Tools for Website Buyers Due Diligence

I would like to believe that every person selling in the SitePoint Marketplace is honest and transparent with their listings. But as with all types of investments, it’s wise to avoid making assumptions about the legitimacy of claims — so you don’t get caught out.

You’ll find that on some occasions the information will be exactly as the seller details. However, knowing you’ve personally verified the information yourself puts you in a strong position to make an offer on a web site with confidence.

On most occasions when you’re considering the acquisition of a web property — whether it’s an entire web site or just a domain — it might be useful to know some details of its history. The two main reasons for needing to know what’s gone on in the past are to confirm what the seller is saying and to know about any unscrupulous dealings.

It would be great to be able to take it for granted that all the participants in SitePoint’s Marketplace are honest, that every web site seller is representing the property very clearly, and all relevant information is transparent. But, in reality, it’s dangerous to assume all this. Even with an honest seller, there might be factors that have been long forgotten, were more important to you than the seller, or have simply been overlooked while hastily writing up an auction listing description. I have even run into situations where a second or third owner of a site was unaware of problematic events that transpired prior to them owning the property.

Trust, but Verify

So, how can you find out what even the owner may be oblivious to? Or, what the owner may be hiding from you? Sometimes you’re unable to, but with some useful tools you can learn quite a bit about where a property has been.

The Internet Archive (archive.org), also known as The Wayback Machine, gives you an easily accessible overview of the long-range history of a web site. What’s truly great about the Internet Archive is that it keeps in its database a copy of each web page it accessed at a specific point in time. If it’s new to you, take a look at what it has for SitePoint. As you can see, the first instance of SitePoint in the Archive is from May 10, 2000 (bonus points to you if you know what SitePoint was called before then!). For the true beauty of the Internet Archive, you click into those dated links. There’s what SitePoint looked like more than eight years ago — quaint, huh? And, to take it a step further, you can click around and see what the internal pages looked like too. Sometimes you’ll need to cut and paste the internal urls to access them via the Archive, and some webmasters block the Archive in their robots.txt file.

The Google Cache is similar to the Internet Archive, but it’s a bit more difficult to browse; also, some sites you’ll only find in the Archive, while others, only in the Google Cache. I use my Google Toolbar to access the Cache, and one of the first things I address when I’m examining a site is what’s in the Cache for the index page. If that matches what I see when I access the page directly, I then check the date it was cached; this gives you an indication of how important Google thinks the web site is — more recently cached being good. In addition to using the Google Toolbar, the Google Cache can be accessed by clicking the “Cached” link that appears below a search result. You can also have a look at the text-only version here too where occasionally there’ll be a red flag.

The third tool I’d like to introduce you to is Domain Tools, which finds historical information about the ownership of a domain. At the heart of its database is an archive called Whois. Every time a domain name has a change in details, it creates a new record in the database. While some changes are more mundane, such as telephone numbers, others can be more revealing. You might uncover the previous owner of a domain and be able to trace how the current owner came to be the owner. The ownership may be questionable if the domain changed hands under sketchy circumstances. Domain Tools also enables you to discover what other domains a person owns.

This is far from being an exhaustive list of important tools, but these are the three I use the most. Most of the time you’ll end up just confirming what you believed you’d find in the first place, but it’s important to validate information. You may also run into situations where these tools will turn up inconsistent data, if at all, and in those cases you’ll be wondering what the seller’s trying to hide. The more information you have on a prospective acquisition, the better position you’ll be in to make a sound offer. And, the last great point I’ll make about these tools is you can do this level of research before you’ve even stated an interest to the seller.

I originally wrote this for the SitePoint Market Watch Newsletter.

What do Michael Stipe and Swiper the Fox have in common?

Can you see the resemblance?

Why I recommend you use an escrow service when buying or selling a website

How much can you trust an individual you’ve never seen in person and spoken to only once or twice, and who might live on the other side of the world?

It’s a decision we all need to make when buying and selling web sites. Places like the SitePoint Marketplace are wonderful at bringing buyers and sellers together, but a nasty by-product is that they may also attract small numbers of criminals looking to profit from other people’s ignorance.

Luckily, services exist to help buyers and sellers protect themselves, and while not perfect, go a long way to keep the fraudsters at bay.

Whether you’re a buyer or a seller, it’s important that you’re aware of the options available to you.

You may have seen me on a number of occasions advising web site buyers to use an escrow service for the monetary part of the transaction. Your threshold for requiring escrow services should be at a financial level where it would be painful if the deal turned out to be a fraud. For me, it’s $1,000.

The two services that I’ll discuss because I’m most familiar with, are Escrow.com and Sedo.com. There are other services that are very good and are mentioned regularly in our forum, but these are the two I rely on for my transactions.

Escrow.com is the service I started with and have used more than any other. One of the things I like about Escrow is that it’s more automated than Sedo, and there’s less probability of a transaction stalling because of the service. Of course, that may make it easier to exploit, but I do believe it gives you a high level of security.

The first thing you need to know before setting up a transaction is who’s paying the fee. Escrow.com gives you three options: seller pays, buyer pays, or an even split. Discuss this with the other party before setting up the transaction. Whichever party initiates the transaction will be the one to instruct Escrow (it’s done by selecting the option in the transaction form). You’ll also need to know the email address of the other party, and if they already have an account, be sure to use the address associated with it — or you’ll have to start over.

When you’ve settled that, log in, and start a new transaction. Escrow.com gives you three options for the transaction type: motor vehicle, domain name, and general merchandise. I always select domain name for the obvious reasons, but all this guarantees is that the domain registration is updated with the buyer’s information.

Escrow.com also asks for an inspection period, which may be a short time as domain transfers are generally instant — as long as you’re transferring accounts in the same domain registration service.

Next, you need to enter the domain being transacted. If there are more than one, you just click the Add Domain Name button. And, in the same screen you enter the purchase price. In the final screen, you simply review your choices and agree to the terms.

With Sedo.com, unless the domain is already listed at Sedo, the process is less automated. And, it’s in your best interest usually not to list it in Sedo. Here’s why: the fee for a sale is 10% when the domain is listed in Sedo, otherwise it’s only 3%. This can mean hundreds or thousands of dollars with some of our higher-value transactions.

To start the transaction you need to have an account with your own username at Sedo, know the other party’s account username, and agree upon who’s paying for the fee. You’ll then need to email this information to transfers@sedo.us [3], as well as the domain name, both party’s names and emails, and the price.

Allow one business day for the transaction to be set up. Usually, if you contact them early during regular business hours, they may have the account set up by the end of that day. But if it’s late on Friday, you’ll probably have to wait until Monday morning. It’s a manual process.

The one advantage Sedo has over Escrow is that they’re directly involved in the domain transfer. That is, they’ll request the seller to transfer the domain to them, which they then pass on to the buyer. Escrow.com only verifies that the registration information has changed. This alone may be enough to cause you to switch from Escrow to Sedo.

Next, the service will instruct you how to submit the money. If it’s a significant amount, chances are you’ll bedoing a bank wire, which you’ll need to arrange directly with your bank. With some smaller transactions, you may be able to send the funds to the escrow service via PayPal. Generally, though, escrow is used for larger transactions, so it’s unlikely to be an issue.

If you’re the buyer, you usually have the last call on the transaction. Hopefully everything has gone well and you can signal to the escrow service that you’re satisfied, and they’ll release the funds to the seller. If there’s a hitch — whether you’re the buyer or seller — you should immediately contact the escrow service and have them intervene in the transaction.

I originally wrote this for the SitePoint Market Watch Newsletter.

Need Help Buying a Website?

If you’re buying a website at one of the online marketplaces, such as Flippa.com, you might find the following information useful.

The gavel has fallen, you’re the highest bidder … so where do you go from here? As the heady flush of winning fades, finalizing your first deal can be a confusing process and one with plenty of stumbling blocks for the unwary. Even for the experienced buyer, there are often new twists and turns that we don’t discover until we’re all but ready to ink the deal. Here are a few tips and pointers to help you along your way.

First, you want to make sure that your due diligence is completed and accurate. Ideally, you should have accomplished this prior to having placed a bid, but in the excitement of the auction this isn’t always possible. Have you verified earnings and traffic stats? Will the seller agree to use an escrow service? Have you researched whether there are any intellectual property concerns with the content, products, or domain name associated with the site you’re buying? If you have not ascertained them already, these are points you’ll want to cover immediately.

Shortly after the auction ends, you should hear from the seller. He or she will likely ask about arrangements for the money to change hands. I am a big proponent of escrow services. For buying the small to medium web sites we deal with in SitePoint’s Marketplace, there are three services I recommend, Escrow.com, Sedo.com, and Moniker.com. I prefer them in the order in which I’ve listed them here, but you should check them all out and determine which suits you best. I’ve saved myself from a scammer by the mere mention of using escrow on more than one occasion in the past. Scammers hate escrow. It’s not foolproof, but it will at least ensure that you receive ownership of the domain name before the seller receives the cash.

The next part of the process will be taking possession of the domain. You can find out where the domain is registered by doing a quick whois search on the domain. I use DomainTools.com for my whois searches, but there are hundreds of other sites that provide this service. It’s easiest if you have an account at the same registrar where the domain is currently registered. Transferring ownership from one registrar to another is a slow process, and quirky enough for a high percentage of attempted transfers not to finish it off on the first try. Almost all registrars, however, make it very simple for customers to send a domain into another customer’s account. Once you have control of the domain, and it resides in your own account at the registrar, you can proceed to transfer it out to the registrar of your choice. The only caveat here is to make sure the registrar where the domain is currently held is a mainstream registrar.

Moving the site itself comes next. This stage can vary from a dead simple undertaking to a massive one. Some of the web sites I buy are accompanied by multi-gigabit databases. Those are never fun to move. And they’re especially not fun when you’re dealing with a membership that is unhappy about the web site changing hands in the first place. Sometimes it helps if you can arrange to have the seller help you with the move; they may let you host on their server for a temporary period while you become accustomed to the functioning of the site, or simply take over their server along with the web site.

While it’s impossible to anticipate every situation, taking the time before placing your bid to make a plan of what to do if you win the site will help you determine whether the deal is a good fit for you. Be sure to get your questions in up front, and quickly–while you’re asking questions, more experienced buyers are putting in their bids!

I originally wrote this for the SitePoint Market Watch Newsletter.

Building Your Online Portfolio

Building your online portfolio

After several years of buying and selling websites, I came to the conclusion that I needed some sort of sanity check in my portfolio of websites. Far too often I had purchased websites because I got a great deal, and I knew I could resell the site for more. A lot of them I ended up keeping for various reasons, but what I ended up with was a helter-skelter portfolio. I was all over the place, and there were far too few synergies among my portfolio. I’ve been working on fixing it for well over a year.

Five years ago, in 2003, it didn’t matter so much whether you had a focused portfolio. Especially so where organic search optimization was concerned. Interlinking your websites, however unrelated, worked. All you needed was some strong PageRank sites, and you could get pretty much anything off the ground if you planned it out well. It doesn’t work so well anymore.

For most people, who are going to buy one website and make that their sole focus, this won’t matter much. However, if you’re considering buying that second site, third site, and so on, then I’m here to help you keep from making the same mistakes I did. Focus! Focus! Focus!

There are two main ways that you can focus your portfolio. First, you can focus your portfolio by platform. For example, I enjoy working with forums. I know guys who do blogs, and that’s it. A nice portfolio of ecommerce websites could be gold. A portfolio made up of five page content sites built on flat html files could be very easy to manage, if not the most profitable type of sites out there.

Alternatively, you could focus yourself into a specific market niche. We’ll say for example, you’re nuts about slamball. You’re a slamball fanatic. So, your first site is a slamball forum. Your second is an ecommerce site selling slamballs and related products. Then, you’re doing a blog about slamball. Maybe you add a couple of “how-to” type sites with basic instructions and tips. Get the idea?

The benefits you’re going to be able to reap when you follow a well thought out plan are that you’re going to be able to outperform the competition. You’re going to be able to move more quickly than the competition when a site comes up for sale, because you know better what the site is worth and how to take it over and run it successfully. You may even find yourself taking sites before they even come up for public sale.

It does seriously limit the range of sites that you’re going to be buying to keep in your portfolio. For guys like me, who are addicted to the thrill of the deal, there are other outlets that will keep you active in the marketplace. You can always buy sites that are specifically intended to be flips. And, one thing I’ve personally been involved with is helping other people buy websites (what better than to be able to get the thrill of the deal without spending my own money).

In the end, I hope to have a well focused portfolio that make sense and has huge opportunities for synergies across the portfolio. If you’re starting new, do yourself a favor by plotting it out now before you end up with a mish-mash of unrelated sites.

I originally wrote this for the SitePoint Market Watch Newsletter.

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