As some of you are probably already known, I am into web investing. I enjoy investing in a lucrative, long-term, web business (on a small scale) and I also love watching my web properties grow (or decline) along the course of their life cycles.
During my short years of web investing, I cannot help myself not to notice one path that many web investors do – Here’s the common steps taken by many web investors (including me):
Look for business and investment opportunities on online marketplaces and forums.
Bid some and acquire some web properties.
Analyse the web properties on regular basis, trying to figure the growth pattern out.
Weed the web assets – Grow the promising ones, sells or let the worse ones rot in your web server.
Rinse and repeat.
From my own experience, I feel that the above steps are not effective. Sure, you win some and lose some, but web investing IS about investing, NOT gambling.
Acquiring a potential site without proper pre-acquisition analysis with the hope that it will boom in the near future is probably the worst web property investing strategy of all.
I did just that in the above – I invest, invest and invest until my web server space and bandwidth are nearing the limit. I then have two choices: “Throw away” some non-performing web investments or increase my web server capacity, which means additional cost on my side.
The result: Thousands of dollar has lost during the trial-and-error process (not mentioning the junk $1000 web property that yield nothing, nada, zip, zero in return.)
Many web investors do the former, and it’s the more logical step to take. Unfortunately, not many web investors are investing smart enough to keep their money working hard(er) for them.
Just like any types of investment vehicles, a proper knowledge on what you are invested in is a prerequisite. Otherwise, you end up gambling, instead of investing. That’s why many investors are gone bankrupt – Instead of equipping themselves with the right knowledge, they blindly trust their hard-earned money to “experts” and “gurus” (remember the Bernie Madoff’s Ponzi Scheme?)
In web investing, the rule of thumbs is similar. Consider this example case study:
Website “XYZ” is listed on an online marketplace with $500 starting bid and $2000 BIN (buy now price tag.) It is making a net of $400 a month. The website has a lot of back links, good Google PageRank, and receives lots of traffic and mentioned in some authority publications (such as Lifehack or Mashable.) A novice web investor with cash on hands see this as a great opportunity – 5 months ROI of a promising site seems like a perfect investment!
Not quite. Here’s why.
How to invest your money better in websites
There are more rigorous analysis needed before investing in websites – Either the price tag is in the hundreds or in the thousands of dollar. You need to analyse the website and question the owner with the following probing questions:
What is the REAL reason why the owner is selling? The listed reasons in the marketplace listing is only the tip of the iceberg, and some even don’t state any reasons why they are for sale.
Has the website time-tested and endure rapid changes in the Internet? I tend to stay away from great potential sites as I don’t have the “touch” and “equipment” to lower the risks – I feel up and coming websites are just like IPO (and they remind me of the online business bubble burst almost a decade ago.)
Have you analyse the niche, traffic and revenue trends? Will it be a short trend or a long one? I once invested in bidding directories (You COULDN’T lose money with them) – They were hot about 2 years ago, but the niche enters an ice age today.
How much work involve in, at least, maintaining the current income level? $400 seems nice, but only if it requires you minimal management time. Spending hours daily to maintain that income level is not really fascinate me.
What type of revenue is the website making?Many websites are making money through advertising opportunities – Banner ads, text link ads, inline text link ads and reviews. While ads sales are lucrative, not all websites have the ability to sustain stable income from ads sales throughout the time. You need to mix and match with other type of ads, namely CPM (cost per thousand impression), CPC (cost per click) and CPA (cost per action) ads. A better, more sustainable income generation is through products and services sales that come in many forms, such as ebook sales, membership sales, widget sales, etc.
I conclude by asking this question to you: Do you invest in a website because you like the potential or the income? Your answer will determine the analysis needed to lower risks related to the web investments. Just make sure you do your homework.