This post is part of my series on investing in digital businesses. Check here for an overview.
One of the first questions I had about buying websites and apps online was: where do you go to do it?
And what are the differences between each of the various options, including buying via a broker, buying directly, or in a Facebook group... What are the risks and benefits of each option?
In this guide... comparing the major ways to buy online businesses
- Buying online businesses (apps and websites) via a broker — safe, but expensive
- Buying online businesses (anything!) directly — lots of fishing and negotiation
- Buying online businesses in Facebook groups... beware
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Option 1: Buying apps and websites via a broker
Pros: Secure payment, easier handover, more trust. Cons: More expensive, less range
The first option for where to buy an app or website online — which I think is the most ovious one, because of their advertising — is via a broker.
A broker handles a few things for the buyer and seller. Depending on the size and scale, this will include
- Advice on valuation
- Facilitating payment services (either directly or via an escrow service)
- Providing a bit (or a lot) of due diligence to verify the traffic and revenue
- Helping with negotiation
There are a few different brokers out there. They'll be the topic of a separate article. You might have heard of Empire Flippers and Flippa, but you might not have heard of Quiet Light Brokerage or Motion Invest. I'll go over them all in detail later.
But in a nutshell, all of these website brokers are marketplaces — they provide a convenient place for people to list a business for sale and for people like you and me to go and browse a business online.
And yes, they charge a percentage of the transaction — always to the seller.
Online business brokers work a bit like real estate agents, and a bit like investment bankers. They're kind of halfway. Real estate agents perform what I think are an unnecessary task. They take some photos, say some generic things about a house, and then take a percentage.
Online business brokers do quite a lot more. Because they're facilitating the transfer of a digital asset, they have to work a lot harder to instill confidence in both you, the buyer, and the seller (which may be you, or you in the future).
A few things that online business brokers do are
- Make sure that both sides verify that they're a real person with actual money
- Help both parties negotiate terms
- Setting a "reasonable price" — nothing too low, nothing too high
- Ensure all the data is real — that the traffic is genuine (and not faked), and that the revenue is real
- Ensure that once a deal is agreed, it goes through
That all sounds good. But what are the downsides of using online business brokers?
There are three main downsides to buying a website/app through an online business or broker:
- Limited liquidity — low supply, high demand. Good businesses are few and far between, and there are many out there shopping (more and more).
- Fewer bargains (mostly due to the brokerage fee) — You won't find any bargains through a broker, unless you make a low offer and it gets accepted with no counter-offers (quite rare)
- Higher general cost — because it's unprofitable to sell low-price websites, most brokers charge a higher fee (some charge low ones, but as time goes on, they get higher).
Despite all the above, this is still my favourite way to do it. It's just easier. Buying websites is so hard, that I like it when any part of it becomes easier.
Option 2: Buying apps and websites directly
Pros: More range, potentially better prices. Cons: A lot more work, and high risk
A second option is to negotiate directly with a vendor.
I've read about people doing this in books like How to Be a Capitalist Without Any Capital (affiliate link) by Nathan Latka.
I read that book over a year ago, so here is a general summary: the author Nathan Latka (I'll call him Nathan; I think I'm older than he is) talked about finding neglected apps and websites, emailing the owner, and entering into a direct negotiation.
In this way, he proposed there are lots of ways of owning websites for pennies on the dollar.
For example, he found a free WordPress plugin that had been left idle for a couple of years. Upon digging, he realised that the owners owed some money on it, and that they had a large number of email subscribers. He negotiated with them and managed to take it all on for a small amount (offering to pay off the debt over a year). The owners didn't value the email list. His strategy was to make the app paid, email all the subscribers, and use that money to pay the app off — and it worked.
Finding opportunities like is hard. You have to find a nexus between good, available deals, things you can afford, and things you can actually fix and grow. That's assuming they're even for sale.
In this space, all I've done is email a few websites I really like and tentatively ask if they're for sale. They haven't been, and I've moved on.
But it's still something I'm interested in. I think it takes putting yourself out there as a website buyer (Note to world: I buy websites! Contact me!) and see what you can find over a longer period of time.
Of course, for the right amount of money, anything is for sale. Just not a bargain (that's, for example, under 2 years EBIT... and let's talk about pricing another time).
Option 3: Buying apps and websites via Facebook groups
Pros: A lot of deal flow, low prices. Cons: Very high risk of fraud.
The final option for buying a website online is via Facebook group.
There are a few groups like this online. But I wouldn't recommend it for anyone, even including myself.
There are of course a few kinds of Facebook groups
- Groups dedicated to selling: Avoid these unless you're VERY experienced (or you're a scammer, I guess)
- Niche groups that are for entrepreneurs supporting each other: This works.
The main advantage of buying through a Facebook group is that there's loads of deal flow. By which I mean: People come through to sell stuff all the time.
Secondly, you're more likely to get a good price on a good product, if you negotiate well. You avoid the markup from agents who have to earn a commission for things to be worth their time.
But the main disadvantage of buying a website through a Facebook group is that it's easy to be scammed. Or just convinced to pay a lot, overpaying for an average asset.
The only place on Facebook I'd consider buying a website is through a special group dedicated to vetted business owners. For example the Mediavine publishers group is open only to current Mediavine publishers. All of these have at least 25,000 sessions per month (which was the threshold to join Mediavine a few years ago), and most have much more. It's a group of high-quality, vetted members, all of whom have websites making $500+/month, and again, much more. Their websites have been vetted by Mediavine as well.
Unfortunately, if you don't own a Mediavine website then you can't be in that group.
And also — I have tried posting (in that group) "I want to buy a website" and my post was never approved. Instead, I've seen other people comment on threads, saying "I'm always interested in buying a good website" and who knows, perhaps those have lead to deals.
Even though I know they're full of sharks, I've tried buying a couple of website flipping groups on Facebook to see what is out there.