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Monthly Archives: June 2017

Freedom Flipping Podcast Ep 11 – Kevin Graham from Bulk Buy Hosting

On this episode I talk with Kevin Graham from Bulk Buy Hosting a Private Blog Network (PBN) hosting service.

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We discuss:

  • How Kevin started in internet marketing putting banner advertising on sites – when was 13!
  • Also had sites in the coupon niche doing well from adsense.
  • Then moved to building amazon affiliate sites in the same vein as the authority sites from Niche Site Project 2 and had a decent exit on empire flippers selling a site for $190k 15 months after launching. Around 50 indexed pages with 20 money pages targeting best and review keywords plus around twice as many informative pages bolstering out the site, powered by around 25-30 PBN links.
  • Kevin’s strategy is to buy aged expired domains and rebuild the site with 3-5 initial articles (brand new content rather than scraping the previous content that was there which could get a copyright slap) and then adding additional articles that link to money sites.
  • Kevin sources expiring domains from Godaddy Auctions spending between $50-$100 a domain plus $25 of content to go on initially to rebuild plus $10 to a VA to take the content and actually rebuild the wordpress site
  • There are arguments that it’s cheaper to build links in a white hat way through blogger outreach however these don’t take into account the fact that PBN sites are linking to multiple money sites, up to 10 from any one PBN site.
  • Post site sales they continue to own the PBNs and they lease the links to the new buyer as a monthly rental
  • How PBNs in theory have lower multiples due to the higher risk nature of PBNs however the ongoing maintenance cost of the PBNs is factored into the price anyway as is in the P&L.
  • There is an argument that any time you’re building a backlink, if you had some influence on it or control over that sits outside the google webmaster guidelines. However to get a link to a brand new website is incredibly hard vs when more established.
  • Just like your PBNs, you want each money site on it’s own hosting and IP
  • Building up a side project site that is easier to get links to is a way to send link equity back to your money site – Kevin has built out free services such as a randon plugin picker as well as botchecker.org which blocks outbound links from PBNs (checks the user agents to see if is Moz or ahrefs and then returns a 403 error if so to prevent it from scraping the content and link profile – explained in this blog post. As it blocks the outbound links to money sites it stops people from reverse engineering the backlink profile.
  • Kevin’s process of vetting or spam checking a domain is to start look at screenshots.com to see if the site used to be part of a PBN. If it passes that he will look at wayback machine and then look at the historical backlink profile on majestic.
  • After the $190k exit, Kevin had another exit last year of $145k (guest post on empire explaining how) and is selling a 3rd site on empire soon and is now building 2 to 3 sites a month (!) and trying to sell one a year in the $150k-$200k range as there is a large buyer pool there.
  • Kevin has about 50 sites in his portfolio at the moment. For new sites Kevin puts content up, builds a few links and if it produces income he doubles down and builds more links and content.
  • Kevin sells the winners – sites that consistently make between $5k and $10k/m and have a bit of age, i.e. 18 to 24 months old and have further room and expansion for the new buyer. Which is fine as when have portfolio of 40-50 sites you don’t have the time to focus building out further.
  • Kevin is going to continue riding this online asset building train as long as the long and mid tail keywords remain profitable, happy to be working 5-6 hours a day buying new PBN domains at the auctions along with finishing touches of new sites passed from his VA.
  • Talk about benefits of static html sites vs wordpress (which he uses for all his sites) however a properly tuned and cached wordpress install you should be able to achieve load times of under one second. Case closed for me!
  • With wordpress themes Kevin uses a small number of theme developers that his VA knows how to tweak
  • Kevin subscribes to the tin foil hat SEO view of not using Google products on his sites such as Analytics or Gmail, instead choosing clicky.com which is a lot easier to track outbound clicks to amazon than GA and report it as a goal.
  • Main monetization of all of Kevin’s sites is Amazon associates – has tried also putting adsense on but it competes for clicks with AMZN. Has also experiences with other products and shopping carts (i.e. clickbank) that pay higher commissions, but the trust factor and conversions that Amazon generates (due to having all the credit cards on file and amazon prime delivery options) blows this away.
  • Bulk Buy Hosting was built on an internal need of managing a high number of PBN sites for themselves and then offered it publicly. At the moment Kevin is looking at building other software solutions that solves other internal problems to his target market. New tool coming through is to manage multiple domain registrars (such as GoDaddy) as well as the hosting.
  • Catch Kevin on twitter

Freedom Flipping Podcast Ep 10 – Coran Woodmass from The FBA Broker

On this episode I talk with Coran Woodmass from The FBA Broker. We used zoom.us to record rather than my Mac skype recorder as for some reason we couldn’t add each other – the quality of this audio isn’t as great but was cool to try.

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We discuss:

  • How and why Amazon listings and sales has exploded
  • Some owners are selling themselves but it’s far better to protect yourself through a broker and to access their buyer pool unless you are super experienced
  • The FBA Broker has a minimum requirement of $100k-200k SDE / cashflow (annual net profit) and the site can’t be selling a super generic product, it needs to be defensible to competitors.
  • If an FBA site does offer super generic products then you have to be super aggressive in launching new products.
  • FBA sites will need to offer the buyer direction for where to go next with product development
  • For them to list a business it needs to be growing steadily and ideally have multiple channels of income, not just FBA
  • Multiple sources of traffic and multiple sources of income is the holy grail
  • Private label as a business doesn’t necessarily mean super generic products, it can be generic (off Alibaba or Ali Express) or unique. Look for patents.
  • Multiples for super generic products can be as low as 2x. Average is 3.5x.
  • Coran gives advice if you are starting from scratch in terms of the FBA business model as an inventory based business which requires a team
  • Long term you will need something that is patented and proprietary and a big enough niche that you can build a website around that you can drive traffic from to Amazon – if more than 30% of your income is outside Amazon a buyer will really value that
  • Big opportunity of buying separate FBA businesses, consolidating and selling for a much higher multiple
  • Discuss whether it’s better to start with FBA or a content site, depends on your capital (as will need to reinvest everything at the start) and skill set.
  • If you have less than $20k possibly better to start with an affiliate site, see what you’re selling on Amazon and then look to create your own product later.
  • Talk about the various AMZ SaaS options available
  • Coran’s wife Leanne is experienced in Amazon selling and project management and is now working full-time on the business too
  • FBA businesses are most interesting for private equity and executive buyers looking to own and even get involved in the business as it’s a physical business they can actually hold.
  • There are also two ways to make a return on capital, 1) from buying the business cashflow and 2) the ongoing returns from inventory in getting economies of scale where you can buy more inventory to get a better margin
  • Most private investors would prefer a totally passive option in terms of innovative online asset funds that is a growing market. However a lot are happy with some time investment in the product business, being educated by the seller.
  • Discuss seller financing – FBA market as a whole has a high list price. In the $100k-$1MM, 70=80% of private investors looking to use their own cash (plus some smaller private equity firms looking at buying multiple businesses $500-$1MM). $1MM – $5MM is a black hole in terms of capital; rare for private investor to have over $1MM liquid! Therefore typically a third down in cash, a third in debt like an SBA loan or lines of credit and final third is some seller financing.
  • Due to nature of FBA a lot of sellers do not have any assistance running the business other than contractors, i.e. the day to day is just the seller and can be run on 5-10 hours a week, as Amazon deals with the fulfillment, logistics and first layer of customer service. However new buyers do lean towards businesses that have teams and if the business is 7 figures+ then it is essential to have a team as the buyer does not want to be involved.
  • Most repetitive parts of FBA are customer service and dealing with suppliers.
  • The FBA Broker’s minimum listing is now around $200k. Other factors that come into play are products (if just have 1 product the multiple would definitely be lower and buyers would be nervous, especially if the traffic was only internal with Amazon, 5 products plus is much better) and age of business (most of these ecommerce businesses that include FBA have been around 7 or more years). One product line shouldn’t make up more than 30% of the business.
  • First public sale of amazon dependent business was end of 2015 so it’s all very new.
  • It’s definitely a sellers market with the buyer pool continually growing.
  • FBA specific private funds are now starting to launch. The biggest issue on the fund side is getting competent operators on board who can rank products and who understands the ecosystem.
  • Public funds is the next possibility but track record is one of the hardest things to figure out along with how to buy and run things at scale plus the dealflow problem if you raise too much capital you can’t deploy, i.e. how deploy enough of that capital for the return to be any good on the total.
  • With these funds we will likely see part of their return on capital from liquidity events (as well as free cash flow).

Grab the FBA Business Price Guide here for the latest reports and sign up to the weekly Market Watch email>> fbabusinesspriceguide.com

Freedom Flipping Podcast Ep 9 – Jeff Hunt from Website-Investors.com

On this episode I talk with Jeff from from Website Investors.

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We discuss:

  • How Jeff got started with making money online by seeing a $500 Google News Site course and then realising it would be better just to buy one from Flippa for $3k instead and get taught by the guy selling it for hiring writers, publishing news and what stories to go after
  • When you’re buying a site, what you’re really buying is a repeatable process that you can emulate and automate
  • Jeff got his money back from the initial news site in just 2.5 months, monetized by advertising.
  • Jeff has gone on to purchase over 300 sites from 50-60 transactions, buying large groups of micro sites that were bundled, and started building sites himself as buying doesn’t become as valuable once you learn how
  • Jeff stuck with google news for a year and a half before experimenting with drop ship ecommerce before moving into lead gen sites, content sites and amazon review sites which he is into heavily right now
  • Jeff typically purchases with the idea of holding but in practise does sell a lot off and has consolidated his portfolio to a dozen or so main active sites.
  • He talks about how a lot of successful guys put all their energy into one main site and then have a few smaller symbiotic sites that feed into the main one.
  • He doesn’t advocate large portfolios unless they have a lot of synergies across sites so you can employ teams doing the same kinds of activities.
  • When looking at new sites to buy you need to leverage your own knowledge, where ugly sites can be better investments by fixing a site that has obvious problems that has traffic
  • If you buy sites from a broker you will not get a discount as they know market rates, but it can still be a great deal.
  • You can still find discounted sites on Flippa, especially if you employ someone to research for you and follow a process to filter out bad sites. People will also reach out to you with a site they are looking to sell if they see you have sold a similar site in the past. There are big advantages to private sales where the seller can get cash within hours rather than weeks. Jeff uses escrow.com and for deals less than $10k would not even use a contract, but over $10k would do the typical asset purchase agreement (APA)
  • Jeff wrote the book The Website Investor which teaches people how to value sites on sale and buy better at typical multiples (Centurica also publishes an annual report of site multiples). Jeff does a risk based valuation first in terms of how stable and predicateble a revenue and traffic source is and how old the site is.
  • You don’t need to get a sale price, even if buy at market rate and there are opportunities to leverage your skills you can still increase the asset value dramatically, i.e. better utilise a mailing list, improve conversion rates
  • Shout out to the Rhodium community where opportunities to buy sites come up
  • Jeff has also had experience of buying from a seller through a broker and then the person reaches out directly with new sites available as selling a site can be laborious, so many questions to answer.
  • Jeff is currently in the trading up mode, having sold off a lot of sites, gravitating towards larger businesses that he knows he can automate and do not require a lot of direct interaction with customers.
  • There are some sites Jeff may never sale some sites that are great cashflow; reasons for selling are customer support having purchased a software company even though they have high MRR.
  • Jeff enjoys being an operator in his portfolio, as well as being an owner
  • Outside of online assets, Jeff hasn’t bought into any bricks and mortar business, just investing in mutual / passive funds. He sees the possibility of moving more into a deal maker role.
  • Talk about how online assets don’t feel real until you sell them – online assets are not as permanent and it’s almost impossible not to be at the mercy of Google, Amazon or Facebook to some extent. The risk / return paradigm is more or less a law of physics.
  • Apparently IRS in America wants you to treat online assets as real assets that depreciate over time – if it’s intellectual property it can potentially be put on a balance sheet and depreciated over 15 years. Another categorization is software that is an asset that can be depreciated over 3 years and in the US there is a provision for wordpress sites that can be expensed in the same year up to $25k.
  • Jeff has developed the Own The Web course to help people get into purchasing online businesses as well as other courses at ownoptimize.com
  • When buying sites you should check out their link profile using tools such as ahrefs or semrush and also request (restricted) access to google search console. Post sale, practically it is really hard to protect links in a contract. Ahrefs gives a history on when links are first picked up – if 80% are acquired within the last 3 months you should probably run away as likely artificially created.  If links have come on gradually over time you can have more confidence. This is covered in Jeff’s course.
  • At the end Jeff turns the interview on me and asks what extent I’m using autoresponders and funnels in the authority sites I’m building!
  • Once you become expert at something it becomes simple to you yet to others still complex. The reason experts create courses is because every time you develop expertise in an area, that’s an asset that you own and if you’re not leveraging that asset in a number of ways, we are being inefficient with how we have been blessed (through hard experience and mistakes).