The Business Inquirer #10 (1/4/2020)
In this week's issue I try a different format where I compare two affiliate websites in a quantitative way.
Every week I highlight interesting online businesses which are for sale adding my own commentary. This newsletter is for those who are interested in business, finance, and entrepreneurship. Subscribe below to receive it directly in your inbox.
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Hello Friends! Happy New Year!
I’m going to be trying out different formats and content as part of this newsletter going forward. My goal is to continue to make sure that this newsletter is 1) interesting for me to write, 2) insightful for you to read, and 3) unique with value add.
Today, I’m going to be taking a stab at comparing two somewhat similar businesses using a very light quantitative framework. Check it out below and let me know your feedback.
Website 1: Best Mom Products (Asking: $10k)
Description
Best Mom Products is an 11-year old review site focusing on best products for mothers. The website has largely been neglected over the last few years with most articles having a 2017 date on them. The website generates revenue from Amazon affiliate as well as from display advertising through Mediavine.
✅ What I Like:
Good niche
Easy wins. SEO audit, update article dates, switch to EZoic, etc
Aged domain with good Authority Score
Website generated > $1k/month in revenue in 2019
Display and affiliate revenue.
❌ Risks:
Mediavine account doesn’t transfer. Not guaranteed that EZoic will generate similar revenue
Neglected for 2-years. Audits may uncover additional issues with the property.
Risky to count on Amazon as the only affiliate program.
Requires investment to hire writers and author new articles.
You can view the listing on Flippa.
Website 2: Test Facts (Asking: $4.3k)
Description
Test Facts is a review website in the tech, sports, travel, fashion, motor, home, and kids niche. The website generates revenue from Amazon Associates only.
✅ What I Like:
Experienced seller with good feedback
Wide, evergreen niche for content
Turnkey business. Can be run as-is or increase revenue with a more hands-on approach.
❌ Risks:
Relying on Amazon Associates alone is risky. Need to add other affiliate programs.
Traffic is steadily declining. Need to add new content.
Website is slow. Need to run some optimization or switch servers or theme.
You can view the listing on Flippa.
📊 QuantView
I’ve been exploring ways to apply a quantitative framework to online business. A systematic way to analyze deals is infinitely more efficient and gives us a chance to uncover more opportunities. It also removes human bias out of the equation.
The two required ingredients to accomplish this successfully are a lot of data and the right metrics. Data is controlled by the brokers but is not impossible to get. The right metrics are easier to uncover as we can use lessons learned from public market investing, online resources, trial/error, and just common sense.
Below is my initial attempt to compare the two for-sale businesses above in a more quantitative way. Keep in mind that this is very much early and a work in progress.
First - let me get some caveats out of the way. The devil is always in the details.
I’m using data that’s directly in the public listing and not audited. There are sure to be mistakes and misrepresentations in this data.
These are different businesses. They’re in different niches and they have different revenue sources. This isn’t 100% apples/apples comparison.
Metrics alone don’t paint the full picture. You need a benchmark to compare them to. Even better if you have a benchmark with some history. Here we’re just doing side-by-side.
Test Facts is an action where reserve has been met. I’m using the BIN price in my analysis but the actual auction price right now is a much lower $4.3k.
Having said that, employing a side-by-side quantitative view does give us some interesting insights.
Pricing for both listings is comparable if we assume BIN price for both.
First glance, the traffic profile is very different. Using the bounce rate to normalize traffic helps us make a more apples/apples comparison.
Best Mom Products is more efficient as their revenue per comparable unique visitor is more than double Test Facts.
Test Facts has a less choppy revenue stream history (revenue COV)
With Test Facts, you’re paying less per Authority Score point, per ranking keyword, and per unique visitor metrics. This is amplified if the listing is priced less than the BIN price I use for this analysis.
So which website is the better purchase? It’s not as clear as I would like.
On many metrics, Test Facts appears to be a better valued and operating asset. But when you normalize the traffic numbers, Best Mom Products generates 2x the revenue per website visitor. I also like that BMP has a diversified revenue stream. For those reasons, I think BMP is the better purchase due to its diversified revenue stream, faster website, more efficient monetization, and lower profit multiple. The big caveat here is that if you can purchase Test Facts below the BIN price then it changes the whole analysis.
Please share your feedback on this analysis. Is this more interesting than the other format? What metrics would you add? Do you agree with the conclusion?
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Important Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.