The Problem With Flippa
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If you are at all involved in building, buying, or selling sites you’re bound to have heard of Flippa.
In 2010, they had almost 20K auctions and almost $21M worth of sales. In 2011 those sales grew to over 26K auctions and just over $31M in revenue.
And while they are certainly the juggernaut when it comes to online website auctions, you’ll see other bloggers mentioning alternatives and hundreds of people asking about where else to go.
Yes, you can list your websites for sale at other auctions, but you’re not likely to find a buyer.
Actually, I’ve often wondered how they ever managed to take over this niche market. Why didn’t eBay squash them like a bug? They definitely had the means and justification to do so. eBay was well known for gleefully towering over the corpses of their competitors. So…why didn’t they do the same thing in this case?
There are some serious problems with both buying and selling that have many users grumbling about their service. Don’t get me wrong…we’re fans, but we did want to point out some of the issues, join the conversation, and see what we can do to provide feedback that improves the buying and selling of websites.
Update 11/15/12: This blog post generated a lot of attention from both fans and haters alike. Many of the issues below have since been corrected or addressed in the months that followed. A short while after this post went live, we had the opportunity to interview Ophelie from Flippa. She gave us the “inside scoop” and addressed many of the criticisms or concerns laid out in this post and in the comments below. You can check out that interview here.
Poor Buyer Protection
They’ve gone to some lengths to provide more information for their buyers (e.g. Verified Google Analytics, extended due diligence information from Alexa, SEOMoz, etc.) but they need to go even further.
As with any marketplace, it’s the buyers that keep the ship afloat, not the sellers. Remove or lose the buyers and the sellers will quickly disappear, but if you were to remove some sellers from the site others would step up to take their place…it’s just the nature of the beast. Still, their revenue is setup in such a way that they are rewarded with more sellers, not buyers.
Note: Check out our tips for buyers here or our podcast episode about how not to get scammed on Flippa.
While they do have pretty extensive search options and while there are 3rd party tools that help you dig through the data like FlipFilter.com, a quick scan through their auctions will present a host of low-quality, uninteresting sites.
In our opinion, the types of sites we build should be at the lower end of the spectrum and considered “starter” sites, but you’ll find that most of the sites for sale there are extremely low-end, have no actual revenue to speak of, and are created without any thought for the end-buyer in mind.
Lacking Seller/Site Curation
While Flippa does end up banning sellers who scam people and connect or associate accounts where “shill bidding” is suspected (but not proven)…it’s still incredibly easy to sign up for another account and begin the process of scamming buyers all over again. As mentioned earlier, it’s the buyers that are critical to their long-term success and not the sellers.
They would be infinitely better for buyers if they were to chop off the bottom 50% of auctions that are currently offered for sale. The problem there, obviously, is that they might be cutting out (approximately) 25-35% of the revenue that comes from the listing/success fees that come from those auctions. Again, it seems problematic that their goals are not in-line with their buyers’.
Path To Improvement
While the problems are clear, the answers to their issues are not. Still, there are steps they could test through that would significantly improve the marketplace for their buyers and legitimate sellers:
It’s great that they have a method to provide verified analytics, but it’s the earnings claims that are often suspect. You’ll find sellers providing screenshots of Paypal sales, but who’s to say that all of those sales came from the particular site at auction?
(Tip: Often, scammers will have multiples niche sites that provide all of those sales, but will claim they are all from the site they’re selling.)
I know that as a seller, I’d be interested and willing to pay more to have my earnings showing a “verified” badge from their staff. My auction would be much more trustworthy and, ultimately, give me a better multiple.
It’s extremely difficult for buyers to keep up on all of the different tricks or scams being run by sellers.
UPDATE: In less than 24 hours of this blog post going live, they released a statement explaining how they now have the ability to verify AdSense earnings from sellers. You can check that out here. Kudos for adding this feature!
Flippa could start a sort-of “Vetted Sellers Program” where some background research is done to verify the people are who they say they are. They could then provide much more detailed information to buyers in cases that end with a dispute.
I know that as a professional seller, many would be interested in paying hundreds of dollars for this vetting process as it would give a higher level of authenticity to the buyers and increase their trust in what you have to offer.
P.S. Our Marketplace vets every single website that lists with us, even for repeat sellers.
I’m not sure how well received this point would be at an executive meeting, but I think a higher quality signal-to-noise ratio would be better for their long-term growth. Their buyers would be better served if they drastically reduced the number of auctions and sellers from their current levels. I’ve said this to people privately before, but it’s extremely frustrating having to scroll through listing after listing to get to the sites that are legitimate.
Bury sellers that are not providing valuable sites or auctions to provide a better user experience for your buyers.
Now…where do you draw the line in the sand? I’m not sure…but I know that even dropping their bottom 20% of regular sellers that provide horrible sites would provide a marked improvement.
Room For Competition?
The path to success is littered with the dead bodies of those who tried to compete. Put simply: It’s not as easy as you might think.
Tons of marketers have tried to create clones or copies to compete, but didn’t realize the heavy amount of optimization and engineering required. Engineers have tried to build a better mousetrap, but failed to realize that the cost to acquire a new buyer isn’t cheap…and Flippa has millions of dollars to do just that. So…how would you go about it?
Here are a few thoughts:
- Audience/Buyers First – Those that would be best suited to compete would have a pre-established list of potential buyers. Established forums come to mind, but well established brokers with large buyer lists would have a shot here too.
- Niche It Down! – Flippa is so far ahead in the buying/selling website business that it would be insane to compete directly at first. With their millions in investment and capital, they could squash you like a bug. Still…you could do to them what they did to eBay, which is niche down even further and serve that particular niche better by becoming THE best resource for buying Amazon sites, AdSense sites, etc.If you’re laser focused on that particular niche, you’ll have a better chance to serve that specific audience better than they can at the moment which would give you a shot.
- Be Disruptive – Change the model in such a way that they can’t (or couldn’t afford to) compete. As you know, we like Free but I don’t think that would work here. Charging sellers listing fees keeps the really bad sellers out.You’d have to find a different slant or model that Flippa simply couldn’t adopt.
We’ve been asked to create our own Marketplace targeting AdSense sites specifically. We did just that and have managed to successfully sell over 95% of all sites that have gone through us.
While there are some significant issues and problems, they remain the best game in town and rightfully so. They’ve done an excellent job of attracting buyers and sellers and provide a much better alternative to buying/selling sites than eBay was able to provide. Even with their issues they are not so far off the mark and could continue to evolve.
I don’t think there’s enough value missing that a competitor could provide that couldn’t easily be adopted by their team.
Still…if they find themselves too engrained in their current way of doing business or not nimble enough to iterate quickly they may find someone else attacking them much in the way they carved out their niche against eBay. Time will tell!
Now over to you. What do you think they could do to improve their service for buyers AND sellers? If you were invited to the board room to propose changes, what would you suggest?
Alternatively, click here and sell your site with us.
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