Doubling Down On Flippa Auctions
Today’s guest post is from Mark Collier and focuses on the data and analysis of sites sold on Flippa. While some of the points aren’t necessarily ground-breaking news, I LOVE the fact that his findings here are based on hard data and reinforce some of the things we’ve thought about the value of site sales. I had some questions about the analysis and will lay them out in the comments below…we’re interested in hearing your thoughts as well! Now enough from me…over to Mark.
I’ve only ever sold one website but I do know a thing or two about data analysis.
I’ve been gathering data on Flippa auction sales for the last few months and have recently published a comprehensive analysis of this data.
I wanted to share the major findings of my study here, which focused on the influencers affecting the price of a website.
It turns out that website values are fairly predictable and the market for websites is pretty efficient.
I analyzed 52 factors I felt might impact the value of a website for 6,500+ Flippa auctions.
Using a data analysis technique known as multiple regression I created a model that would predict 68% of the variation in website prices.
This model indicates which factors are statistically significant influencers of the website price and how much influence they have.
Revenue, profit and traffic
Beyond any shadow of a doubt revenue, profit and traffic are the three most important factors influencing the sale price of a website.
If you cut costs by $1 dollar per month without impacting service (and thus increase profit) the value of the website increases by $3.50.
If you increase revenue without impacting other metrics like traffic e.g. by adjusting some sales copy each extra $1 earned per month will add approx. $2 to the sale price.
Similarly increasing sustainable traffic has a substantial impact on the value of the website.
To this end verifying your traffic by linking your Google Analytics account to Flippa will on average see a $630 increase in the website’s sale price.
Interestingly, having an unverified Google Analytics attachment has little or no bearing on the sale price.
Upgrades and Flippa Reserve Price
Buying premium upgrades is probably one of the best investments you will ever make and give you room to set a higher Flippa reserve price.
All the tested upgrades; highlighted, screenshot, bold and premium listings are significant influencers.
This makes good common sense as getting attention in a crowded market is tough.
Each of the low cost upgrades mentioned will typically increase the sale price by approx. $500.
Even assuming a large margin of error the returns to your $5-20 investment will likely be in the thousands of percent.
While there wasn’t a lot of data for premium listings, the available data suggested the $200 upgrade would add between $6,500 to $10,000 to the sale price, although I would like to see some further testing of this conclusion.
I’m not a website flipping expert but I believe that this data is exceptionally informative for website flippers and that implementing from the actionable data will lead to substantial profits.
But if you want to be able to command a higher Flippa reserve price and overall sale, the two things that are clear from this study are:
- A small number of core metrics; profit, revenue and traffic are the fundamental drivers of a website’s sale price.
- Buying upgrades is an exceptionally effective way to artificially boost a website’s sale price.
So how do you implement from this data if your buying and selling websites for a living?
When you take over a website, implement a laser-like focus on increasing revenue and profits.
Forget long-term strategies like SEO or content marketing, you’re flipping websites so you need quick, sustainable wins.
Redesigning the site, unless it’s set in the 1990’s is unlikely to be of significant short-term benefit.
Let the end-user of the site focus on these issues.
Primarily you should be focused on cutting costs and increasing revenue.
Implementing new revenue streams or more aggressive monetization strategies would be my first port of call.
Product launches, email marketing campaigns and more advertising space are all good ideas but you’ll be better at knowing what works in this regard than me.
As an aside – the model showed no preference by buyers towards any particular source of revenue, advertising, affiliate or product sales dollars were all equal in the buyers eye’s.
Become a conversion rate optimization expert – testing sales pages, advertising positioning, sales copy, etc. can lead to big wins with no increased cost.
Additionally you can apply the same techniques to every website you flip and thus have an easy win every time.
I would review every cost a website has and see if you can minimize it.
Do you need the deluxe package, is there a cheaper email marketing software available, etc.
But the big wins will be found by being audacious.
For some reason people are afraid to ask for discounts. Make it your policy to call every supplier and renegotiate the price you pay.
In launching my own new business I’ve been able to make massive savings. In fact I’ve reduced my monthly costs on the order of $5,000 just by making that call.
And, of course, buy those upgrades.