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.
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.