Why I paid 81x Monthly Profits for an Outdated, Ugly Website
I spent $6,050 on a website a few months back (chevytrucks.org). After fees, because I paid with a credit card (be careful if you do this), the total price was $6,225. The website was generating, on a trailing 12-month average, $82 per month. I pay about $7, for hosting, so the value to me was $75 a month.
If you take that $75 a month and divide it by my clean purchase price (true value of the website since fees shouldn’t be accounted for) of $6,050, you get an 81x multiple. And if you divide it by my total purchase price of $6,225, its 83x.
Let’s put that into perspective…that’s a 6.75 year “payback period”.
Most people would shit bricks from seeing that number. Most websites sell for 12-36x monthly profits. Anytime you pay above a standard market price for a website, which I did by more than 2x in this case, you are paying what we call a growth multiple. In simplest terms, a growth multiple is when you are paying for the amount of money the business could be making instead of how much the business is actually making. If I just roped you into the concept of a growth multiple, you can read more about it here: What is a growth multiple? When you should, and when you shouldn’t pay one.
Anyways, lets get into the good stuff, here are the reasons I paid 81x for this website (in no particular order):
1. The website is old enough to order a beer at dinner…it’s 21 years old
Jokes aside, this business is almost older than I am, which has a ton of value from a search engine optimization standpoint. Since 1997, this website has been online. Google loves that and trusts that.
Websites 3 years and older make up for 60% of first-page rankings. Sites younger than that take the remaining 40%. Not terribly skewed towards older sites, but it is a factor. Additionally, Google’s thought process on this one is “this site has been around for 21 years, why wouldn’t we expect it to continue to be around for the next 10 years?”.
Aside from all of that, 21 years is simply a lot of time to build a great SEO profile. Without any SEO having been done on my part, or any of the past owners, the site has accumulated nearly 50,000 backlinks, from 1,000+ domains. End result: it ranks for 626 different keywords, and takes the top spot on google for a number of them.
2. The traffic is extremely consistent
The way a blog typically works is: if you consistently update it and create new content, the traffic goes up; if you let it sit and don’t create new content, the traffic goes down. Websites that get more attention rank better, generate return readers, and therefore generate more traffic.
There hasn’t been a new article posted on this website in about 10 years, and traffic is about as flat as I’ve ever seen with a website!
The website was consistently making $70-90/month with an average of $82. The profits are all ad-based, so traffic is the primary factor for profitability. If the site averages $82 per month, and the traffic is consistently flat, why wouldn’t it continue to make $82 per month? It will. To prove that, in the 3-full months I have owned it, it’s profited $74 per month (remember I pay $7/month for hosting). So it is $1 off of the $75/month average that I anticipated when I purchased it.
My 6.75 year payback period might scare the shit out of some people, but I’d bet this thing will be as flat 10 years from now as it is today. And as the site gets older, it gets more valuable, so I am confident that I’ll always be able to get my initial $6,050 back out of it when I want to.
3. It’s a static html website: opportunity!
If you haven’t ever looked at archive.org, it’s kinda cool. It shows you what websites used to look like, going back to the beginning of the internet. My Chevy site goes back to May of 1997 on archive.org, and from looking at all of the archives, I can tell that the design of this website hasn’t changed since 2002.
Websites have gotten so much faster and efficient since the early days of the internet. This website is coded as a static html website, which is how the first ever website was built. Today we have WordPress, Wix, etc. which are designed, coded, and optimized for speed and search engine optimization. There is a huge opportunity to upgrade this site to WordPress and boost its search engine ranking factors, such as mobile usability, and load speed – which are huge factors in 2018!
Today, the majority of search engine searches are made through smart phones and mobile devices. In July of 2018, Google started penalizing websites who did not have mobile-friendly web pages, and actually began ranking sites off of their mobile website, rather than browser website. Because this site isn’t mobile optimized, it’s capabilities are being suppressed by Google and it’s ranking more poorly than it would otherwise.
My plan is to get this site on WordPress, optimize it for mobile usability, and optimize it for search engine optimization. None of this has been done or really can be done, simply because it is a static html website. I believe I will see a good traffic and ranking boost once this site is more up-to-date, which also includes a fresh design!
4. Keywords in the domain name
I don’t know if I need to even write anything for this, Google’s own answer box tells you all you need to know:
Alright, I’ll say a few words. ChevyTrucks.org has a fantastic domain name because Chevy Trucks is exactly the keyword this site is trying to rank for.
63% of the top ranking sites in their industries have their keywords in their domain name, per SearchEngineWatch.
5. It’s under-monetized and neglected
As previously mentioned, this site hasn’t had a new piece of content in nearly 10 years. NEGLECTED. For blogs and information sites, Google pays attention to how frequently new and fresh content is being published. More new content = better rankings. It’s also essential to build a recurring reader base. If I never posted another article on here, you’d probably stop coming here, right?
So goal 1: add fresh content. I will likely outsource an article a month or so.
This website has 2 Adsense ads published on it – one in the header and one in the footer. With all the advertising options in 2018, you could say this is under-monetized. I think the main opportunity is to do affiliate offerings. Most people visiting this site are looking to fix or build their own Chevy, so it’s the perfect opportunity to load up an affiliate deal where I can link to Chevy truck parts for purchase.
Once traffic is back on an upwards trend, and fresh content is being added, I’ll reach out to business for private advertisements and guest posts. The traffic is extremely targeted and niche, so a lot of opportunities exist.
This leads me into my investment thesis:
This website can easily profit $200-300/month, with limited work needed on my end.
“So why isn’t it making $300/month now that you’ve owned it for 3-month?”
Yeah yeah, good question. This website isn’t going anywhere and it’s making the amount of money I was expecting it to, so it just naturally got pushed to the bottom of my to-do list.
I probably won’t ever buy a <$10,000 website again, because it simply isn’t valuable enough to me (I have a good day job) for me to care to really put a lot of work and effort into it.
However, I am about a weekend away from getting the site to where I want it to be from a design standpoint (moving it to WordPress). From there it’s just testing out monetization methods.
So it’s almost there! Just going to have taken 4-months to get it where it should be rather than 2-weeks.
Which leads me to another point….
I’m a long term website investor. If I were a website flipper (learn about the difference here), I would have gotten this thing fixed up in 2-weeks, gotten it on trend for $300/month within 4-weeks, and then would have tried to resell it 2-months later. I invest for the long-term and will own this website for a long time so sitting on it for a couple months really doesn’t hurt my holistic investment thesis.
Did I overpay at an 81x multiple?
Probably. But I think it has long-term potential to make a lot more than $2-300. I could see it turning into a chevy truck forum in the future or something of that nature, and generating some significant cash flow. I already own 3 other automotive websites, so there is value to me in making it a fourth. For example, I can go to Carmax, or whoever, and say “advertise with me, I get 100,000 unique visitors a month across BMW, Porsche, and Chevy related websites.”
At the end of the day, I have confidence in my $2-300 number. At $200 my multiple decreases to ~30x, and at $300 it’s 20x, which is a lot more reasonable.