Website Investing Weekly 🧮 ROI

Welcome to Website Investing Weekly, bringing you up-to-date with what’s been going on in the world of website investing. If you’re not already on the list to receive these updates, sign up below. You can also leave comments at the end of the post.

🥇 The First Fund

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When someone boasts about getting a 130% return on investment in a year, then I look twice at what they're doing. It's either a scam or it has real value.

Domain Magnate is a private equity firm that has been buying, growing and selling online businesses for over 15 years. Given their extensive experience, you'd expect them to know what they're doing when it comes to investing in - and flipping - websites. That's why you might be interested in the results from their first small investment fund - DM Fund 1.

Of course, Domain Magnate is an active business investor, but this was the first fund that involved investors from outside their firm.

The group combined their cash to acquire a total of 9 websites for $457,000. During an 18 month period, these sites generated $346K in revenue and 4 of the businesses sold for a combined amount of $494K. They estimate that the 5 remaining sites have a consolidated market value of $275K.

If the fund was liquidated now, they state that the total value would be $1,050,604.

Their report is a succinct summary of the process they adopted, and what they learned along the way. In my opinion, it instills some confidence that their next fund will produce equally solid results. [JL]


♠️ Is Investing in Websites +EV?

After reading the positive results from the fund above, it got me thinking: just how profitable is website investor for skilled operating companies? I obviously turned to Twitter:

Dom from Onfolio replied:

So I thought I’d apply an expected value calculation, just like you do to work out how profitable a certain action is in poker. The EV for a $100K acquisition (just in terms of growth, putting aside ROI from yield) from a skilled operator is therefore:

(0.2 x $100K) + (0.4 x $50K) + (0.25 x $0) - (0.1 x $50K) - (0.05 x $80K) = $51K

With this split, for every $1 a smart investor / operator invests, they get $1.51 back in asset value. Website investing done well looks like it has a great positive expectation. In which case…

♿ Let’s Make It More Accessible

On a recept episode of the Josh.co podcast, Jason Shepphard mentioned my tweet about staking and said:

I always thought there should be a way to have a blockchain based shares in a portfolio and I look forward to the day when that gets fully fleshed out.

I think that’s the direction we’re going, at some point we will either see fractional shares of single domains or fractional domains of specific portfolios.

I think this needs to happen with revenue-generating websites too. There are group buys and now funds, but there is not a way you can currently invest less than $10K. Being able to invest ~$5K in a number of deals / portfolios would make this asset class available to the general public.

Until then private funds and media companies (my recent post for paying subscribers) will keep buying them up for themselves. [RP]


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🦄 SEOs with Skin in the Game

Smash Digital - a growth agency, filled to the brim with unicorn images and SEO memes. A team of SEOs with actual skin in the game, ranking their own portfolio of profitable businesses, and offering the exact same services to clients. An agency with so much link juice you’ll need a mop and bucket to clean it all up. Check. Them. Out.


🌧️ Why Does It Always Rain on Affiliates

Did you really think it would stop with Amazon? If so, then you don't understand that the big guys always write the rules to suit themselves.

Onlinetoolsexpert report that Walmart have cut many of their affiliate commission rates from 4% down to 1%.

Walmart have not released an official announcement, but it comes on top of the changes they made to their influencer affiliate programs back in April. Most recently, they halted affiliate programs with Vox Media and BuzzFeed.

BuzzFeed responded by getting ready to build its own e-commerce platform. They've teamed up with Bonsai to integrate e-commerce, assist with store management, and to convert readers into shoppers.

I'll be interested to see how many large publishers switch to owning the entire consumer journey within their content. The benefits are several, but top of the list is a sustainable income stream and the potential to earn larger revenues. This shift also enables publishers to design campaigns specifically for their audience and to track what works best for reader engagement.

In terms of insulating yourself from the influence and whims of the big guys, my advice has never changed:

  • Own your platform

  • Diversify your revenue streams

  • Form partnerships directly with product owners - and others

[JL]


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🍌 Your Friend (Until The Bend At The End)

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The ability to identify a trend is a cross between art and science. Who could have predicted some of the fascinating trends that emerged during this global pandemic? 

While "loungewear" and "puzzles" may have spiked in April, those searches have returned to something resembling normal.

Of course, product trends and trends in website data are not the same thing. If you're looking at overall trends for a website, then Dom Wells gives one firm piece of advice in his latest article:

The trend is your friend.

Dom focuses on a very narrow definition of the word 'trend' when evaluating a website purchase. The trick is to identify a site that is just starting to increase its monthly revenues and then to gauge the likelihood of a continuation of that trend. An upward trend over several months will result in a huge increase in the value of that asset. What's more, this is achieved with very little work on your part.

Of course, these sites aren't easy to find. Still, sellers often leave money on the table because they can't identify where the quick wins are on their site. Often you'll see very rapid gains in revenue simply by posting better content, adding alternate monetization methods or doing private deals for affiliate commissions. Ultimately, this also gives a substantial boost to the website's value.

With any trend, it's always hard to tell whether it's reached a peak and for how long it might continue. There is no easy answer to that, so I'll simply quote Dom again:

The best way to grow a business after buying it is to just buy one that's already growing.

[JL]


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🏗️ Niche Website Builders

Looking for a fully hands-off approach to outsourcing your content? Niche Website Builders is a marketing agency designed for content sites. Their packages come with keyword research, formatting and uploading to Wordpress (using templates that have proven to convert) and are written by native English speakers. Check it out.


🔦 Spotlight on Patey

Richard was interviewed for the Ezoic Spotlight series and spoke about his entrepreneurial journey and investing in all things digital. [RP - yes I just wrote that in the 3rd person].


😎 Publication Sponsorship

Interested in sponsoring this publication? Every update gets emailed to over 2,400 people and averages ~ 1,500 views, with click-through rates as high as 8% on links. The web version of the posts get shared on social. Visit the sponsorship page for newsletter and podcast advertising opportunities.


That’s it for another week, hit us up in the comments at the bottom of the web version.

Cheers!

Richard Patey & Juliet Lyall