How Hiding URLs Protects Buyers, Not Just Sellers
Most who have followed our journey in recent months (or years) understand that we’re not in the business of stealing deposits from buyers, but our recent marketing campaigns have put us in front of a host of new potential buyers—many who are amazed that we hide critical details behind a deposit.
We usually hide the URL and specific details on the websites when we list a new site. To get that information, as a buyer, we require a (refundable) deposit – typically 5% of the purchase price.[callout]The biggest marketplace in the buying/selling space doesn’t do this, so why should we get away with it?[/callout] The biggest marketplace in the buying/selling space doesn’t do this, so why should we get away with it? Doesn’t this make us less trustworthy than our competitors if we’re requiring cash up-front, before you’re even able to perform any due diligence?
This post is an attempt to answer that question and explain to those new to Empire Flippers who we’re really protecting when we require deposits on sites. I’ll cover a few different points and criticisms we’ve received later to better explain how this process protects our buyers, not the sellers.
1. Hiding the URL Protects Against Dozens of Copycats and Competitors
When we were just starting out, we were completely transparent about the sites we were selling. We’d list the URL, keywords they ranked for, specific analytics and monetization proof, etc. Eventually, previous and prospective buyers started reaching out to us and asking if there was any way we could sell them sites without publicly sharing this information.
These buyers realized that by publicly sharing the URL and all the ranking/traffic details for everyone to see, we were inviting a ton of copycats to simply recreate the success of the sites by targeting the same keywords. Even worse, some of these unscrupulous builders would use negative SEO tactics to harm the new buyer and give themselves a chance to outrank the original site.
This wasn’t good. By sharing too much information publicly, we were putting our end-buyers at risk and giving them a ton of competition they wouldn’t have had. That’s when we created the marketplace and limited the more critical pieces of information to those few who were willing to pay a deposit to see that information.
“But doesn’t a (refundable) deposit still give copycats a way to go after the site?”
Yes, it does. They can simply pay the deposit, review the information we send over, and then take steps to copy the success of that site. The difference is:
A) Typically, the type of person that does this isn’t willing to put their money at risk with a deposit. While it’s refundable, they worry that others (like us) would do anything they can to keep/steal their money.
B) We have control over who’s paying the deposit and reviewing the detailed information. Buyers who are looking to copy and not purchase may only get to look at one or two sites before we cut them off.
C) We’ll usually have two to six depositors on a site before it’s purchased. Odds are, you won’t have a copycat at all or, worst case, maybe one or two that go after the niche.
2. Hiding the URL Allows the New Buyer to Protect Against Business Competitors Before Going Primetime
This usually comes up when prospective buyers say something like, “Doesn’t the fact that sites can be copied show they’re not very defensible (and not very valuable because of that?)”
The more defensible the website or business, the more valuable it is, yes. In most cases, a $200K website with multiple monetization sources, an established and well-known brand, and a great reputation in the niche is significantly more valuable than a $3K AdSense site. But that value has already been baked into the price for obvious reasons. Let’s look at this another way.
Consider the businesses we sell as fitting in somewhere along a wide-ranging spectrum. A five-year-old eCommerce business that has a uniquely-designed product sourced from China, has a well-known brand, and is years ahead of their competition is much more established and harder to replicate than a one-year-old Amazon site that gets the majority of its traffic from five to ten keywords. But many of the businesses we sell fall somewhere between those two extremes.
A two-year-old dropshipping site with a new but emerging brand and a non-exclusive arrangement with their supplier(s) can be valuable, but also vulnerable. They may be on a trajectory that will give them a defensible position and a “moat” around their castle eventually, but the new buyer may need or benefit from another one to three years of privacy before going public.
Keeping the specifics private to everyone but qualified depositors gives end-buyers the time they need to further establish and build out both the value created and the defensibility of the business through better industry relationships, established brand image, diversified traffic sources, and more.
3. We Put Our Seller Through a Rigorous Vetting Process – We Need a Sniff Test for Buyers as Well
Before listing their websites on our marketplace, our team has had a chance to dig through both the seller and the site that we’ll be listing to look for inconsistencies and to disqualify sites that don’t meet our criteria.[callout]close to 40% of sellers who have paid to be listed with us are denied or disqualified.[/callout]We use a funnel system that’s meant to disqualify the sites and sellers – close to 40% of sellers who have paid to be listed with us are denied or disqualified.
We may spend anywhere from 1-2 hours (for sites we can easily disqualify) up to 20+ hours reviewing things like:
Seller – Is he/she a real person? Do they have an established presence online? Have they been inconsistent in their claims?
Monetization – Can we independently verify the earnings via 3rd party? Are the earnings consistent with their traffic? Do they pass any of the dozens of scams or sketchy tricks we’ve seen other sellers use?
Traffic – Is the traffic verifiable via 3rd party? Does any of the traffic match that from less-than-reputable traffic brokers or sources?
We put our sellers through so much up-front (See more on our due diligence process here) that it only makes sense we require a commitment from potential buyers. Sellers are MUCH happier working with potential buyers when they know they’re serious – a deposit allows us to take questions to the seller from a much better position and usually elicits much more detailed answers from the seller.
4. Listings That are Fully Public Can Get as Much as 50% More Views and Interest
Some sellers are confused about this as well. They come to us relieved that their niche and URL are protected. I think they’re worried about copycats themselves, just in case their website doesn’t actually sell and they end up keeping the site. (Even though, to date, we’ve sold 95%+ of the websites and businesses we’ve listed on the marketplace)
When it comes to whether the listing is public or not, we don’t allow the seller to choose. While fully public listings would likely bring in a larger audience and, with it, a bunch of new potential buyers, it’s important to us that our end-buyers know the websites they’ve purchased have been protected.
Ultimately, hiding the URL is to protect YOU if you end up buying the site, not to protect the sellers.
Once we’ve determined that a listing is acceptable to be publicly listed, we take the option to the seller and allow them to make the decision whether to list the site publicly or not.
We usually advise that it is in their interest as they’re likely to get at least 50% more views on their listing, but if we feel that this would put the end buyer at risk, we keep the listing private.
5. Most of the Questions and Concerns About Deposits Come From Those Who Have Never Purchased Before and are New to Our Brand
It’s rare that any of our regular buyers or subscribers have an issue with deposits—most of these concerns come from people who have never heard of us before. The idea that we’re requiring a deposit from them before they’ve even had the opportunity to do due diligence themselves sounds awfully presumptuous on our part.
We’re not as strict with buyers, as it really just comes down to their ability and willingness to pay. Some buyers do end up asking a ton of questions about us, the seller, and the website that’s listed. We’re happy to answer any questions they have, but there is a drag on resources the deeper the questions go. To balance this out, we ask for a deposit to show that buyers are serious and coming at this with earnest.
There are two main reasons potential buyers balk at paying the deposit:
A) They don’t trust us.
B) They don’t really have the money.
If they aren’t convinced we’ll happily refund their deposit should they back out, we’ve not yet convinced them that what we’re offering is valuable to them and we probably shouldn’t do business (yet). If they don’t have the cash for this deal, it’s better we spend our efforts and resources elsewhere with potential buyers that are serious about the prospect of purchasing the site.
I haven’t verified this, but I’d be willing to bet none of our previous website buyers bought a site from us the first time they visited EF. These aren’t impulse purchases—buyers need more time figuring out who we are and what we do before plunking down significant cash to get the process started.
That may be…but once we’ve had a chance to explain how this is a move that ultimately protects them, they come around. I’m hoping this post will help explain the situation to those that have wondered about this, but never bothered reaching out to ask about why we charge deposits.
We’ve received deposits from, refunded deposits to, and sold websites to hundreds of buyers. Most of them are private, but we’ve also worked with industry experts and insiders like Ace Chapman—an experienced business hustler and guest we’ve had on our podcast recently.
If we were holding his deposit as some kind of profit scheme, that would be a pretty short-sighted strategy—and we’re in this for the long-haul.
So, do you agree that deposits benefit the end-buyers? What do you think about requiring a deposit before due diligence can be done?
Photo Credit: David Goehring – Flickr