One of the things I’ve always wanted to do is purchase an online business bringing in at least $1,000 per month and then try to optimize and grow it.
I figured my three main skill sets of copywriting, SEO, and content marketing would be a great fit for this type of endeavor, and then I could look to either resell it at a higher price or simply retain the monthly cashflow as income.
This is not that story.
Instead, this is the story of how I spent $60,000 to buy a 7-year-old recipe blog instead of making a similarly priced real estate investment… and then did absolutely nothing to it… much the same as I would have treated a real estate investment.
Here’s what happened.
The Real Estate Strategy & Why I Decided Against It
If you saw my tweet, which prompted this writeup, I actually misremembered the price of the real estate purchase I was considering.
After looking it back up, the property I was looking at buying was a $27,900 home with existing renters at $480 per month.
I was thinking about buying two properties like this in the short term, which would have brought in around $1,000 in monthly revenue, with the idea being that if I could purchase around 10 of these homes over the next decade at a combined $300,000, I’m bringing in around $5,000 per month in recurring revenue via pretty stable assets.
Not a bad strategy, and it’s one I’ll probably add in at some point. There are some clear “pros”:
- Real estate is mostly a risk-averse investment
- $30,000 is a pretty manageable periodic cash investment relative to alternatives
- No need for financial leverage (I know interest rates are low right now, but I’m a risk-averse, unsophisticated investor who believes we are in an unsustainable bubble)
- 60x cashflow-to-purchase multiplier is really good for real estate
But at the time, there were a lot of reasons I was hesitant to go this route:
- Large opportunity cost – nearly every other potential investment I was considering had much higher return potential. I’m only 30, and I have enough in my 401k already for a survivable retirement, so I didn’t feel pressure to go stable with a low return.
- Old building with high potential for repairs to eat away from already meager return.
- Property was located in a different state where I was less familiar with market/renters/local issues that might affect value.
- Real estate prices have gone up for the last 11 straight years – didn’t seem like an ideal time to buy.
- Other options sounded more fun
With this in mind, I was keeping my eye on those alternative options.
The Website Purchase Strategy
Beginning in July 2019, I set up an account with Empire Flippers and started browsing through their listings from time to time.
I chose Empire Flippers because I found the messaging about their extensive vetting process and hands-on transfer process to be really compelling. I knew that “I didn’t know what I didn’t know” coming into this, and so I liked the idea of having an experienced 3rd party provide that extra reassurance that the site numbers were legitimate.
Websites are typically priced via a cashflow-to-purchase multiplier. For example, if a site makes $1,000 per month and is selling for $30,000, that’s a “30x Multiple”. While you don’t pay a fee as the buyer, sites on Empire Flipper range from a 24x-55x multiple, which is significantly higher than what you’ll find on most other website brokers, but I felt like the additional security was worth the premium heading into my first purchasing experience.
I didn’t really know exactly what I was looking to find.
The main thing I had in mind was what I mentioned in the intro – a business bringing in $1,000 per month or more that I could optimize and grow through copywriting, SEO, and content marketing.
In order to want to commit to something like this, it would need to have a content and product focus I was personally interested in – something connected to my hobbies, existing businesses, or something I’ve been wanting to dive into.
As I looked through various listings over time, the factors and metrics I was looking for begin to take shape.
- Primarily organic traffic
- Rankings I thought I could keep
- Available monetization sources beyond Amazon affiliate
- Stable or growing traffic
- Stable or growing income
A lot of sites were driven by small-scale paid ads, and I wasn’t confident I’d be able to scale that. I wanted a solid organic base I could build on instead. Building that initial base is often the hardest and most time consuming part of building an organic-driven business, so I wanted to pay to skip that.
Additionally, a lot of sites’ top rankings seemed very vulnerable to competitors – the type of stuff they could easily rank for if they ever targeted it. That’s technically true for all rankings, but it’s more true in some niches than others.
I also didn’t want to buy into a business that could only be monetized through Amazon affiliate payouts, which seem to get lowered every other year these days. I was looking for something where I felt like I could build an email list and maybe create products or go in a few other directions.
Finding all these metrics on the same site was rare.
The vast majority of the sites that I viewed seemed to fall into two categories:
- Formerly successful businesses that had begun dying
- Relatively new sites designed to look good and sell quickly
A lot of businesses looked like they had been successful at one point but were on a steady decline the owner didn’t know how to turn around, like this five-year-old site which is currently selling for $23,000.
I was hesitant to tackle these types of sites. Over the years, I’ve seen talented SEOs struggle to right the ship when a site has fallen out of favor with Google for one reason or another, and I didn’t want to tackle that sort of challenge on my first go, unless I really liked everything else about the site.
In addition to the dying businesses, a lot of businesses looked like this one, which sold for $36,000.
This was a year-old tech review business ranking for terms that I felt were vulnerable to its much bigger competitors. I didn’t want to put myself in a position where I could get crushed the moment a bigger player targeted me, and furthermore, given the young age of the site, I felt like I could pretty easily replicate the site myself for a much lower price if I wanted to.
In other words, there was no moat, and I’d be paying a premium based on the trajectory rather than the real value of the site.
My price range was pretty limited at the time. I was only looking at sites under $100k, and since Empire Flippers is focused more on the larger sites north of six figures, the selection was relatively limited, and I didn’t find much in line with my goals during the months I was sporadically checking in.
Why I Purchased A Recipe Blog
In January, my saved cash had gotten to a point that I was feeling really irresponsible, even as an unsophisticated investor, but I didn’t want to just put it in stocks, because I felt like we were on a bubble (I know, I know).
This is when I was looking into real estate investments, and the aforementioned $27,900 home landed on my radar.
At that point, I had a pretty solid baseline to evaluate website purchases. $30,000 for $500 per month. Can I find a website deal that is superior enough to justify the additional risk?
So I decided to get a bit more aggressive about finding a website deal. I hopped on the phone with an Empire Flippers rep to talk about what I was looking for, and I wired them a fully refundable $10k that would allow me to look at the actual domains and Google Analytics behind the sites I was interested in… plus it would let me immediately purchase a site I wanted to pull the trigger on, rather than needing to wait for a wire to go through in order to secure the purchase.
They publish new listings every Monday, so I began reviewing all new listings under $100k every Monday.
I did this for about a month before finding the recipe blog that I’d end up purchasing.
If you had asked me a month before if I’d consider a food blog, I’d have said no. It wasn’t even remotely lined up with my interests or experience.
So why the recipe blog?
Simply put, the numbers were insane compared to everything else I’d looked at.
It was a 7 year old blog with a strong DA, backlink profile, and around 500 blog posts.
It was bringing in around 80k-100k visitors per month, half through organic and the other half through social and direct traffic.
And the revenue had been fairly stable for the last 3 years with barely any additional content being added to the site. There was a slight decline in the most recent year, but it was more of a “hey I need new content” decline rather than an “I’m dying” sort of decline.
The site was purely monetized through ad revenue, which had ranged from $1,400 to $2,400 per month in the previous year. It had gone as high as $3,800 two years prior, but either way, ad revenue is generally considered the least optimal form of monetization for a website, so it seemed like there was some opportunity there.
The official numbers from Empire Flipper were $1,700 net profit per month with a selling price of just over $60,000, giving it a multiple of 35x.
This was a bit higher than some of the other sites I’d looked at, and I had no desire to get into the food niche, but the revenue stability and the sheer traffic volume were what really attracted me to this listing.
Here’s what I was thinking.
- As-is, this site is bringing in twice the revenue of my comparable real estate purchase.
- If I can improve the SEO and hire out content, I make even more.
- If I can find a superior monetization strategy, I make even more.
- If I can find a talented food blogger to partner with, we’d have a really stable base to build on.
That last part is what I had in mind. I had two food bloggers in mind in my warm network who I thought would be a great fit. I know how long it takes to build this type of audience, so it seemed like taking over a brand with 100k monthly visitors would be a no-brainer.
So I decide to pull the trigger and purchase it.
Here’s What Actually Happened After I Purchased It
The moment I purchased the blog, I reached out to the first person I had in mind to partner with… and then the second shortly after.
As I said, I thought it would be a no-brainer win-win given how competitive the space is, how long it takes recipe brands to build their base, and how little traffic 95% of food blogs get.
What I hadn’t anticipated in both cases is that for each of these individuals, their work was essentially their art – a form of self-expression. And neither were interested in evolving their vision to incorporate the website assets from the brand I’d purchased.
I was a bit surprised, as I’m a compromising pragmatist, but to be honest, I respect the hell out of that.
I asked the seller if she had any people she thought would be interested in partnering with me, and she ended up sending some really incredible people my way, but we’ll pick up that thread in the next section.
The purchase went through in late February, and then we started the 30-day transfer and verification process. The idea here is that you get 30 days inside the site to verify that the advertised data was accurate before they release the funds to the seller.
I was really impressed with Empire Flippers during this process. They quarterbacked the transfer very well, and while I can see where some things could have gone poorly if the seller hadn’t been as friendly and cooperative, I don’t know that there is anything more Empire Flippers could really do in those types of situations.
My plan when getting the site at the beginning of March was just to wait and evaluate the data over the next 30-60 days before looking to make any changes.
During that 30 days, a global pandemic hit the country and I experienced the worst lower back injury of my life, where I literally couldn’t sit down for the entire month of April, and my productivity ground to a halt.
In May, my wife gave birth to our 2nd child, and the meaning of “I have no time” changed forever.
I’ve now had the site for 8 months, and I’ve done exactly nothing to it.
You can see the pandemic traffic spike above. The site had 150,000 sessions in April, but things eventually settled back down.
The site had 83,000 sessions in February when I purchased it and hit 86,000 this last month (October), so the stability really held out as expected.
Unfortunately, RPMs plummeted during the traffic increase as advertisers pulled back on ad spend heading into Q2.
As a result, earnings remained about the same, with the traffic spike pretty much perfectly offsetting the RPM drop.
RPMs have since started to rise as they do around this time of year, and as a result, earnings have done quite well over the last 3 months, with the site breaking $3,000 in ad revenue this last month.
Ad revenue over the 8 months I’ve owned the site has averaged out to $2,092, and with Nov & Dec tending to be the strongest performing months historically for the site, there’s a reasonable chance it will finish 2020 with a $2,400 average over the 10 months I’ll have owned it.
All in all, it’s performed significantly better than two $30k home purchases would have performed over the same time period, and I haven’t had to worry about fixing air conditioners or dealing with tenants.
My Plans For The Blog In 2021
Here’s where we pick up the partner thread.
I’ve been in talks with one of the individuals the seller sent my way since February, and we are finalizing a partnership agreement as we speak with the plan being to merge brands in January 2021.
This person has a great brand of her own that is primarily built on social media, and she runs a successful media agency that creates content for sponsored campaigns run by food companies. It’s an ideal match, both in terms of assets and skills, and we’ve been really excited about this since our first meeting.
We estimate that once we merge brands and have both the blog numbers from my end and the social presence from her end, we’ll be able to do around $10k per month in brand sponsorships. From there, we’ll be working on building her longterm brand vision through a diverse content marketing strategy and a content-based product line.
I’ll be the behind-the-scenes SEO/technical/strategy guy and she’ll be the face of the brand and content driver.
There’s some risk that we’ll lose a bit of traffic in transferring the site to her domain, but the upside is more than worth the risk. Provided we are able to complete the merger by the end of January, I think this business will cross six figures in 2021 and could be a seven-figure brand by 2023, so that’s the goal.
Is that actually what’s going to happen?
Who knows… but I’ll let you know how things are looking in about a year 😀
Great write-up. Caught the original twitter thread and it is fun to get more than a few hundred characters on the story…
For those with the skills I do believe websites can be a far superior investment than real estate. Way to go making this happen.
Thanks Miles, well said!
This is awesome, Jacob — excited to see how it goes.
I’ve casually poked around Empire Flippers and Flippa a few times, and like you said it’s mostly super new sites with no domain authority (especially on Flippa). But this makes me want to take another look.
And congrats on the second kiddo!
Thanks Kyle! And yeah, there definitely seems to be a market for people who quickly build these sites and get some initial traction. Makes me want to try it myself.
You bought a business online at a 30X multiple? That’s very, very high. I’m scared for you. My sense is recurring-revenue online models like I have with the Den are highly valued — at maybe 4X if you’re lucky.
Hope you can find a way to make this thing pay!
Oh wait… Just redid the math. I think if it’s like $1200 a MONTH, that’s more like $15K a year, so more like 2X. But on an ad model, that’s STILL likely to high! 1X – 1.5 is more typical. If you want to have a Zoom call about valuations LMK! Spent a lot of time covering M&A as a reporter…
Yeah, I almost mentioned that some companies do multiples by year, so it would be considered a 3x multiple. As I mentioned, the multiples on Empire Flippers are a good bit higher than other sites, but it’s due to the added security of their vetting and transfer processes relative to other platforms where it’s pretty much on you to not get duped in due diligence.
That said, I’d 100% love to hop on a Zoom call with you about ANY topic, valuations included 😀 I’ll shoot you an email.
That valuation number caught my eye too. 2 – 2.2x was the best I could ever get with real estate. But that was in distressed mortgages.
Great write up. This is definitely an asset class we are incorporating as we move to the UK.
Real estate doesn’t have to be expressly local, but more than 3 time zones is a bit of a headache when the toilet blows up with a crappy management company.
The crap pun was completely intended to class up the thread.
There’s still a place for post bubble real estate plays though. Hit me up.
I totally agree and still plan to make real estate a part of my strategy. Heading into this purchase, I had about 40% of my net worth in my 401k and 40% in my personal home (aka real estate), so I wanted to go with something a bit spicier. Will definitely ping you on Twitter to talk real estate opportunities!
Jacob, You’re my spirit animal. I’ve been studying real estate investment this year, and all of the local channels I’m interested in exploring are dead right now. This gives me new ideas for my 2021 plan. Thanks 😊
Perfect timing!
Great case study. Several months ago I looked very seriously at a few websites on Empire Flippers. It seems like a great investment for people with some digital marketing skills. Thanks for sharing your experience. I’ll probably follow in your footsteps one of these days.
Nice! Would love to hear about how it goes if you pull the trigger!
It seems to me that forwarding your site to hers is too risky. Has to be perfect and you need to be prepared for a downturn for 6 months or so. Great article on comparing to real estate.
I felt like I was reading an affiliate add for Empire Flippers…
That’s called a “recommendation” Mike.
This is fascinating, and SO useful, thanks for sharing Jacob!
I am in the midst of building and monetising a second site, but I may also consider buying one outright with a DA built up, after reading this.
The only thing that worries me is the risk, ie the risk that the site has penalties/bans/ bad history which may affect the SEO ranking later on.
How do you mitigate that risk?
That’s definitely a concern, but you get a chance to look through all that stuff before buying. You can use a tool like Ahrefs to check through the backlink profile, and then if you use Empire Flippers like I did, they do their own due diligence as part of a vetting process.
This is awesome, Jacob! 🚀 I almost can’t imagine investing that amount of money the first time on a property like that.
But following you for months now, I’m certain you would be able to pull it off in no time.
Thanks for sharing, man!
Thanks Alan, I 100% lost some sleep over this when I bought it, but I quite playing League of Legends in January, so the only thing left to do with my time has been make moves ¯\_(ツ)_/¯
Smart move Jacob.
Very calculating and futuristic. I can only wish you the very best in your mega plans to scale the business.
And, I’ve gotta a good feeling about the newly found partnership. Go forth and conquer!
Thanks Wambani, definitely a bit of luck mixed in with that foresight, but it’s nice when these things work out!
I had an awesome read. Thanks for putting this up.
I guess I missed the Twitter thread but I’m happy I didn’t miss the email.
It’s awesome to see you transitioning from a copywriter to more of a “business owner”.
And that’s a big potential, I’m eager to hear about how things turn out in 2021.. I’m sure it’s going to be a big brand.
Thanks Akinduyo, it’s been a fun, surprisingly fast transition!
I want to hear a podcast between Jacob and Carol about website valuation methods. I’m a student of real estate investing (think MeetKevin) and of content strategy (think Julia McCoy). I also produce weekly podcast content about business acquisitions. It would be nice to learn more about where these three worlds collide: website acquisition for passive income via organic traffic.
Great idea Jon! Haven’t met Kevin, but I will gladly do a podcast with either Carol or Julia any time, any place, for any sized audience.
I bought it for 45x, well it was worth it. I love risks and I’ll be honest the guy know what he was doing. So did I. I already made after tweaking and quite some work return on that investment.
I believe 45x evaluation is well worth it. What i saw usually 20x – 24x usually lower quality of sites sell for that multiple.
Wow, that feels high but sounds like it worked out! I was definitely seeing the same thing as you – seemed like lower quality sites on a steep decline were the only ones selling with a multiple in the twenties.
It also seems to depend on the dollar amount coming in. The really high income businesses seem to have a bit lower multiples than the lower income sites – I’m guessing due to the potential for minor fluctuations to have large income impacts.
Jacob, thanks for your write up. I am on EF as well but most sale prices are way out of my reach. Any thoughts on how you found one less than $60K?
There’s not many William. Currently only four under $60k. All the sites under $100k get bought really quickly on EF. You have to check every Monday when they add new ones, and even then, it’s only gonna be around 5 new ones each week in that price range.
Great write up, I have played in this space alot myself over many years. My advice is to be VERY careful when you ‘transfer the site to her domain’, you could loose a large amount of traffic. I may be misunderstanding what you actually mean by ‘transferring the site to her domain’ though ….
Thanks Chris, plan is to 301 redirect it under the new domain and then build from there. I’m hoping we can do it with no more than 25% traffic loss, but we’ll see.
It’s 100% a risk. I heard that I got featured in a “What not to do” from EmpireFlippers themselves this morning, and I’m guessing I wouldn’t disagree with their points.
The reality is that ad revenue is going to crash a bit after Christmas and be pretty low for about 6 months anyway, so I only stand to lose around $1,500 per month during that time.
On the upside, we’ll have a much more focused food brand with at least 50k visitors per month, a social reach of around 50k, paid products to sell, and the long-term attention of an incredibly talented food blogger who is treating this brand the same way I treat JacobMcMillen.com.
So I’m basically trading in the low-effort real estate idea presented in this article for more of a fully-faceted business.
The age-old question. Does one build a site and sell it or buy a site and either improve on it or let it ride and collect the monthly income, then sell it 6-12 months later pocketing the cash as an ROI. The latter seems riskier if you don’t know what you’re doing. I’m very interested in this type of investing, but you can’t really leverage online businesses like RE.
Yeah not many sites are as stable as this one has been. That’s the main reason I bought it, and this report is mostly just to confirm that it’s continued as expected based on the previous 3 year trajectory.
In hindsight, I think for employees operating on a fixed income, buying one or two sites like this and growing them is a superior early investment to diving straight into real estate, but for people who run their own business and have a method for scaling income a bit, sinking savings into real estate is probably the smartest play – definitely the most proven path to wealth up to this point in American history.
Great story..thanks for sharing.As a real estate investor myself I was wondering where you can find a property worth 30k that produce $500 in cash flow per month. That is a great ratio. Where exactly you find them?
Online businesses and especially the one that get traffic from organic search results are very susceptical to the Google algorithm. Real estate, although require more work and perseverance will last for years to come and you win on 2 fronts…building equity with each mortgage payments and with inflation as time goes by. I made my wealth via real estate and perhaps I am biased yet paying 3x (yearly) income is ludicrous in my book and especially in light of the fact that most businesses that are for sale are there because they either dying or losing momentum and the owners want to get out while they have some income. Congrats on your second child.. and your partnership.. and thanks for sharing this story.
It was out in Oklahoma. And yeah, all valid points. For this site, it was less about buying the income multiple and more about buying 80-100k recurring monthly visitors and gambling that I could make more money from them than ad revenue could. Remains to be seen!
Five years ago I bought my first website from Empire Flippers, after looking at over 50 listings. The next month I bought my second. Both are drop shipping websites. Now we have eight!
Your due diligence and reasoning are really insightful. Few asset classes offer the upside of websites, especially using your individual skills to improve valuations. Real estate certainly doesn’t have this leverage.
Great write up and best of luck!
Thanks for the kind words Ian! There’s so much disinformation about drop shipping out there that I’ve been hesitant to dig into that niche. Just signed up for your email list and looking forward to learning from your website investing experience.