Top Five Website Seller Scams
You’ve seen your dream site, all the figures add up, the price looks good and the transaction is going through escrow. Nothing to worry about, right?
Take a step back and have another look. Having experienced several
hundred transactions and dealt with virtually thousands of sellers, we’ve
learnt that what looks black and white may appear a distinct grey under the
due diligence microscope. The top scams we see by website sellers are:
1. Inflated earnings: The screenshots themselves could be faked. And,
let’s be honest, sellers can’t go giving out the logins and password to
their earning accounts. They may offer the closest alternative: access via a
screen sharing software. In theory, you both install the software and you can see
what’s on his screen. He navigates and clicks based on your phone
manipulated host files that could make you think you’re on Google’s
Adsense stats page when in fact you’re not! Even if he’s given you direct
access to his affiliate account, YPN stats or Paypal login, the
earnings may not be what they seem. The figures can be inflated in a
multitude of ways but the two primary routes are to over state what’s coming
in and to understate what’s going out. In examples, revenue could be
inclusive of money made on other sites and the cost of all the advertising
required to make that revenue could have been swept under the carpet.
2. Inflated traffic: It’s often the case that buyers see a site
they believe is under-monetised and base their value of the site on how
profitable they think they can make it using their own monetising
strategies. This usually relies substantially on their assessment of the
traffic. But how reliable are those figures?
The simpleton seller may repeatedly hit the site from his own PC, or set
up a script to do that for him. Examining the traffic stats and the IPs of
the most frequent visitors blows this trick out of the server logs. But what
if there really are millions of visitors from different IPs?
Visitors can be bought. There are numerous programs that sell millions of
"visitors" for a few dollars. However, many of them send just bots or
visitors of very low quality (perhaps by loading your page as a pop-up on
some heavy traffic sites). The wary buyer satisfies himself not just of the
quantity of traffic but also the quality. Here are some neat tips and ideas on
traffic logs and getting useful information out of them.
3. Hidden time costs: Professional businesses account properly for
all time used in the managing and running of the business. If the
owner/manager puts in some hours, the cost of his labour is deducted from
the profits. Most webmasters selling sites ignore this basic accounting rule
and as a result their profit figures are over-stated.
The principle is simple: Profit is reward for capital and risk. Salary is
the reward for time spent. You cannot arrive at a profit figure unless you
first deduct the notional cost of salaries (even if those salaries haven’t
actually been paid out). It’s factors like value of seller’s time and
depreciation that are the main reasons why companies’ final accounts are
recalculated ("adjusted") for the purpose of a business sale.
Always recalculate the profit based on your careful estimation of the
level of skill and the hours you’d need to employ to replace the owners.
tools and spreadsheets may be handy.
4. Fake Page Rank: Fortunately, most buyers now know how to check
for fake Page Rank. However, what they use for their investigation are "fake
PR checking tools". They omit one of the most important checks: archive.org.
Yes, the Wayback Machine is a powerful tool when relying on the PR of a
site’s pages to decide the site’s value and, let’s face it, some of us are
influenced by Page Rank when buying sites.
How does archive.org help? It doesn’t give you PR, it doesn’t tell you
the past PR of any page. What it does show is how a site used to look in the
past. If the last cache of the site is considerably different it should ring
alarm bells. Large organisations like government bodies, quangoes,
educational institutions, companies etc., often own multiple websites.
Sometimes they forget to renew a domain registration and domainers quick on
their feet snap up these domains. The original content is promptly replaced
with some new material and it’s flogged off as a "quality site".
Risk: Buying a site based on a dropped domain invites legal action.
There’ve been numerous cases where the previous owners claimed the domain
back and … won. But that’s not the only risk.
5. Dropped domains: Dropped domains that have been quickly
re-registered by opportunistic domain vultures still show PR in the Google
toolbar. However, Google is aware that the domain was dropped and often
wipes the slate clean on both PR and backlinks – treating the site as a
completely new one. As PR updates don’t happen on a daily basis, the new
site owner may end up putting a lot of effort into his site only to find
that at the next update PR reverts to 0. Further, he usually also loses all
linkback credibility as the original links were made for the previous
content and purpose of the site.
More by this author on buying and selling businesses