Should you Own or Invest in Websites

Should you Own or Invest in Websites? Most Investors Lack the Skills to Succeed

Website ownership often starts as a labor of love, a side hustle that turns into a profitable full-time business. Website owners invest time and effort into building their sites to gain long-term, even life-changing, rewards.

Website investors also achieve sizable six or 7-figure profits from investing in or buying websites to scale. But a successful website investment depends on numerous factors, which we cover below.

Website operators also play an important role in this ecosystem. Owners or investors often contract or employ experienced operators to manage and scale their websites. 

As many of you know, there are pros and cons to owning, operating, or investing in websites. 

Successful owners who’ve built and sold a business might choose to invest in websites to earn a more passive income than they did as operational owners. 

Operators who profit from the sale of a site they’ve scaled may re-invest cash into building another digital business or join a syndicate investing in a portfolio of websites. 

Individuals (or businesses) who invest in, buy, and scale websites don’t need an operational background. It helps, but it’s not essential. 

Below we compare the pros and cons of owning websites, investing in sites, or acting as an operator. 

We also offer insights on how to invest in websites, what to expect, and ways to minimize risk so that high-growth websites become a profitable part of your portfolio (don’t miss the expert input from Mohit Tater below).

Before we continue, let’s be clear on the differences between a website owner, operator, and investor. 

Website Owners, Operators, and Investors: Definitions 

When we talk about operating a website, we’re referring to one person owning and operating a website or a portfolio of sites. If you manage one or more sites, you’re an owner-operator (or owner, to keep things simple). 

But there’s a distinction between a website owner and a website operator.

Website owners purchase (or build) and run their own websites. Like content creators or bloggers, website owners publish content on topics that interest them, promote that content, and grow a site’s traffic until it generates revenue. 

Owners invest both time and money to build and grow their digital businesses. Website owners take all the risks and earn 100% of any reward or profit. 

Website owners need the same level of commitment as other entrepreneurs. It can take years of effort before your website starts producing a healthy profit and generating enough cashflow so you can hire a team to scale it. 

That’s where website operators come into the picture. 

Most Website Operators don’t own the sites they manage unless they work with an investment fund, such as WebStreet (formerly EF Capital). Operators here typically invest around 5% of the fund value.

Operators are usually professional marketers, experienced content leads, or search engine optimization specialists (SEOs) who manage and grow websites for owners. Owners contract or employ operators to scale their businesses.

Operators can benefit from the successful sale of a site with performance-related bonuses or shares that are agreed upon at their appointment.

However, operators with skin in the game have an even greater incentive to scale a site into an acquisition target, achieving a profitable exit for themselves and the owner. 

Website investors may own sites in several ways: 

  • As a solo investor who supports an owner to grow one or more websites, providing a capital injection to accelerate growth. This is comparable to an angel investor in a startup. Investors at this level either take an equity stake or negotiate dividends from profits to receive ongoing returns. 
  • Investing through a micro private equity fund (micro PE), such as those managed by Domain Magnate or BlackBook Investments. These funds set minimum investment criteria at their discretion and only accept accredited investors. Micro PE funds typically fall outside of securities and exchange commission (SEC) requirements, so your capital is locked up (5 years is common), and there’s less outside transparency. However, with quarterly payouts and impressive returns to investors, PE funds run by reputable businesses are worth a look.
  • Investing through a platform where fund managers spread investments across a portfolio of sites, such as WebStreet or FE International. You must be an accredited investor, and there are minimum investment criteria. Again, investors usually receive quarterly dividends or one-off payments from exit events. 

Most investors in websites or funds that invest in websites have the same goals:

  1. Profit more from investing in websites than other investment vehicles while assuming less risk
  2. Beat the stock market
  3. Beat fund managers and investment algorithms
  4. Make more money than they would by investing in other assets such as real estate, crypto, or currencies.

Now, let’s compare the pros and cons of these various approaches. 

Pros and Cons: Website Owner 

Upsides of website ownership 

  • Let’s assume the risks have paid off. Your website has decent traffic, and you are generating enough revenue to work on the business full-time.  
  • When you reach profitability, you can recruit staff (or use contractors) for repetitive tasks like accounting, content creation, and marketing. This reduces your workload. You may even reach the point where you hire a website operator to run your business.
  • You can now build a portfolio of sites by duplicating the model and strategies that worked well in your first business.
  • Owning websites offers entrepreneurs the long-term upside to achieve financial freedom, either from an ongoing revenue stream or a successful exit.  

Cons of website ownership

  • It takes a lot of effort (alongside a salaried role or a business) before your website generates enough revenue to justify working on it full-time.
  • It’s a significant challenge to produce the volume of high-quality content and other assets required to grow a website.
  • Website owners can generate revenue in several ways: advertising, sponsorship, sponsored posts and content, affiliate links, and premium memberships. Unfortunately, website owners are always at the mercy of search engine algorithms that influence whether or not a site receives enough traffic to generate revenue. 
  • Until you’ve built a strong customer base, audience, or a community of premium subscribers that keep coming back, you constantly need to bring in new traffic/web visitors to generate revenue. 
  • Even when you’ve scaled your traffic, audience, and revenue streams, your traffic can still stall or drop. Competitors and other channels or platforms may steal your audience. Your site could be penalized by search engines. Your customers’ or advertisers’ disposable income or budgets might reduce or change, which makes your digital business vulnerable.
  • Like any business, there is an element of uncertainty. Revenue streams are never guaranteed, especially in the digital sector. Website owners must work smart to keep revenue flowing while reducing growth-related risk factors. 

Now let’s take a look at website operators. 

Pros and Cons: Website Operator 

Upsides of being a website operator 

  • Contract or salary-based operators take less risk than owners and investors. It’s not your money. You get paid to grow their business(es) — past the early growth that occurred before your appointment.
  • Now, you’re tasked with growing a website further. Scaling a website is easier to achieve when you’re working with an owner (or investor) who has allocated a budget to content creation and site promotion. 
  • The risk model is different when you work as an operator within a fund because you own a percentage of the site(s) you manage. You’re risking your cash with the hope of a success-based payoff when the business sells. 
  • For professional operators with a proven track record, a profit-sharing bonus is one significant upside you should negotiate with an owner or investor. Ask if they’re looking to achieve an exit and, if so, over what timeframe. Include this key performance indicator (KPI) in your contract, with a percentage of the sale value as your bonus.
  • Operators don’t get an equal share of the profits. Still, if you have a stake in the business or have performance bonuses in place, an exit could significantly improve your financial position.

Cons of being a website operator 

  • Most website operators put in vast amounts of work without the advantages of ownership (unless they own a percentage through an investment fund). 
  • A website operator’s role is usually full-time — whether you manage one (or several) websites. Unlike running a marketing or SEO agency, it’s more challenging to work with multiple owners simultaneously, unless you’ve scaled your operations to deliver results using an agency-style model. You need a team, and your fees must factor in those overheads while still producing a profit. 
  • Website operators need experience and a successful track record of growing digital businesses before an owner or fund employs them to manage a site portfolio.
  • Every website is a gamble. Operators need to take as much care picking websites as investors do. Choosing a website with growth potential, and scaling it for a successful exit, is a big win for any operator — potentially leading to success-based bonuses and more lucrative opportunities in the future. However, picking the wrong website could damage your reputation and earning potential. Choose wisely. Do your homework before committing to an operator role — whether or not you’re offered a stake in the business. 

Pros and Cons of Website Investing

Once you’re ready and have the funds (anything from a few thousand dollars if you join a group of investors to six or 7-figures as a solo investor), you have several options for investing your cash (which we cover in more detail later on). 

How to invest in or buy websites? 

  • Investors can negotiate a deal to invest in or buy a website (or portfolio of sites) from the owner
  • Investors can join an investment syndicate which givies them equity in a portfolio of sites, or invest through a fund
  • You could buy shares in a company that invests in and runs websites and digital businesses, such as Onfolio. As a shareholder, you can receive dividends or buy and sell your shares, giving you more liquidity than investing in a fund.

It all depends on the amount you have to invest, your risk tolerance, your earning expectations, how websites fit within your investment portfolio, and how hands-on you want to be. 

Upsides of website investing

  • Website investing has plenty of upsides. Pick a website that’s already established and generating a profit. Hire an experienced operator. Make strategic investments in the quality and quantity of published content, and promote it more effectively to increase traffic, increase revenue, and earn even higher profits.
  • In the right hands, websites have tremendous potential as an asset class and investment opportunity. With the right team and strategy, a digital business has the potential to return 5-10x your original investment

Cons of website investing

  • As with any investment, your money is at risk. You may lose part – or all – of your investment.
  • Only certain digital businesses have the potential to scale and produce high growth. The market and niche you enter both influence a website’s capacity for growth. According to recent data, websites in the health and fitness, personal finance, and self-care niches demonstrate high-growth potential. 
  • If you choose the wrong website or niche (even with additional funding), your site may stagnate and fail to scale further. 
  • You must know how critical a business is to its customers. If its products or services are viewed as non-essential, you could experience a drop in traffic, click-through rates (CTR), and revenue — particularly during an economic downturn. 

How can website investors maximize their ROI? 

It’s a good question.

We asked an expert in alternative investments for his advice and opinions on website investing for owners and operators.

Mohit Tater is the Founder and CEO of a successful micro private equity firm, BlackBook Investments. He also partners with Flippa (as a broker) and is an operator for WebStreet. 

It’s fair to say that Mohit has extensive experience with buying, selling, and operating digital businesses. 

Let’s see what he told us.

Mohit, what sort of return on investment (ROI) could investors expect if they recruit a skilled operator?  

As a website investor, you might think your ROI would be low since you are paying someone to operate and manage the site. But if the site operator you hire is skilled and knows what they are doing, they can grow your site to a level that wouldn’t be possible if you did it yourself.

And due to that growth, not only would the site make more money, but its valuation would also increase.

In my experience, for every $1,000 in additional income a site generates, those already profitable websites can increase in value by $35k-$40k.

Historically, we have provided investors with a 27-30% ROI annually, and that’s after our fee.

One of the reasons we charge a fee is that most investors are not operators. They don’t know or understand SEO or how to run and grow sites. So it is prudent for them to hire the right operator to manage and grow their sites.

What skills or experience do operators and investors have that increase their chance of success? What separates the two?

I would say the average investor usually doesn’t have the skills and technical know-how to operate and grow content sites.

These people know a little about the industry but haven’t actively participated as owners or operators. Some have, but not all. They are keen to invest in this space because of the high ROI they could achieve. 

At BlackBook Investments, we have seen people come to us after they bought a website, tried to run it, and failed. They quickly realized that websites are not the passive income they were promised, that it actually involves hard work.

It’s better if website investors let content creators, operators, and SEOs do what they do best while investors pay them well to do that work.

Having said that, I always try to encourage investors to read and learn about the industry, SEO, and how to run websites in general because someday they might have to, and it’s always better if they are prepared.  

We appreciated Mohit’s insights and advice on this topic.

Investing ‘hands-on’ or investing through a fund isn’t for everyone, but there is a more passive approach to website investing…

Is there another way to invest in websites? 

Yes, there is. If you’re concerned about being a hands-on investor and owner (or simply don’t have the time), there is another way to invest in websites. 

Onfolio is one solution for anyone who wants to invest in websites without the daily commitment of running and growing a digital business.

Onfolio launched in 2018 and, within four years, went from a one-man startup to a public listing on the Nasdaq ($ONFO). At one time, Onfolio offered private investors a 12% annual dividend on the business portfolio they owned and managed. 

Since August 2022, the company has expanded its portfolio with the acquisition of several successful digital businesses. 

For those looking to invest in websites, Onfolio does the hard work for you. They select and buy “established profitable companies with excellent opportunities for growth” and appoint experienced operators to further scale those businesses. 

Compared to investing in a fund, this approach is entirely passive. You benefit from increased liquidity ⏤ by buying or selling shares whenever you choose ⏤ and earning more when the portfolio value and profits increase. Owning shares eliminates many of the downside risks of investing in a fund. 

You’ll find out more on Onfolio’s investor website.

In review: Owner, Operator, or Investor? 

Let’s review the original question: is it better to be a website owner, operator, or investor? 

To make money as a website owner you need: 

  1. A topic with a large enough audience. It could be broad and deep or a niche with a highly-engaged audience that’s not served well by other websites. 
  2. To create engaging, informative, and SEO-friendly content and consistently publish and promote it.
  3. An audience that trusts you so that when you introduce adverts, affiliate links, or subscriptions, you can monetize your site. 

Once your website is profitable, you have choices: continue as is, seek investment to scale, or locate a potential buyer. You have built a viable business, and buyers will pay handsomely for your efforts. 

Once an investor acquires a site, that’s not the end of the story. An investor must commit to a site, e.g., hiring an operator, content creation, and marketing, to ensure it keeps growing. It takes work but can generate a sizable return for everyone involved. 

As an operator, most of the early-stage work is complete. Your aim is to choose the right website opportunity to work on and scale, whether that’s for an owner, an investor, or a fund. 

If you make the correct choice, the potential is there for a large payoff. Operators with an equity stake in a business ensure they benefit when a site sells — provided they do their job well.

Those operators who manage websites for a salary or monthly retainer must negotiate factors such as performance bonuses and/or profit-based bonuses.

In short, no single method is better than another. 

It depends on numerous factors such as your access to funds, your risk profile, and your lifestyle goals.

Naturally, whether you’re an owner, operator, or investor, the outcomes are always influenced by the work you’re willing to put in, plus, as always, a little bit of luck. 

Find out more about Onfolio. We buy digital companies from independent entrepreneurs and grow them to their full potential. Get an offer or learn more today

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Dom Wells

Dominic Wells is the CEO and Founder of Onfolio. Dom is responsible for developing and implementing Onfolio’s long term business strategy. He is a serial entrepreneur with more than a decade of experience investing in and building digital businesses. Dom has grown Onfolio from a startup to a NASDAQ listed company. For Onfolio’s investors, Dom has built a diverse and profitable portfolio of online businesses that deliver consistent returns. Dom is passionate about entrepreneurship and regularly speaks on digital business strategy, online business investment and profitable growth opportunities. For Dom, diversification and exceptional talent are the keys to sustainable growth.