San Francisco based HotOrNot, founded by James Hong and Jim Young in October 2000, has been acquired.

The buyers are investors connected with Avid Life Media, and paid somewhere around $20 million for the site. Hong and and Young have been taking money out of the very profitable business all along the way – which we reported was another $20 million or in May 2007. HotOrNot never raised outside funding.

At a whopping $20 million it is clear that the web business was certainly a HOT property 😉

That is the shamefully bad pun out of the way, so let us know your thoughts on this deal.

Welcome to the Website Purchase Review of Just-Pooh.com with Keith Mander.

The goal for this exclusive interview is to give you a deeper look into buying websites, we are using actual case studies as the basis of our interviews, and this will give you a real life insight into buying websites. The site in question is Just-Pooh.com. Keith’s personal blog is at KeithMander.com

Keith, thanks for taking the time to speak to us. How long have you owned this site now?, and if you don’t mind sharing the juicy details? How much did you pay for it?

I stumbled across the site several years ago, but only made first contact with the owner in September of last year. After some lengthy negotiations and analysis, the site was finally in my hands by mid-December. I’d prefer not to share further details of the transaction.

You mentioned due diligence there… what did this entail for you? Do you have a set checklist or procedure for this?

I was new to the process, but had a good intuition as to what I needed to check. I asked the owner for details of current traffic volume and verified this by analysing the site’s ranking for the most relevant keywords. Simple searches also helped me gauge the volume of advertising inventory on the topic, indicating how well the traffic could be monetised.

Very interesting. I am sure there is a lot of info there for readers who may be looking to purchase a website….. Also, I noticed that you used rankings and traffic tools to not only confirm the site’s existing traffic, but also to view future growth potential. That is a great idea!

Yes, Google Trends is also an excellent way to get a snapshot of the industry growth for the site. I could see that Pooh’s popularity was starting to plateau, but picked up whenever a new movie was released. It’s important to use common sense in additional to the data tools might provide.

Excellent advice. So to confirm, this was a private deal, and not done via any marketplace? Have you had any experience of a market place like Sitepoint.com?

Yes, the deal was conducted privately. I tend to avoid marketplaces such as SitePoint and eBay. Sellers using one of these platforms tend to have a better understanding of their site’s value, and therefore have higher expectations. My approach would be to directly contact site owners who are unaware of their site’s value and who’ve never experimented with online advertising. They’re usually surprised when you contact them with an offer and this eases the negotiation process. The potential with this approach is far greater.

Yes, that would be an ideal scenario…. how do you go about finding such sites though?

Using information on popular search keywords is a good starting point. I think it’s wise to concentrate on topics that are not immediately commercial in nature as you’re more likely to discover a site created out of passion, rather than for profit.

Superb advice, and I am sure an eye-opener for many readers. I suppose fan sites and hobby based sites spring to mind.

Absolutely. I’d suggest these sites represent the best opportunity. Don’t forget that you’ll need to find a site where you’re comfortable in adding further content to.

I agree. My girlfriend actually purchased a fan forum earlier this year, and I will throw out a quick warning to the readers: monetizing these sites can be very tricky. Even with high traffic, so some creativity and knowledge in this area is going to be required. It is certainly worth the effort though, and the rewards can be huge

Yes, forums are notorious for being difficult to monetise. But if you can nail it, there are high rewards to be made without much effort.

Yes, personally I feel the key is to use the forum as a feeder site, both to feed traffic into a site that will make sales, or to use that base to launch new, related sites and create a network.
Anyway, back to your site – Have you made many changes to the site since you purchased it? And have there been any unexpected obstacles?

Yes, just this month I outsourced the complete redesign and restructuring of the site. The aim was to create a more structured and more appealing site. The results are impressive; average page views are up 25%, the average time users spend on the site increased 35% and bounce rate dropped 20%. I’m now using analytic tools to make further improvements to the site’s navigation and content. The largest obstacle I’ve faced is finding a balance between user needs (pictures and games) and what will generate traffic (quality content).

Excellent. What does the future hold for you in terms of purchasing or selling more sites? Is this something you would like to do again?

Absolutely, I’d love to build a small portfolio of sites that bring in a stable secondary income. For the moment, I’ve decided to concentrate on maximising the potential of Just pooh before moving on. Cash flow and time management are significant hurdles to expanding.

Very true. Ok, one final question…. any regrets Keith?

Not starting sooner!

Better late than never I suppose. Keith, thank you so much for your time….. this has far exceeded my expectations, and there are some real gems of information here. Best of luck with Just-pooh in 2008, and we wish you continued success.

It is often difficult to be creative with gifts at Christmas. Often we just buy gifts and hope for the best, knowing that a few weeks later these gifts will be put in a cupboard and left to gather dust.

But what if there was a gift that was not only fun, and uber-cool, but was also a gift that could be used for many years, and could generate tens of thousands of dollars?

Today we are going to look at buying websites, and our 5 reasons that they make a killer gift for a family member or loved one.

1 – It is what they love – does your son love Football? Is your brother passionate about street cars? There are websites on almost every subject on the planet. If your father likes antiques, perhaps buy him an antiques and collectibles blog.

2 – They rise in value – ipods, cars, toys, computers, video games, mobile phones… they all have one thing in common: they drop in value very quickly. Websites can grow in value, and with a little love and care they can become very valuable very quickly.

3 – Longevity – Even the latest mobile phone will be worthless in 18 months. But websites generally become more valuable with age. How many other gifts could provide entertainment and value for decades?

4 – Give them a business – Once a website starts making money it is technically a business. You can buy web businesses for as little as $20 and this gives people invaluable real world experience, business lessons and a look into a possible new career option.

5 – Meet new people – There is no better way to meet huge amounts of like minded people in a short period of time than owning a blog or website. I have met hundreds of inspirational people and contacts from owning websites.

Ok, so now you want to buy a website, but where do you get them from?

Sitepoint.com is a popular choice.

Alternatively, contact us and let us know your budget and let us know your areas of interest, and we will keep an eye out for a site that matches your criteria.

Remember, a website is for life, not just for Christmas.

We have all had an idea for a website or web business that we felt was a killer idea. Some of us decide to turn that idea into a multi million dollar business (Google, Facebook, Flickr, Myspace), and the majority of us forget about it and then regret it later.

But in between these two ends of the spectrum is something far worse… it is the people that think of an idea, create the website, and then realise that the idea has already been done many times, and success is almost impossible.

At Midascode we get a lot these cases, people contact us with an online auction website they spent $10,000 on, and they then realised that there was a little thing called eBay, so their site never got off the ground. To make matters worse, they often want to sell for more than $10,000 to “cover the development costs”.

This angers and upsets me in equal measure. I don’t like to see people fail, I certainly don’t like to see them lose money, but at the same time, it is clear that these people have rushed into creating their website without doing any research.

Which begs the question: should development companies have the morals and good faith to tell such clients that they are wasting $10,000?

It is easy for us to laugh and joke about people who want to create a search engine for $500 to compete with Google, or a $10,000 site to compete with eBay, but many of you have spent a lot of time on the net, you know the rules, and the unwritten rules, you know what works and what fails, you know what adverts not to click, and you know not to show your willy via webcam to a guy called KinkyJoe (ok, perhaps that was just me then?!?)…. but remember that each and every day there are thousands of people who are using the Internet for the very first time, these people don’t know the rules and unwritten rules, they barely now how to load the Internet browser.

Perhaps there should be a one year buffer period, where nobody is allowed to create a website or web business until they have been online 12 months.

For instance, take my mother…. no, please… take her!

She started using the net recently, using the IM username: Deans.Mum (bless)

The other day she contacted me and was furious about the fact that on the net, people pretend you have won things, but really, they say it to every visitor. I laughed at this because I have had 10 years of seeing such banners and pop-ups, but she hasn’t, and from time to time we have to remember that we were just as naive when we started online.

We all make mistakes, for me, “mistake” is just another word for “experience”, but until you have got your Internet “experience”, it may be best not to invest $10,000 into an idea that has had no market research, and what’s more, if you do make this big mistake, please don’t use us as your “get out of jail free card”, we can get the same $10,000 site developed for $2,000 and we are “experienced” enough to know that it would take millions of dollars in promotion to launch an online auction site these days.

Rant over.

For all of the people reading this who are new to the Internet, I would like to share one vital piece of information with you, one nugget of info that will change your lives:

****Congratulations, you are the 1 millionth visitor, you have won a prize, please send $100 to INeedMoreInternetExperienceBeforeISpent10kOnMyIdea @midascode.co.uk to collect your cash.****

Have you ever wondered who owned iphone.com before the iPhone was invented?

No? Perhaps it is just me then.

I can reveal that this is an archive of the iPhone.com website prior to Apple purchasing the domain:

iPhone website in 1999

It makes you wonder, perhaps you are currently the owner of a domain that could be worth millions in the near future. Perhaps Apple will create a product called “Midas Code” 😉

We can only dream.

If you have ever considered buying or selling a website, then I urge you to take the time to read this article/rant.

More and more people are looking to buy existing websites as a way of saving time and money, in theory this is a perfect model, webmasters who no longer have the time to run their site, have gotten bored of their site, want to cash in on their site etc… have an outlet in which to get a nice chunk of cash for their efforts.

In some ways this is the equivalent of a get out of jail free card. The webmaster starts with a grand idea, gets excited, creates the site, the site flops, webmaster sells, recovers cost of development etc…

On the other side of the coin, site buyers are able to save huge amounts of time, market research and promotion, by letting someone else do the hard work, and then paying them for their efforts.

This should be a win/win scenario, and often it is… but there is one issue that seems to be rearing it’s ugly head over and over again: The Webmaster Delusion.

The Webmaster Delusion

The Webmaster Delusion is basically the mindset of webmasters who own websites and are looking to sell. I don’t mean to stereotype, but the vast majority of site owners that we deal with on a yearly basis (a LOT), have the delusion of thinking that their website is the new Myspace or Million Dollar Homepage. However, without fail, these sites are often amateur failures that are worth no more than a few hundred dollars.

Today I would like to pose the question to everyone reading this… WHY? Why do webmasters consistently over-value their websites to crazy proportions?

Midascode.co.uk is an industry leader in site flipping, yet we don’t have an exact answer to this question.

How can a $300 website be seen as being worth $40,000? Yes, you read correctly… $40,000

One obvious answer is that the site owner is the owner, and therefore is bias. But car owners don’t do the same, you don’t see small, knackered old cars being sold at Porsche prices. It would be crazy to do such a thing. Yet in the world of webmasters, it is common practice for a car with no tyres to be valued as a gold plated limo.

a prime example of delusion

Recently we had a great example of this, we knew a site owner who had a site with approx 150 visitors per day, and the site was making almost no money, the design was poor, and didn’t have many links. So we valued the site in the low end of the spectrum, let’s say for the purpose of this example, we would be willing to pay an absolute max of $800.

We discussed the site in detail with the owner, and then we asked him to tell us what sort of price range he was considering… for privacy reasons I won’t give the exact details, but his valuation was over $70,000

His twisted logic was based on a value per visitor of $250, despite the fact that he was making no money from the users.

In reality I could have achieved this same traffic via PPC for less than 25c per visitor, which would have given a value of $700 (much closer to the actual value)

So how on earth can an owner of a $700 website, demand $70,000?

I would love to hear your thoughts on this… if it was just a few people, I would put it down to lack of knowledge, but this represents the vast majority.

Also, it is worth noting that he contacted us.

We all know that the real value of something is whatever anyone is willing to pay, but when you have been in the site buying and selling business as long as Midascode, you develop a strong sense of a site’s value, and in most cases we are correct in our assessments.

So once I again I must pose the question… why do the vast majority of webmasters do this?
I have seen life changing amounts of money being offered for websites, and the owner will refuse and demand x100 more.

Why would someone with an average income refuse such a large amount of money?

I have a few beliefs on why there is such delusion:

What causes the delusion?

1) They have a personal interest – Webmasters often put huge amounts of time and effort into sites, in the vast majority of times, this time and effort is largely wasted, and is of no value in the real world. But the webmaster doesn’t see it that way, as it was THEIR time and THEIR effort.

2) They are bias – Many webmasters are blind to the mistakes they have made with their sites. They are convinced that the $1,000 they spent on directory submissions will add $3,000 to the site’s value, when in reality it has done more harm than good. So getting a logical valuation is always going to be trickier.

3) They lack basic business knowledge – Again, I don’t want to stereotype, but if a site is not making any revenue, then that alone is enough to show that perhaps you are not dealing with the brightest business mind in the industry. I often find the sites that have been complete failures, have the craziest valuations. So perhaps it is just a lack of knowledge that is the cause?

4) A lack of foresight – Here is something we hear very often: “my site makes $50 per month, so I could just keep it for 10 years and make $6,000, so my valuation is $7,000”

So many webmasters presume that their sites are only going to get better with time, despite the fact that many of them have long since given up on the sites. In reality, the sites are going to rot, and revenue will decrease each month. Also, the sites are susceptable to changes in Google rankings, new competitors, hackers, spammers, loss of interest in the industry, a web 2.0 bubble crash.

To presume that a site is only going to improve, shows a fantasy style of thinking. In reality, any site on the planet could potentially be worthless in a years time. It only takes a large lawsuit, a determined hacker, a huge Google change, or a web bubble crash for this to happen. Yet webmasters are happy to predict perfect conditions for the next 10+ years.

Your thoughts

Have you bought or sold websites? Have you experienced any of the above? Can you relate to any of the above?

We would love to hear from you. This article is not a rant, we are genuinely looking for answers to this delusion. We feel a lack of knowledge is the main factor for this delusion, and we are trying to do something about that by providing the largest source of quality site buying and selling information on the net.

We look forward to your thoughts.

Midascode

Browser Compatibility and Accessibility Tools

If you were creating a website for a city where the residents spoke 3 different languages, would it not make sense to make a site that used all 3 languages?

Of course it would!

So why is it that so many websites don’t cater for many of the popular web browsers?

If you are considering buying a website, why not see if browsers such as Firefox can use the site? If they can’t, then there is huge room for improvement for you.

Watchfire WebXACT: WebXACT tests the quality, accessibility and privacy of single webpages.

Wave 3.0: Wave 3.0 tests website compatibility with WCAG 1.0 and Section 508.

Browsershots: Use Browswershots to see how any website looks in various browsers like Firefox, Safari and Iceweasal.

Ready.mobi: Ready.mobi lets you test any web page to see how it will look on mobile phone browsers.

Note: These Browser Compatibility and Accessibility tools can also be used to keep an eye on your competition.

These “Financial Reports and Financial Research Tools” can be used to:

* Find out more about your competitors
* Research a niche
* Evaluate a website prior to buying it

In terms of buying websites, if you know that your competitor is financially broke, then this gives you an edge during the negotiations.

Credit eValuator Report: The Credit eValuator Report gives information on creditworthiness and payment history. Using this tool, you’ll be able to find out if your competitor is struggling or flourishing.

Yahoo! Finance: If your competitor is a publicly traded company, you can check out stock quotes and analysis on them using Yahoo! Finance.

BusinesScope: Use BusinesScope to directly compare your financials and credit with your competitors. This report is good for a year and updated quarterly.

Public Relations
If you are buying a large site, then it will be important to not only discover if they have a positive image in the industry, but also, you will want to know exactly how they got to where they are, thus allowing you to learn from their mistakes and positives.

Below are some public relations research tools and websites that will help you discover all you will need to know.

Warning: If you are buying a website, then you can skip this stage of the research process UNLESS the site you are buying is a well known brand in it’s industry.

Better Business Bureau: Search the Better Business Bureau’s database for reliability reports on your competitors. You can search by name, address, and phone. You can even check out businesses of a specified type within a certain mile radius.

ok, there you have two of the best sites to conduct your public relations research.

KnowX: Use KnowX to search lawsuit public records by defendant, plaintiff, case number, date and type of case.