimes, it runs a detailed check on a bunch of websites and then applies these actions. Basically they say “Yo! Your backlinks are weird. You’ve been trying to game the system. Bad, bad website.”

It’s then up to the website owner to “clean up”. They do this by disavowing old backlinks and rebuilding the backlink profile, if necessary.

The problem was that there was no evidence that the owner had done anything different. They cleaned up the backlinks profile by just buying different backlinks — from the same service.

The end result, of course, is that the rankings didn’t stay for long after I bought it.

The Transaction Process

When you buy a website from Empire Flippers, it goes in a few stages.

1. Identify the website you’re interested in. Request the detailed info.
2. Make a refundable deposit if you’re interested and begin the due diligence. Get as much data as you can.
3. If you’re happy, make an offer or pay the asking price.
4. If you’re not, you get the deposit back (hassle free, minus wiring fees of course)
5. Pay the balance. Then there’s a “cooling off” period during which you make sure the website performs as you expected.
6. Once it’s done, you confirm the transaction.

I was interested in this website over a long period. I watched it and checked out another few websites, all of which I passed on for some reason.

I didn’t pass on any of the websites because of current performance reasons. In every case, revenue matched sales and the traffic matched target keywords.

Mostly it was because

• I didn’t think I could write or source content in that vertical easily (something I was unfamiliar with)
• The vertical was too competitive (e.g. laptop reviews)
• The multiple was too high / history too short / the seller wouldn’t budge
• Some metric was not good, e.g. DR / DA

The website I purchased passed all my criteria. It performed fine during the cooling off period and even performed fine for a few months afterwards.

Then, after a few months, there was a sudden 80% drop of traffic, and another severe drop of traffic after that. Over time, traffic dropped from around 500 sessions a day to just a few sessions a day — basically, zero (or effectively zero).

When I looked into reasons why — there was nothing obvious. The website content was the same. We had even reworked and slightly improved a few pages.

Aftermath — What happened?

In a nutshell, there were a number of scary Google Algorithm Updates that had totally tanked affiliate websites.

Looking around on forums like BlackHatWorld and Reddit, we saw that many people with affiliate sites had lost basically all traffic. We weren’t alone.

So what did I learn? This is much like when I first got into investing in stocks. I made mistakes, lost money, but kept going and eventually figured out something that works for me.

My own philosophy in buying stocks, websites, and even in building businesses and products is to make sure that I’m buying something that really helps people, is unique, and has a great strategy.

For example, I bought stocks in Tesla, Amazon, and Apple around five years ago. They’ve gone up. They’re just good companies with strong positions, and that only got better with time.

Before that, I had tried using various algorithmic trading strategies or following blogs. Those strategies all failed, mostly because I didn’t believe in them and thus chickened out when they first started going wrong. I didn’t have the faith to continue.

The lesson I take away from investing in websites is: Only buy websites you really believe in. If there’s a single red flag, or something you don’t understand or any “wizardry” involved in its success — it’s not for you.

I still actually believe in the niche and in the website fundamentally. I could spend some time working on it, but my other websites started blowing up, and they have performed better than my acquisition target ever did. So I just put it to one side and moved on.

I do think that to buy such a website you’d have to be spending at least $100K. And the best deals are definitely NOT from Empire Flippers. You’d get them directly.

So — is Empire Flippers a scam? In a nutshell, no. But don’t place much confidence in the fact that a site is listed on there. Because to anyone but the savviest of investors, willing to make a few mistakes with disposable assets — it may feel like a scam.

This is probably the last time I’ll buy a site through Empire Flippers, but it won’t be the last time I’ll buy a website or a business.

Got questions?

Email me if you have anything you want to clarify.