Buying Digital Assets

buying digital assetsWhat does buying digital assets mean? Let’s start with defining digital assets. Here’s a link to a sophisticated definition, but for the purpose of this post, I’m going to focus on websites, which includes their content, images, logos, mailing lists, and in some cases, the associated social network accounts (Twitter, Facebook, etc.).

A friend that attended the Rhodium Weekend 2014 in Las Vegas recently gave me a copy of a book that he had received titled Digitally Wed, The Entrepreneur’s Toolkit For Buying Profitable WebsitesIt was a quick read and changed a few of my assumptions about buying websites. The book lays out the principle of “…find a good and possibly undervalued internet business, add value, extract a profit and get a return on your investment.”

The book points out that most internet businesses sell for multiples from just under 2X to just over 3X annual net profit. For example, if an internet business/website nets $40,000/year, the market value for that business will generally be from $80,000-$120,000 +, depending on the niche and other important factors. The multiples paid for successful internet businesses are often much lower than the multiples paid for “regular” businesses, say those in a brick and mortar location.

The book is informative and does help provide someone like me, with limited experience in buying digital assets, a good primer on the subject. One of the biggest myths the book debunked is that having the majority of a website’s traffic coming from organic search isn’t as important as I would have thought. The book points out that if a website you’re purchasing receives a lot of their traffic from paid sources (think Google Adwords), that traffic is more within your control than organic traffic from search engines that can be greatly impacted overnight. You also know how much it’s going to cost you to drive paid traffic to the site. Scaling the business may be easier via paid advertising as well and it doesn’t involve as much effort as link building and developing content.

I also learned that the “best” websites to purchase are typically those in which the price is above $20,000 as they’re more likely to have been established longer and to have consistently generated profits. If a website does have a profitable campaign in place, the book recommends you obtain the campaign information from the seller. More to come when time permits…

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