The more I think of it, the more I see a strong similarity between bonds and websites.
Perhaps I look at these things a little differently than most people. I spent 20 years as either an institutional bond broker in top-tier Wall Street or a bond portfolio manager with $280 million to $1.5 billion funds.
Basically, I look at bonds as reasonably safe producers of passive income. You buy a bond and you put your faith in that issuer, be it the US government or a corporation, to pay you timely interest and principal.
A few years ago, I started working with a new client, the World’s leading and largest web property brokerage. They specialized in established and profitable web properties and I did preliminary due diligence for them in association with writing a prospectus for every listing.
Prior to working there, I didn’t understand that web-based businesses can be bought and sold. It didn’t take me long to realize that websites that generate revenues can be good investments. In fact, there is a growing market for these properties and I believe the growth and development of this market will eventually result in an important investment tool. Financial institutions have already discovered these alternative investments and are active buyers in that marketplace.
Why Web Properties are Investments
Websites are an interesting property. I never thought about them much until I got into this business. They were just online brochures for me and my business. And they were places to go shop, read the news, pay a bill, check my bank account, etc.
Somehow, when I think of the Internet and my usage of it as a whole, I totally overlook the vast array of small businesses that are thriving online, with no physical storefronts. But now I see them every day. They are little islands of value. Some of them get millions of unique visitors every year. Some get a few hundred a month, and some get a hundred thousand uniques a month. Some have over 50% return users and others have 15% return users.
Basic Web Property Business Operation
For the most part, they require at most a couple hours of time a day to maintain their operations and the income they produce.
As people visit those websites, they see advertisements. They might be in-line links, pop-ups or the boxes around the edges. Each of those ads is a link to an ad network that placed them there. Google Adwords is probably the best-known ad network. Google AdSense is the best-known ad placement agent. And you can see what a big business it is by the mere fact that Jeff Bezos has decided to create a new company, presumably Amazon Adwords, to provide the same ad network services.
What does this mean? Of course, when you see ads on a website, you know the ads are paying to be displayed on the website. Do you realize how much the owner of that website is making in passive income?
Some of these little websites that you hardly think of are raking in $100,000 a year just off ad network income, alone. And they have very few expenses: web hosting of a few hundred a year, domain name registration, and the time and effort of the website owner.
Few have employees. It just takes a couple of hours for the website owner to publish new content and answer emails. That’s pretty much it.
Creating a Web Business
HOWEVER, it isn’t really as easy as all that. You see, it takes an incredible amount and effort to discover a good niche, choose a name, design a business model, develop content around that niche and business model, develop and implement SEO marketing, develop and implement social media marketing, (both huge tasks in themselves) tweak and tweak again until you get it right, and then wait for the tipping-point when the site pretty much runs itself and draws in fairly reliable, stable traffic.
It’s a lot like putting together a startup business in the real world. In fact, it differs only in that it is a digital startup business.
Did you know there are a lot of people ‘out there’ who make a great living off of creating websites, developing them until they have reached that passive-income-producing stable phase, and then selling them?
I help people identify good website businesses to buy. I try to match my client’s skills and experience to web-based businesses they can operate, and I assist them through the process of due diligence and acquisition.