Buying A Website Case Study 83% ROI

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today I’m going to share with you a case study where my business partner David gas and I Chris Yates purchased a website and ended up getting about an eighty-three percent annualized return on that website now my name is Chris Yates my business partner David gas and i co-founded the internet Investment Summit and I’m going to talk more about the summit at the end of the case study here but let’s get right into it so the case study I’m going to share with you today is about the website dungeon mastering calm we found the site for sale on Flippa it was doing about sixteen hundred and seventy nine dollars according to what the seller was claiming in revenue per month we ended up buying the site for five thousand dollars which at a glance seems like a wonderful valuation however we’re going to see that you know at the surface there’s more to this deal than sort of meets the eye so once we looked at the auction on flippa we realized that the site had actually been purchased by this person on flippa previously so one of the first things that we did was to go back and look at the old auction on flippa to find out what the real story was when he originally purchased it so the original owner of the site had built this thing from scratch and up to about 25,000 unique visitors per month and was making about four hundred dollars a month from the site now the really interesting thing he had done here was heat built up a nine thousand plus list of RSS subscribers and to us that was a really big benefit because RSS subscribers tell us that his audience was very engaged they wanted to continually get updates on the blog and we saw that as a big asset in the site we also saw that the person had built up a a newsletter email newsletter subscriber list of about 4500 and as we looked at it more he really had been building a quality relationship with that list by sending quality content on an ongoing basis and and that to us also was a big benefit the site also had unique products like books and tools and things like that that he was selling directly to that audience so it had a lot of the elements that that to spelled out potential so if we look at sort of the overall stats of what the original owner had done with this site we don’t have for about three years he brought it up to about 25,000 unique visits per month as I said he was doing about four hundred dollars a month now if we calculate revenue per unique visit which is a great metric related to how well monetize a website is we see that that’s around 1.6 sense one and a half cents per visit is what the revenue he was making into me and my experience that seemed pretty low it seems like they’re so there was some opportunity for improvement there in terms of monetization we talked about the subscribers he had built up and he was actually still getting new subscribers all the time about 15 to 20 per day which was wonderful and we don’t know what his roi was on that because we don’t know if he put money into it early on if it was really just he made he made some money during the process of owning it and then he made some money a few thousand dollars in the sale so we don’t know exactly on that so we won’t make any assumptions there now when we looked at the new flipper auction the one that we were currently interested in we started comparing those numbers so let’s look at the comparison of what the original owner had done versus the current flipper auction so the current seller rather than basically keeping that site for a long period of time he’d only held it for about seven months and during that period of time he basically took the visits from 25,000 up to about 46,000 visits per month which is almost double the visits he taking the net income on on a monthly basis from 400 a month to about 1600 a month so basically around four times the monthly income and the way that he had done that if you look at a couple of things here you’ll see that he had increased his email subscriber list from 4500 up to sixty three hundred and his revenue per unique visit is almost triple and really again that revenue per unique visit number is a measurement of how well monetize the site is so what we when we looked at this a little bit more we realized what he was doing was basically utilizing the list that had already been built and sending out promotions to that list to monetize the list and I think that was a great strategy on his behalf however there were obviously some downsides to doing that for a new owner like us and we’ll talk about that so for us the positives on this site was that again he had built a very responsive list we did some due diligence around the list a couple of things that we were really interested in were how responsive that list was and we actually saw that he was getting about a forty to fifty percent open rate on emails that he was delivering which is actually pretty amazing compared to what’s what’s typical out there and he was making around 25 to 50 cents every time he would send an email to a subscriber again really responsive there’s money in that list we liked that the other thing we found with this site was that it was an authority website and had a lot of good traffic and it also had won some awards in the past which were industry awards and that’s something that’s really difficult for you know somebody to duplicate or fake so we saw that again as a positive on this deal we also saw some some really interesting keywords there were one keyword in particular the site was around page two or three on that had about a million searches per month and if we knew if we could take that up to page one we’d see traffic really improve a lot so we saw that as an opportunity on this deal and again I already mentioned the original products we saw that as a positive we can sell those to the list we can sell those two new visitors on the down side you know the site’s all about Dungeons and Dragons and my business partner and I had no clue we’d never played it we really didn’t know anything about it however we saw that as an opportunity to bring in some other people who had an expertise in that area and make them part of the site but we had to take that into account in our valuation because we’d likely pay those people or give him a profit share or something like that the other thing we looked at as a negative was that the current owner of the site had done some pretty aggressive email marketing and had done a lot of offers to that list in order to generate the revenue that he was generating and in a way he probably had damaged the reputation that he had that list so we knew going in that there may be that the things that he was doing were not sustainable and that we may need to have to actually do a little bit of you know sort of recovery in terms of developing that relationship back up and adding more value to those people and that tied right in with the revenue spike that we were seeing on his deal he had a couple months there where he brought the revenue up to i think around five thousand dollars by doing like a one or two email series promotion so again we didn’t see that as something that was very sustainable so when we really looked at it we we started contacting this website owner directly as opposed to just going right in and bidding and we did some numbers on the side in our estimate was the the site would probably bring in around 500 bucks a month something like that was was sort of our guests of where it would be and we started talking to the site owner developing some rapport with them and ended up saying that if we were going to go ahead and bid around five thousand dollars for the site that he would end up ending the auction early for us and letting us have the deal which we liked you know who knows we might have made less money or might have been able to get it cheaper but at the same time we were able to in to that auction early take all the other players in that auction off of the table and it would have went right to us and so to us that was a good deal we felt confident we knew the risks going in we need the opportunities so if you look at this from a timeline what you’re seeing here is an sem rush chart of the traffic that you see in our in the period of time that we owned it and sold this site so the original sale occurred back in 2010 we purchased this site about seven months later from the the current the current owner at the time we held it for around two years ended up selling the site at the end of 2012 now so let’s look at what our revenue looked like during this period of holding it and I’m just going to start yet with the first six months here month one was about 200 then in month two we did another email promotion because we’d prove or the previous owner had proven that that worked and we made about twelve hundred dollars from that email promotion not quite as good as what the purse the previous person had done but still really quite a good return for us because we got twenty five percent of our investment back you know basically in one month period of doing an email promotion which we were really really happy with month three four five and six sort of bounced around between two and four hundred dollars in revenue and then after that thing sort of leveled off and balanced out and actually right around i think the months fourteen fifteen was where we got all of our money back just from the monthly income that that site was generating for us if you compare the stats here the original owner built this site up over a three-year period he may be made you know several hundred dollars a month for several months and then maybe made a few thousand dollars in the sale of that site the second owner the the person who sold it to us owned it for about seven months probably made about ten thousand dollars and owning that while owning that site would be our guest and he got probably about a two hundred percent return on his investment and for us we held it for about twenty six months made about three hundred and fifty dollars a month on average and our ROI on that site ended up being around a hundred eighty-two percent the difference here is that the original owner built this thing from scratch put a ton of time into it and you know he got his money he got some money out of it the second person probably it sounded like put a really heavy effort into that site for that seven-month period but for us we took a little different approach and we focused more on automating that website getting people in place to to really run the site for us and by doing that our return with minimal amount of maintenance time ended up being about 83% annualized which we were very very happy with not too bad considering what you might get if you were to put it into say a savings account so that was the case study we were really happy with how things went with that and that’s one of the things that that we’re excited about in the event that we’re doing in October the internet investment summit it’s a lot of it’s going to be geared around specific case studies I’m going to share a case study about how i went i took a we purchased a website for around six figures how it dropped in revenue by eighty percent and how i was able to bring that thing back from the dead so i hope i hope to share some really good takeaways in my experience both in making a poor decision in purchasing but also how to improve a site sustainably over time we also have a couple other speakers we have a guy who built up a mobile app portfolio sold it for around two hundred thousand dollars to a hedge fund we have another guy who built a membership website from scratch and it’s doing about fifty thousand dollars a month and and also justin from flip filter is going to be sharing one of his current renovations he’s working on this renovation right now and he’s going to be sharing all the things he did over the next six months before the event and the results that he got during that period so we’re really excited about these case studies I think there’s going to be some great discussion some great networking coming out of this and so I really hope to see everyone who listened to the case study today ending up at the Internet Investment Summit in October really excited to have you there i want to remind you that our early bird pricing will be ending soon so make sure that you register for that that for that event thank you for listening the case study today