Value Added Ep.20 – Investing and Flipping Digital Assets for Profit

Buy low, sell high. 

If you’re a seasoned SEO, many opportunities exist in the affiliate marketing space for you to:

• Buy an underperforming website
• Optimize it so that you increase traffic and profitability
• Turn around and sell (flip) it — in a relatively short period of time. Often a year or less.

Jonathan and Jarod have been doing this for years, and in this week’s episode of the Value Added podcast, they’ll be sharing some tips and some lessons they’ve learned in the affiliate game.

So, with Jonathan’s disclaimer that nothing contained in this episode should be construed as professional financial or legal advice, just the wisdom of “two dumbasses on a podcast,” here are your…

KEY TAKEAWAYS

• Jarod initially began buying affiliate sites not with the intention of flipping them for a profit, but for testing purposes. He wanted to determine the impact of various SEO tactics on real-world websites, without jeopardizing the health of his client’s properties.
  
  Some of the tests he ran to assess the SEO benefits include:
  • Publishing a high volume of content without sending any links back
  • After a period of time, sending two “insanely powerful” links
  • The impact of doing nothing — just leaving the site alone for an extended period of time.

As Jarod says, the tactic of simply not touching the website is going to be a tough sell to any client.

• Jonathan has always approached buying affiliate sites from the angle of purchasing an underperforming website with potential and scaling it up into an authority site.

“Let’s say I buy a site for $10k and grow it to a point where it’s making $5,000 a month — then it becomes a really valuable asset.

If I build it the right way, then it mitigates the risk of an algorithm update dropping out of the sky.

The process of taking what is basically a shitty site and then growing it into a behemoth is what really interests me.” Jonathan Kiekbusch

• Jarod prefers the investment strategy of flipping sites for profit after a short period, in contrast to Jonathan, who is attracted to relatively reliable recurring revenue a successful affiliate website can provide.
• When it comes to buying or selling a site from FE International, Empire Flippers, Flippa, or any other platform, it’s crucial to note that each broker has its own methodology for valuing a website. 
• Beware online business “valuation calculators” or “average multiples.” Valuing an online business is a nuanced process, and both these methods are likely to be highly misleading.
• With that caveat, both Jonathan and Jarod currently see the acquisition of affiliate and content-based websites as a “buyer’s market.” Many sites are “massively undervalued” despite their growth potential.

“The reality is that 100% of the websites that I see for sale, especially in the Facebook groups, are totally undermarketed. That’s why they’re being undervalued — the majority of these websites are being marketed through one channel and one channel only.” Jonathan Kiekbusch

• Never pay the asking price — this is true whether you’re buying a house or an affiliate website.
• Jonathan predicts that affiliate websites and other online businesses will be valued higher in future, because they will shift from being viewed as flippable assets to companies worth operating and investing significant resources into.

“The moment we stop treating a website as just a basic WordPress affiliate site with some shitty content on it, that gets no love, no beautiful design, no beautiful CRO work on it vs. the moment that we turn it into a business, the value will go up. I’m just convinced of it.”

But a lot of people who get into affiliate marketing aren’t interested in that — because the reality is once you turn these websites into real businesses, they become real work.” Jonathan Kiekbusch

• A practical tip from Jarod when acquiring an affiliate site: 
• A short checklist from Jarod of what he does when he acquires an affiliate site
  • Don’t forget to change the affiliate links immediately! You’re missing out on earnings that are rightfully yours if you don’t make the affiliate links payable to you right away.
  • Ensure the site and the content on the site are fully compliant with the T&C’s of your affiliate partners, e.g., Amazon.
  • Check that all products mentioned in the site’s content have working affiliate links.
  • Focus on content strategy and publishing first — not backlinks.
  • After a few months, consider sending two or three strong backlinks to the site.
• Both Jonathan and Jarod are more likely to hang on to sites that generate predictable and reliable revenue month after month.
• Jonathan often sees the best path to higher profitability to be finding better affiliate partners or cutting better deals with existing ones. 
• Jarod dedicates his resources to individual websites based on how much money they’re already making. For example, if a site is generating $200 a month in affiliate commissions each month, it’s not worth it to him to invest in something like CRO, because even if his conversion rate goes up by 30%, he’s only making an extra $60. It’s not worth the additional investment and effort required to realize a relatively meager cash reward in his eyes.

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