Buying Websites Due Diligence Step 2: Researching History of a Website

due diligenceIn Step 1 of the buyer due diligence series, I talked about checking the ownership of a website. If everything checks out, then it’s time to proceed to step 2 of the process: researching the history of a website. In this article you’ll learn what aspects of a website’s history you want to verify and what tools are needed to verify them.

How Old Is The Domain?

The age of a domain, or the length of time the domain has been registered, is important. Many Internet Marketers believe the search engines favor websites that have been around longer. Checking the rankings of websites for keywords in any niche seems to support that. The logic makes sense – if a website has been around longer, it’s more likely to be deemed “trustworthy” by search engines so they are likely to rank established websites higher over new ones. You can verify the domain age by checking the registration date doing a basic WHOIS search using the free tool at DomainTools.

Important Note: There is a difference between domain age and website age. The domain age is simply the date the domain was registered. It may or may not have had an actual website at the date of registration. A domain can be registered and “parked” for years before an actual full-blown website is built on it so don’t assume the registration information from the WHOIS is the website age.

Have There Been Frequent Transfers?

As you look through the registration history for a domain doing a WHOIS search, check to see if there have been frequent transfers of ownership. If there has, that may raise a red flag and may need further investigation.

What Is The IP History?

Do a WHOIS search using DomainTools and note the IP address of the website. Then head over to YouGetSignal.com and enter the IP address to do a reverse IP address search. If the seller is hosting the website on a shared server, you’ll get a list of all the other websites hosted on the same server. Sometimes the other websites hosted on the server can cause problems for the website you’re looking to buy. For example, if one of the other websites is a porn or spam site, the IP address may be banned or blocked by the search engines. Because it’s a shared server where all the websites hosted on it have the same IP address, then the website you’re looking to buy may be banned or blocked as well.

Has The Website Been Banned From The Search Engines?

You won’t find this information in the WHOIS but it’s imperative you check to see if the website has had any issues with the search engines – particularly Google. Banned websites can be very difficult (if not impossible) to get indexed and ranked in the search engines. Here is how you can check to see if it has been banned:

Go to Google.com and do a search for the domain with www and without it (i.e. www.domain.com and domain.com). If the domain name appears in the results then it isn’t banned. If it doesn’t show up in the search, then there may be a problem. Next, search for “site:www.domain.com” and then “site:domain.com”. If the results read “did not match any documents” then it is safe to assume that the site is banned at Google since no pages are indexed. You only need to do this initial check on Google. If things aren’t looking good at Google, then you can assume there are likely problems with the other search engines as well.

Has The Website Been Banned From Affiliate or Ad Networks?

If you are purchasing a website with the intent of promoting products as an affiliate or having ads from a network like AdSense on the website, you should ask the seller if the website has been banned from any networks. If you’re not confident with what the seller tells you, try contacting the networks yourself to verify there are no issues.

What Is The Backlink History?

The number of backlinks to a website is referred to as “link popularity.” The more “popular” you are, the better your website will do in the rankings. While the quantity and quality of backlinks play a role, quality is the most important. The quality of backlinks is often determined by relevance and authority. You want backlinks from relevant websites and ideally authoritative, relevant websites. The best tool to use to find backlinks to a website is the Yahoo! Site Explorer tool. Using my camcorder website example mentioned earlier, you’d want to see most of the backlinks coming from other websites about camcorders or electronics. Ideally, you’d want to see as many links coming from authority sites like CNET reviews, for example.

Checking the backlink history will also give you some clues about the historical content of the website. If the camcorder site was a porn site at one point, you may find several backlinks coming from porn-related sites. Again, that would not be a good thing as the backlinks wouldn’t be relevant anymore and may hamper your rankings.

What Is The Historical Content Of The Website?

Let’s say you are looking to buy an affiliate website that promotes camcorders. During your due diligence you see the website has been around for 5 years but how do you know it has always been an affiliate website promoting camcorders? If it was a porn website at any point, this may work against you as many of the backlinks the website claims to have may be from porn-related websites – something you don’t want and something that won’t help you with your rankings. To see previous versions of a website going back to 1996, use the Wayback Machine.

If you don’t find anything using the Wayback Machine, you still may be able to get some clues as to what the history of the content was about. Do a search for the domain in the major search engines using both www and without the www. Click through the results and see how the website was mentioned. Do you get any clues as to what the past history of the content was about?

What Is The Website’s Past and Present Reputation?

It’s a good idea to know if the website has a favorable reputation or not – especially if the site sold products or services. Do a search for the domain with www and without www in the major search engines and click through to the search results. What do you dig up – good things or bad things? You can also do the same searches on Twitter, StumbleUpon, Technorati, Digg, and other social networking and bookmarking sites.

I know there is a lot to digest here, but it’s better to take these steps before you hand over your hard earned money on a website!

Buying Websites Due Diligence Step 1: Checking Ownership of a Website

due diligenceWhen you buy a website the first step of the due diligence process is doing some basic checks on the owner of the website and on the domain itself. If there are any red flags during this stage, it’s probably best you walk away from the deal. At the very least, you’ll want to address any concerns uncovered before proceeding to the next steps of the due diligence process. So let’s get started…

Checking The Ownership of a Website:

The first thing you’re going to do is a simple WHOIS search. The best WHOIS tool is the one provided by DomainTools. They provide a lot of information for free but they also have paid services where you can get indepth information on domains. A basic WHOIS search will give you the domain registration information, contact information, and much more. You can then compare that information to the information the seller provides you. They should obviously match and if they don’t, the seller should be able to explain any discrepancies.

If you have any concerns after your search that the seller may not have control of the website, there is a way to verify he does. You could have the seller upload an empty file to the root directory of the website so that you can confirm the seller has control. For example, you could have the seller upload a text with a file name you choose (say verification.txt). After the seller does that, you should be able to get to the file by typing in the file path in your web browser: http://domain.com/verification.txt.

Important Note: Once you confirm CONTROL of the website, you don’t necessarily have confirmation they have authority to sell it. A designer, developer, or some other third party may be managing a website for a client so be aware of that.

Checking the Owner Himself

You want to be sure that the person you’re buying from is legit and someone you can trust. If you’re buying from a marketplace like Flippa, you can look over their seller profile to see how often they buy and sell websites and what kind of reputation they have.

If you can get the seller’s full name, you can also do a search online to see if the seller has any accounts on Twitter, Linkedin, Facebook, etc. You may also discover comments made about the seller in forums and blogs. Even if you can’t get the full name, you can do a search online for their seller username to see if they use the same username on other marketplaces, forums, etc.

Finally, don’t forget the simple things. Is the seller using a website email address when communicating with you or a free email account like one from Gmail. Free email accounts don’t necessarily mean anything but it’s worth noting. Also, does the seller provide a phone number and if so does the number work?

Checking Registrar History and Domain Status

Other information you’ll get from a WHOIS search using DomainTools is the registrar history and the domain status. If the website has recently been transferred to another registrar, it may not be able to be transferred again for 60 days – the waiting period after domains have been transferred. You’ll also see the domain status. It will typically be “locked” which simply means the owner of the domain has to unlock it before it can be transferred to a new owner.

Trademark Ownership Considerations

You’ll want to make sure that the domain for the website doesn’t contain a trademark, and if it does, you’ll want to make sure the seller either owns the trademark or has explicit permission to use it. Not addressing this can be a very costly mistake. Example: Microsoft is a trademark term. You are looking to buy MicrosoftRules.com. The seller better be Microsoft themselves or you better make sure you have proof – as in some kind of legal documentation from Microsoft – that the seller has permission to use it in the domain.

These are the quick and easy things you should check out before proceeding to the other steps of the due diligence process.

Was Twitter The Mystery Buyer of Retweet.com for $250,000?

I ran across an interesting post over at the DomainGang.com blog about the recent sale of Retweet.com on Flippa for $250,000. The post was about the trademark ramifications of the term, “retweet.” Apparently there are two pending trademark applications for the term.

The post details these applications and while I’m sure you’d love to read about all the legal mumbo jumbo, I’ll spare you the details. What’s important is that one of the applications was filed by Twitter and the other one wasn’t. Furthermore, the fact that there are pending applications indicates the term will likely be a registered trademark so where does that leave the buyer of Retweet.com from a legal stand point?

Well accordingly to the post, it might not matter. The author “guesses” that the buyer may in fact be Twitter themselves. How does the author come to that conclusion? Given the proximity of the status update of Twitter’s trademark application (March 1, 2010) and the sale of Retweet.com the following week, Twitter could very well be the buyer.

It makes sense to believe Twitter may be the buyer for a few reasons. One, purchasing a high-traffic domain and service so closely related to their own makes good business sense. Second, paying $250,000 for a domain that is getting 12 million monthly visitors is a drop in the bucket given the valuation of Twitter. Finally, as the author of the post points out, making such a purchase adds weight to their trademark application against the other applicant – giving them the edge in obtaining the trademark.

What Say You? Do You Believe Twitter Was The Buyer?
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How To Buy Websites For Sale That Aren’t Listed Publicly

Buying websites for sale from well-known marketplaces like Flippa.com and the Digital Point forum is an obvious first step but there are other ways to buy websites for sale that nobody else even knows about. The advantage of buying sites privately is that you avoid competition from other buyers. And while that doesn’t always mean you’ll get a screaming deal, it does mean that you’ll at least get the first crack at the website.

Even if a seller offers to sell you a website privately for $10,000 and you know it’s worth every penny of that or more, you’ll at least get a chance to buy it. Contrast that experience with the scenario at Flippa. That same website listed on Flippa may sell for more than $10,000. And even if the seller lists it with a Buy It Now of $10,000 it will likely get snatched up very quickly. You’ll have to be fast on the draw to get it as there may be hundreds of buyers interested. The best way to avoid this feeding frenzy is to go where the other buyers aren’t and that is to buy websites privately.

How do you find these private opportunities? As my father used to tell me, it’s not what you know but who you know. This means you have to network. Learning how to network among website sellers and buyers is beyond the scope of this article, but what I’m going to show you is a fast and easy way to uncover websites that may be for sale privately.

The first thing you’re going to do is browse through the websites currently for sale on Flippa.com. You are looking for quality websites being sold by reputable sellers. In other words, conduct your searches as usual. This isn’t a shotgun approach to finding private sales. We want good websites and we want to deal with professional sellers.

As you’re browsing through the listings, I want to pay close attention to the auction descriptions. You’re looking for sellers who indicate in their descriptions that they are in the process of selling some (or several) of their websites. You may also find descriptions where they are selling a specific website because they have, “too many to manage.” You’re essentially looking for some kind of indication that they may have other websites for sale for whatever reason – they are too busy with other projects, they need to raise cash NOW, they only want to focus on one website right now, etc.

You’ll usually find this information in the description where the seller explains why they are selling-but not always so be sure to read the entire description. What you’ll do then is send these sellers a private message. Do not spam these sellers! Take the time to send a personal message. Here is an example of an email I sent to a recent seller:


Hello! My name is Travis Van Slooten. I’m a regular here at Flippa as a buyer and seller of websites. I was looking at your iPhone Apps website for sale. While it doesn’t fit my portfolio of websites, I noticed you mentioned in your listing that you’ll have more websites for sale.

Can I ask you what those websites are as I may be interested? If you’d rather wait until you actually list them, I completely understand. If that’s the case, can I ask you what niches they’re in and when you’ll be listing them?

Thanks!
Travis Van Slooten


A message like that will almost always get you a reply of some kind. The seller will either tell you about other websites they own that they would consider selling to you directly or the seller will at least let you know what types of websites they’ll be listing. If that’s the case, you can add them to your Flippa seller watchlist so you know immediately when they list their websites.

You can also use this technique on websites that have sold or that have ended unsold on Flippa. You’ll just want to change your message to the sellers accordingly (i.e. you are contacting them because you found one of their websites that sold). By employing this quick and easy technique, you’ll be able to dig up your own private gems.

Do You Know Of Other Ways To Buy Website Privately?
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iPadAccessories.com Sells for $9,000 But Was It Worth It?

FlipWebsites.com is all about buying and selling websites so normally I wouldn’t write about a domain-only purchase. However, the purchase of iPadAccessories.com recently on Flippa.com can provide a lesson for website buyers. The lesson being that you should be very careful about buying websites (or building and selling websites for that matter) that have a trademark in the domain.

The domain auction on Flippa.com for iPadAccessories.com ended on February 3, 2010 with 42 bids and a sale price of $9,000. You can view the auction listing here. I’ll give the seller props for being forward-thinking and for being a very shrewd speculative domain investor. He likely snagged the domain for less than $10 and made over $8,500 on the deal after his listing fees. However, I’m not so sure the buyer did so well in the deal.

TechCrunch.com reported on January 7, 2010 that Apple had filed a complaint with the ICANN UDRP (Uniform Domain-Name Dispute-Resolution Policy) back in November 2009 against Daniel Bijan, who owned 16 domains with Apple trademarks in them. One of the domains Bijan owned was iPodAccessories.com. On January 6, 2010, Apple won the rights to all of his domains.

Do you see where I’m going with this? What are the chances that Apple will file a complaint against the “lucky” buyer who purchased iPadAcessories.com? I don’t know about you, but I’d be sick to my stomach if I lost $9,000 over a simple domain name. I hope the buyer doesn’t get nailed but I’m not holding my breath.

How does this apply to website buyers? As I wrote about in my due diligence 101 article, you need to tread very carefully when buying websites with trademarks in the domain. Unless you have explicit written consent from the trademark owner that you can use the trademark, I would avoid any website with a trademark in the domain.

At the very least, you should do some digging around the Internet to see if the owner has a track record of pursuing people who use their trademarks in domains as Apple clearly does. I would also be looking to see if there are a lot of other websites ranked in the top ten on Google, Bing, or Yahoo! with trademarks in them. If there were, I would check to see if they were owned by the trademark owner or not.

Personally, after my experience buying a website with a trademark in the domain I would never do it again with or without written permission. Owners of trademarks can change so even if you have permission today, there are no guarantees for tomorrow. Imagine spending a couple years building up an authority site on a domain with a trademark in it only to find out down the road that you can no longer do that. You could potentially lose everything overnight!

The best thing to do with trademark domains is to stay away from them no matter how tempting they are. I hope the buyer of iPadAccessories.com never hears from Apple but I won’t be surprised if he or she does. I just scratch my head and wonder why anyone would take a $9,000 gamble on such a risk in the first place.

Would You Feel Comfortable Buying This Domain?
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Due Diligence 101 for Website Buyers: Tread Carefully With Trademark Domains

A while back there was an Internet Marketer who released a very popular ebook that extolled the virtues of building websites with product names in the domain. For example, if you were promoting the Amazon Kindle his whole deal was that you would register a domain with “Amazon Kindle” in it – say AmazonKindleToday.com. There were many people who jumped on this bandwagon but I never did because I could see legal troubles a mile away. I had never bought or  built a website with a product or company name in the domain and I never would – so I thought.

How I Got Screwed Buying a Website With a Trademark In The Domain

In November 2009 I found myself buying a website with a product name in the domain. I knew the risks going in and even though my gut was telling me to walk away, I couldn’t resist. The deal was just too tempting. This particular website was promoting a very popular fitness program and ranked very well in the search engines for the product’s name. It was also generating around $400 net profit every month in auto pilot. The icing on the cake was the seller was only asking $1,200 for it. Even though I had a feeling this website was trouble and I would likely get an email from a lawyer sooner or later, my thinking was I could milk it for a few months to recoup my investment and then everything after that would be pure profit. Surely I could get away with it for at least a few months, I convinced myself.

Wouldn’t you know it one week after I sent the seller the money I got a cease and desist from the company’s lawyer! I was lucky because the lawyer was actually a pretty nice guy. After I told him that I just purchased the website and stood to lose a lot of money, he was willing to let me keep the site up for a few weeks to recoup some of my losses. How nice of him, right? Actually, it was because it allowed me to get at least $400 back from my losses.

Within a month I went from buying what was going to be an auto pilot cash machine to having nothing and losing $800 after having to surrender it due to trademark laws. I won’t bore you with the details but suffice to say, laws are in place that make it very easy for a company to take a domain from you if you are using their trademark. Of course if you have money to burn and you’re stubborn, you could put up a legal battle but is any domain at this level worth the trouble -especially when there is almost an 100% chance you’ll lose it anyway?

You’re probably thinking the seller knew this website was a legal liability and was selling it for that very reason except you would be wrong. Before I agreed to buy the website I asked him if there were any legal issues I should be concerned about and he said no. I believed him because I had known the seller for a while through a private forum we were both active members in. But as Reagan always said, trust but verify, so I asked the lawyer if he or anyone else from his company had pursued this domain before. He said no. The company was just beginning their effort to pursue people using domains with their trademark in them. I was actually one of the first persons they had busted – lucky me:)

Lessons Learned: Due Diligence 101

1. Get Permission In Writing To Use A Trademark In Your Domain
It was an expensive lesson that could have – no, should have been avoided. I knew better and my gut instinct was right all along. If you are considering buying a website with a trademark in the domain do your due diligence. Contact the company who owns the trademark and get their permission in writing that you can use their trademark in your domain before you buy anything. Some companies are actually o.k. with it but 95% are not so don’t be surprised if you get the no-go.

2. Listen To Your Gut!
Another lesson learned is you should listen to your gut. Chances are if something doesn’t feel right, it probably isn’t. There are plenty of deals out there to be had. There’s no sense wasting your time, money, and effort if you don’t feel 100% confident in the website you are buying. As another Reagan once said, Just Say No!

Do You Have Any Due Diligence Tips To Share?
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Buying Websites: How To Buy Low and Sell High

The most important aspect of buying websites for cheap and flipping them for a nice profit is building yourself a solid understanding of the business. If you don’t know anything about about website flipping then you should strongly consider investing in an ebook that explains the business in more detail. But the basics of flipping websites come down to these principles: knowing what websites to buy and where to buy them on the cheap, and then knowing how to sell them and where to sell them.

If you don’t master these principles then you’ll have a hard time buying and selling websites with success. Let’s take a look at each one…

Knowing What Websites To Buy

The professional flippers will tell you that the best way to break into this business is to take it slow. Don’t bite off more than you can chew! Set realistic goals and don’t invest a lot of money on websites when you first get started. For example, set a goal to make $100 profit per week. That may sound ridiculously low but it’s a small enough goal that most people should be able to meet. They key is to buy websites on the cheap that have potential, then adding value to them, and then selling them in the right marketplaces for a profit.

When you’re first getting started you should look to buy websites for less than $200. To find websites at this price that have profit flipping potential, you need to know what marketplaces to buy from and that’s covered in the next section. What you’ll be searching for on those marketplaces are “established websites” or “websites with revenue.” Try to avoid those websites for sale that are labeled as “turnkey websites.” These are basically website templates with pages of content that isn’t always the highest quality. By searching for established websites or websites with revenue (no matter how little), you’ll be getting a more valuable website that will be easier to flip for a profit.

Where To Buy Websites on the Cheap

Right now there are only a handful of marketplaces where you can sell and buy websites. There are really only four that are worth focusing on regardless of your experience. They are Flippa, Warriors Forum, DigitalPoint, and eBay. These are the most popular marketplaces right now but they are all very different.

Flippa.com
This is the grand daddy of all marketplaces for selling and buying websites. This is likely the market you’ll do most of your website flipping as it has the most buyers and sellers of websites. There are hundreds of websites listed for sale everyday.

Warriors Forum
The Warriors Forum is the most popular forum dedicated to Internet Marketers. There are literally thousands of members and the forum is incredibly active. Every Internet Marketer should be a member of the Warriors Forum! Not to long ago they started a section within their forum where people can buy and sell websites. While it’s a very popular section of the forum, there are usually less than 12 websites for sale listed everyday. This is a great marketplace to buy established websites on the cheap. You don’t find too many expensive websites for sale there so keep that in mind when it’s time to sell;)

DigitalPoint
This is another popular forum dedicated to all types of professionals who work online. There are Internet Marketers, designers, developers, and writers who frequent this forum. The section of the forum dedicated to buying websites and selling them has been around for a long time and is probably the second most popular marketplace behind Flippa. Unfortunately for sellers, not too many high-valued, expensive sites are sold there. The good news is it can be a great place for a buyer to find some great deals. The forum is loaded with start up sites and cheap established websites.

eBay
This used to be a decent marketplace for flippers but not so much anymore. Instead, you’ll find hundreds of “useless” turnkey websites for sale. These sites are basically templates so there is very little value in them and require a lot of work and effort to get them to a point where you can sell them. There is the occasional gem for sale that you can buy cheap and fix up so it’s still worth checking on a regular basis.

Knowing How To Sell Websites

There are entire ebooks written on this one aspect of website flipping so I won’t go into great details here. You can read my sell websites article where I highlight some of the basics. In addition to the tips in that article, you’ll also want to keep your website’s overall presentation in mind. Your buyers will be looking at the layout, design, and content of the site first and foremost. A few simple tweaks and improvements to your website’s overall appearance can go a long way in maximizing your sales price and your profits!

Where To Sell Websites

The place you’ll be concentrating your sales efforts is Flippa. It is the largest, most popular, and most active marketplace today for website flippers. Aside from selling your websites privately, this will be the main place you’ll be selling as it will generate the most profits for you.

The Buy Low and Sell High Process In a Nutshell

The idea is you buy a cheap, established website from one of the four marketplaces listed. You’re looking to spend less than $200. You then add value to the website by improving the website’s presentation, increasing traffic or revenues (or creating revenues if it’s not already doing so), and a host of other possibilities that are beyond the scope of this article. Then when it’s time to sell you list it on Flippa for a profit.

Buying websites on the cheap is the easiest part of the process. It’s the adding value part that can be the most challenging. However, if you stick with it and get a system down pat, that can become easy too.

Do You Have Additional Tips For Buying Websites?
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