It’s a business model that has been used for centuries: by an undervalued property, fix it up, and sell it for handsome profit. A new generation of Web entrepreneurs is applying this classic wealth creation formula to virtual property online, resulting in the increasing popularity of flipping web sites for profit.
The idea, like most business ideas, is to make a great deal of profit with very little effort. Savvy entrepreneurs are discovering that by scouring the web, they can often uncover hidden gems — undervalued or poorly managed web sites which can be converted into big-money makers.
Even though the real estate industry has been in a slump now for several years, the virtual real estate business continues to boom. High profile deals such as the sale of Wired news to Conde Nast last year for $25 million have created a “gold rush” mentality among Web entrepreneurs, eager to cash in on the craze.
But many resold or “flipped” web sites end up going for a lot less. In fact, eBay reports that the average price for an auctioned web site is just under $80 US. Still, an entrepreneur who deals in volume can make a great deal of profit off of these smaller sites, by improving their appearance, and developing a linking strategy to help the sites rank better on the major search engines.
Just as with real estate, flipping web sites is a short-term business. The idea is to buy a site, invest a minimal amount of time and money developing it, and then resell it as quickly as possible. The most popular sites for “flippers” are those that are highly targeted to a specific and usually quite narrow niche. For example, baby strollers, organic dog food, luxury bird cages, etc.
Sites that attempt to be online department stores, and have no clearly defined niche require much more time, energy and money to develop. Accordingly, these types of sites are the least popular for flippers. Ideally, entrepreneurs look for a site with great potential, which is poorly executed. In this way, it is sometimes possible to only make a few simple cosmetic changes to the site in order to resell it at a higher price.
The field of flipping virtual real estate has become so popular that many entrepreneurs now make a full-time living from buying and selling sites. According to the New York Times, the number of web sites auctioned off on eBay over the last quarter doubled.
And just as in the housing market, there are also potential pitfalls to flipping web sites. Some unscrupulous sellers have been known to use software programs to artificially inflate the number of visitors to their site, giving the appearance that a site is more popular than it is in order to increase the selling price. It just goes to show; even in the virtual world real estate can be a tough business.
