What single thing keeps most people away from buying content sites? I get asked this question a lot by people who know enough about the space to know that investing in content sites is still relatively obscure compared to some of the other assets people invest in.
The answer is fairly obvious: People are afraid of making a mistake and losing their money.
And they’d be right to be wary. If you don’t know what you’re doing, picking up any online business can be a huge risk (hence the reason we offer our services to would-be investors).
But what are some of the biggest mistakes people make? What’s the most obvious things that a beginner can take steps to avoid?
I don’t believe that lack of knowledge is enough reason for people to stay away from investing in sites forever. This is a fantastic asset class that can offer incredible returns.
So it makes sense that if you want to get yourself up to speed and more ready to make your first steps into the space, you start off by arming yourself against the biggest mistakes, and work up from there.
This article is a group effort. As well as using my own experiences, I’ve also called on a few people in the community, as well as some brokers themselves, to offer their inputs.
First up, some of my own experiences
Getting Distracted By Potential And Ignoring The Fundamentals
I’ve made this mistake a couple of times and definitely seen others make it too. This space is filled with case studies about incredible growth and successful flips, and even more stories of people building sites from $0 to $20k per month.
As a result, I think it makes us look too much towards the idea of picking up a site and tripling it in a short time then flipping it.
There’s nothing wrong with this model (even if it’s not my favorite), but I do think it leads people, particularly inexperienced buyers, towards chasing after sites with a ton of upside.
Sure, if you can find one, absolutely nail it down, but if you buy a site that doesn’t even grow, you’re still looking at 30-40% ROI..which is far from terrible.
Why I consider this a mistake, is because focusing too much on insane growth potential can cause you to look at sites with a lot of downsides, and you may overlook those downsides because you’re excited about the upsides. It happens all the time, and when the site goes to zero later, you’re left wondering what happened.
In my experience, sites with the most upside also have the most downside. It makes sense, because a lot of the upside is based around fixing or improving the downside.
I don’t want this to come across the wrong way, like I’m saying you shouldn’t go for short flips or you shouldn’t look at upside, I’m just saying, always, always, always make sure a site is fundamentally sound before considering the exciting elements. I’d rather make 40% ROI every single time, than 200% sometimes, and lose my money other times.
A deal has to make sense without considering growth potential. If it does, THEN you can start to get excited about upside.
Expecting A Site To Be More Passive Than It Is
Content sites are very passive, and often don’t require more than a few hours a week to manage, which is great.
But they do require a few hours a week (on average) to manage. They’re going to eventually die if you do nothing with them.
As recently as a few years ago, companies would buy sites and literally do nothing with them, because website multiples were so low back then that you could do so. You could buy a site, let it go to zero over a year or two, and you’d have doubled your money doing zero work.
These days, sites cost more, and tend to go to zero sooner (if left alone), so I don’t recommend this entirely hands off model.
Buy a site, do the minimum if you want, and you’re all good.
But don’t buy a site and do nothing and wonder why the site slowly died.
Buying Too Complicated
I quite often have investors send me sites to look at as part of our services, and I just discard them fairly quickly for being too complicated. Content sites are wonderful for their simplicity, so overly complicating it is a little bit of an opportunity cost.
It’s the same reason I prefer a content site to an eCommerce or dropshipping site. Why bother with shipping, inventory, customer support, and forecasting, when you can just focus on publishing content?
So in that same vein, why focus on a site that has huge content demands, gets traffic from all sorts of different places, requires a ton of social media attention, and so on?
It’s not necessarily a dealbreaker, because some sites are worth the complications, but more often than not, there’s a much simpler site out there.
If you’re a beginner, this is once again, especially true.
As mentioned, I reached out to a few FB groups and asked them for their biggest mistakes as well. See their answers and my thoughts below
You’ll have noticed a theme among these answers. The most common fear was the site tanking after purchase, which is of course the most normal fear to have.
The reasons behind this varied, but it was mostly a result of a fear that the seller had been doing something dodgy, or otherwise undisclosed, and the buyer would not be able to maintain the site’s trajectory after taking it over.
I HAVE seen this kind of thing happen, but most of the time it only happens when you buy a site without doing proper due diligence, and it rarely happens when you buy from a broker (though it still can, due to unforeseen circumstances or algorithm changes).
Speaking of brokers, we’ll be hearing from a couple shortly, but before that, the other mistake I noticed come up often was people thinking they’d be able to turn around a poor site. Just like I mentioned earlier in this article, it’s a common mistake people make.
You don’t need to buy something assuming you’ll turn it around. It’s that simple.
What The Experts Said
Alex Champagne – Empire Flippers
I think a huge mistake that potential buyers make when NOT BUYING a content business is thinking they must be an expert in the field.
So many times I see buyers say, “I don’t know anything about this industry,” When actually the Seller doesn’t know anything about it either.
I would say most new buyers getting into content sites don’t understand link building. Learning the process the seller uses is pretty important as well as the content creation process.
The biggest mistake, especially for a new buyer, is probably not asking enough questions/speaking directly to the seller to get to know the seller and the strategies used to maintain/grow the site.
Incorrectly evaluating an opportunity as an area of concern. Obviously this is the eye of the beholder kind of of stuff like PBNs, lack of recent content, lack of keywords ranking, messy backlink profiles, poor UX, dated look, high bounce rate (eye roll).
The site is performing well despite these issues and they all can be improved with a minimal amount of work.
Alex makes some good points here. As always, NOT taking action can be the biggest mistake of all, and a lot of people run into analysis paralysis, particularly around the “But I’m not an expert” situation.
He also makes a good point about viewing a risk as an opportunity. This contradicts some of what I said earlier about people not focusing enough on risks, but actually they’re separate arguments.
I agree with Alex that many people incorrectly analyze risks, whether that’s by thinking something is a risk when it isn’t, or whether it’s not understanding how to turn a risk into an opportunity.
It’s definitely a fine balance though. Some people view a website that only ranks for a few keywords as a risk (what if those keywords lose their rankings?) while others view it as an opportunity (more room to grow). You should weigh each one up separately.
Thomas Smale – FE International
Over the years we have seen some very successful buyers and some who are less successful. Invariably, the best buyers know their strengths and focus on building a portfolio with synergies. They are willing to pay fair prices for great businesses and realize those businesses are often in the 7-8 figure range where there is already a team in place.
Less successful buyers focus on irrelevant metrics like multiple and ignore relative quality. Paying a low multiple for a business means you will only have access to the lower quality deals (often acquired by portfolio buyers who can offset the risks) and will miss out on the best businesses. There is a lot of misinformation in the industry around “average” multiples which becomes less and less relevant as deals get bigger and better.
It always makes sense to stretch yourself as a buyer and acquire the biggest deal you can. It is more likely to lead to a successful acquisition as you will be more focused versus a smaller business where it is easier to overlook issues.
I love that Thomas considers the multiple “irrelevant”. I think really his point is that in the bigger picture, the selling multiple can be completely irrelevant without context.
36x could be cheap and 27x could be expensive, it all depends on what you’re getting for that price. To take this further, usually the strength of the site dictates its multiple, so a 36x site and a 27x site can represent the same opportunity level. In fact, a 36x site is most-often going to be a better purchase, since it will have more positive factors.
Of course, don’t just arbitrarily start buying more expensive sites, but if the valuation is justified, absolutely go for it.
As an example of this, we recently passed on a site because it had a 33x multiple but had only been making money for a few months. It was on a great trajectory and had fantastic upside, but we didn’t want to pay that price for a site with such a short history. Someone else did pay that price and maybe we’ll live to regret it; but remember the number 1 rule of investing.
Don’t lose money.
It’s better to err on the side of caution, and back to Thomas’ point, that can often mean paying more for a more solid site.
There seems to be a correlation between what people fear, and mistakes others have made. This makes perfect sense.
A pragmatist will learn from those mistakes and be able to invest in websites without the fear of repeating them.
My best piece of advice after reading about people’s mistakes, is to make sure you fully understand how websites work (at least from a traffic and conversion perspective.)
And of course, get over the fact that you need to find websites with flaws and correct them.
Websites are still cheap compared to a lot of other investment classes, and that’s because they come with the inherent risks that people have experienced above.
If you can mitigate those risks by improving your skillset, or by just working with us to do more thorough due diligence and operations post-purchase, then you end up with a cheaper asset class, without the aforementioned risks.
You shouldn’t have to worry about buying underperforming or low quality websites in order to make lucrative returns.