Building a new Marketplace

[Andy]

That proves buyers want to go where there are a lot of other buyers (not a lot of pubs)

You got me on that one Clinton!

But we'll have to agree to disagree

Agreed... I think. :-)

What we probably agree on is that the market will eventually need a good mix of both buyers and sellers.

Yes.

On that note, I can easily envision how to put a marketplace together by signing up brokers and even potential pro seller/owners for starters.

I cannot fathom how one would go about establishing one starting from the buying end. You'll need to educate me if you want to get me up to speed on this one.

As far as how "Internet Marketing" is defined - good luck. This term is so misused and abused it is now lumped into the book defining snake oil salesmen and politicians. If you've ever seen a "business opportunity" rag, you are sure to know what I mean. This is where the concept of Internet Marketing is headed. The template market is today's answer to the biz op crowd. Instead of sending away for a sales kit, now all ya gotta do is pop in your cc information and your cartload of gold will be delivered to your inbox in seconds. No assembly required.

It's places like this that can help separate the hype from the true value and real opportunities. We need to make it clear we advocate the high road and present a detailed map so folks know how to get there.

Andy

[Clinton]

I cannot fathom how one would go about establishing one starting from the buying end.

My thinking goes like this: Sellers won't list with you unless sites are selling. Even if it's a free listing, they won't take the time to type up their description and fill in the boxes. They will only do so - and even pay to do so as happens in Flippa - if there's a likelihood they will sell.

To attract the sellers you therefore need to demonstrate that sites are selling - not that you have buyers.

What attracts buyers is something completely different. They don't care if sites are selling or not selling in your marketplace. They don't care about the success rate. They are happy if they end up making acquisitions with the minimum time investment trawling through listings that are outside of their requirements.

So your buyers can be a hidden group, completely invisible. As long as they are spending money and buying sites.

If you have a database of buyers, either via putting some contacts together manually like I could do here or doing a deal with some business brokers to access their lists, you can get some sites sold. You then give prominence to the successes by listing in a very visible location all the sites that sold in the last week/month. That would build confidence among sellers and get over their barrier to filling in the listing form.

[flipfilter]

Hi everyone,

It's great to see the discussion evolve to where it currently is and I guess what sets everyone here apart from the rest of the market.

If a marketplace could be established that requires high standards to participate and no tolerance for scammers, I think it could grow into something where nearly any buyer would want to look first for quality offerings.

Amen!! But the hard part is in keeping everyone honest, not just the buyers but the brokers too.

1. The customer who is looking for a cheap way of getting into online business
2. The customer who has $50K to a few hundred thousand wanting to buy his first online businesss, but lacking the technical skills
3. The customers like benitez17, peterdavis and me - who have budgets all the way from a few hundred to a few million - who just want to be put in touch with people looking to sell established businesses of a particular type - peter with forums, me with finance sites etc.
4. The customer looking for acquisitions to add to their existing portfolio - perhaps to shore up their link building, add some synergies, or buy up and close a competitor (the site doesn't have to be generating profit)
5. Others
.......................
I don't believe "internet marketing" describes all online money making opportunities - from domaining to virtual assistants working by the hour to forex trading to making a living from poker/gaming.

Clinton, this is a good attempt at a market breakdown but lacking some detail:

1) is spot on, but this can broken down further still, as a cheap option is $5,000 to someone used to property investing or buying offline businesses but $100 to someone who dabbles on the weekend and just wants to try something out, possibly with the Wife knowing that they've just spent $100 chasing their 'dream' of online freedom

2) $50K is too high a starting point and too big a jump from 1 to 2. More than 50% of transactions (in volume) are in the $500 - $10,000 range, and many of these people do have the technical skills, but probably not the patience.

3) This is the minority any Model B marketplace would love to attract but still the minority. I could count the number of people I personally know comfortable and able to invest seven figures in a site on my hands and toes.
This possibly means I don't have very many rich friends, but most of the people I do know with that amount to invest are not entirely comfortable doing it in online business at this point in time. (and btw, from your many many forum posts and comments where you've told us you have a few million to invest - we GET IT! Now put that huge wallet away and stop making the rest of us feel so poor and 'underachieved' )


As for the ongoing "internet marketing" debate whilst I see and agree with your point that I often misuse the term, the whole idea in me singling out Internet Marketers was to exclude the exact types of "online business" people you've described. In my opinion, these are not typical website buyers.


What's interesting is that there are many different opinions, but the one where everyone so far seems to agree, myself included, is that a completely minimal marketplace that does nothing but list and step aside, is probably the best solution. Maybe we're all the victim of over-engineering solutions to solve what should be simple problems.

Justin

[Clinton]

I don't have a few million. I did however make an offer to put up $100K in capital towards the creation of a new marketplace if the right idea/partner emerged. I make a very comfortable living online, but I'm a pauper compared with some of the people I know who browse these forums but don't necessarily post often.

Clinton, this is a good attempt at a market breakdown but lacking some detail:

You're very kind, but it's lacking a lot of detail, my friend

what sets everyone here apart from the rest of the market

There is no us and ...the rest of the market. Flippa may see many of us as buyers with budgets above their average selling point. Brokers and business for sale listing sites may see many of us as buyers with budgets below their average selling point. We are but dots in a long line from South to North and many of us have budgets even below Flippa's average.

$50K is too high a starting point and too big a jump from 1 to 2.

Maybe. I don't believe there can be any best starting point for any group, but I do know that your claim of 50% of transactions in the $500 - $10,000 bracket is a wild guess and possibly skewed by the low-end markets you have a lot of data on.

This is the minority any Model B marketplace would love to attract but still the minority.

If you're creating a marketplace as a business then the number of players tail shouldn't wag the profit dog. People spending six figures on buying sites spend five figure sums on professional advice - accountants, lawyers, due diligence etc. They'd happily spend $20K on a broker who finds them the right business. I've had offers like that from interested investors even though I'm not a broker. As a marketplace, you're far better off with a 2% cut of 10 x $500K properties than 5% on 1000 x $500 properties. Even better if you could have both. Similarly with sellers in the high price brackets, they often pay their broker 10% of the sale price, and 10% of 10 x $500K properties - $500,000 in commission - is better than selling 10,000 "starter" sites.

I could count the number of people I personally know comfortable and able to invest seven figures in a site on my hands and toes.

How many you and I can count as close friends is irrelevant. It's how many exist out there who can be attracted to the market that matters, and there are lots.

the whole idea in me singling out Internet Marketers was to exclude the exact types of "online business" people you've described. In my opinion, these are not typical website buyers.

I've got a pre-prepared reply for your blog which I can't post till I get to my office. In it I say that the best businesses I've found were the ones started by hobbyists passionate about a subject who put together fantastic content, entrepreneurs with a great idea well executed, ardent networkers who assembled loyal communities, good programmers like you who built kick-ass functionality, whacky types who came up with a viral concept .... etc. Not Internet Marketers.

What do you mean by "typical website buyers"?

[marczphillips]

Having just built an online marketplace for buying & selling websites, I have some observations for everyone.

We know full well the effects of the "flipping" of property (speculative buy, fix-up/renovate, then sell) which was fuelled by ineffective governance of the central banks in many countries (UK, USA) in the past 10 years. Low interest rates fuelled over-borrowing, hiking property prices and a gold rush buying mentality. Now, 25% of US mortgage holders have their house values lower than the mortgages they owe! England's public sector debt as a % of GDP is the highest in history. Apply low cost servers, cloud computing, free databases (MySQL), WordPress and mashup feeds coming from affiliate networks and you have a potent recipe for websites that smart webmasters can build fast for little money and "flip" them.

What we haven't seen yet is these website buyers complaining in HUGE numbers because the flipping type websites (like houses) they bought are not worth what they thought they were. So we should not confuse the technical functionality of a marketplace with the intent of that market and those who run it. We built the functional components of a marketplace easily in 4 months. The trust and longevity of the marketplace is a custodial responsibility I know Clinton and many members of this forum share with me. Learning from the errors of the property flipping offline world go a long way to protecting the rights of buyers and sellers in the online world of websites.

[Clinton]

What we haven't seen yet is these website buyers complaining in HUGE numbers because the flipping type websites (like houses) they bought are not worth what they thought they were.

That's, sadly, a group that is conspicuous only by its invisibility. Far too many buyers have been duped or talked into buying sites that are not worth what they thought they were worth and/or aren't going to make the money they thought they could make with their own time and skills. Unlike property buyers whose banks foreclose, these website buyers have paid with their own money and so we'll never know the real scale of how many lost out - they tend not to stand up and shout about it.

[onpreneur]

I have been quietly flipping websites on and off since 2006 and I feel that there is a real opportunity to create a website marketplace that serves both the buyer and seller in ways that currently aren’t being offered. I’m seriously contemplating the idea of developing a new marketplace and I would greatly appreciate any feedback on this topic.

Here are a few thoughts on the subject.

Price of listing: I believe that a base price of $10 for a website listing is reasonable.

Vetting of sites: A review of the site on offer prior to listing with a special emphasis on verification of income. I’m not sure exactly how at this point how a site’s earnings can be satisfactorily verified short of providing login details to the site’s payment processor.
This is an area where it is taken on faith that the seller is representing a site’s earnings factually, adding some sort of independent verification of earnings could go a long way in increasing the site’s listing credibility. Perhaps only sites that have been verified in this way would be featured listings.

I believe that human scrutiny of listings is another area that can be improved upon. Again this goes towards increasing the credibility of the listing. I’m thinking of some kind of panel or review process which evaluates a site’s viability and long term worth. While this might be considered a subjective opinion at least it’s an evaluation by people with experience in the industry. This could be something as simple as “ four out of five of our experts agree that this site..etc, etc. This could be an optional process for the seller as it would require a delay in listing the site.

I simply feel that any process that helps validate a site’s worth and credibility is a major plus to both the seller and the buyer and is just one area that can be improved on compared to existing marketplaces. I would love to hear your thoughts and opinions about this or any other aspects of creating a new website marketplace.

<<EDIT - Merged new post into this thread as I like to keep similar threads together - tke>>

[Clinton]

Thanks tke. Actually, considering how often this talk of a new marketplace comes up - this could become our own Most Asked Question, like Sitepoint's "how to value a website" threads

I also have a detailed PM today from someone (else) who's in the process of starting a marketplace. We keep getting so many of these that I'm considering making it a topic for the VIP Lounge only (i.e. only for members with a certain post count)

But onpreneur, welcome to experienced-people.net

Price of listing: I believe that a base price of $10 for a website listing is reasonable.

I find it strange that people wanting to start a new marketplace even consider charging from day one! It amazes me that they believe that punters will pay despite the marketplace having no proven history, no back catalogue of sites that have sold ... and, possibly, not a single buyer actively looking for sites. Surely the early questions for a marketplace operator are how to attract buyers and sellers, how to provide a better experience than Flippa etc. How much to charge should be a question that comes months/years later and after achieving critical mass.

[richrf]

Very interesting thread. I came to this forum because I have what is sometimes referred to as a super-premium domain that I am trying to develop into a business with the intent to eventually sell (if the business is truly successful then I will keep the site).

The information is invaluable and some of the best that I have seen. So thank you. Some quick observations:

1) It is not only domain buying and selling that is full of scams. So is most of the world nowadays. This includes financial services (banks, brokerages, etc.), medicine, real estate, mobile phone services, and used car sales. It is a function of our times that scamming and bankruptcy are considered part of the joie d'vivre. It is so ubiquitous it is like trying to rid a house infested with bed bugs.

2) I think there is a part of the business world that still adheres to some ethical standards and I think a marketplace that attracts this group of people can be successful. It is a matter of filtering with a vengeance. I would love to participate in such a marketplace. It may not be fabulously big but it can still be quite successful. I can't tell you how many people I have run into over the last few years who are legitimate in their desires for a clean business deal and can't find a marketplace to transact the deal.

3) Insofar as due diligence is concerned, I completely agree with Clinton. The buyer must sift through the data as they would any business transaction. I use to collect coins and I would scrutinize the coins before buying one. And if I can't scrutinize it (e.g. online deal), I just don't do it. In so far as domains and websites are concerned, one has to look at the books and tax returns. It is the only way that one can analyze a business. So, if revenue is important, the buyer has to take a look at the books.

Thanks again for the thread.

[akirk]

I find it strange that people wanting to start a new marketplace even consider charging from day one! It amazes me that they believe that punters will pay despite the marketplace having no proven history, no back catalogue of sites that have sold ... and, possibly, not a single buyer actively looking for sites. Surely the early questions for a marketplace operator are how to attract buyers and sellers, how to provide a better experience than Flippa etc. How much to charge should be a question that comes months/years later and after achieving critical mass.

I sort of agree / disagree - and maybe turn it on its head

- I think that any business you set up has to consider cost / business model, so you need to establish a potential charging structure
- however, agree, it is unlikely to be at start-up, so alongside the person starting has to consider as a part of their model their start-up / investment costs, which must include customer acquisition, which therefore includes a period of no charge (as a cost against the company - i.e. the overheads are there against an income stream = investment period)

part of the problem with the internet is that so many people believe that you can set up immediately successful businesses with no investment cost
- you can set up slow-growth businesses with no investment cost which may one day become successful
- you can set up immediately successful businesses with high investment costs
- immediately successful with no investment is less likely...

the problem with a competitor to Flippa is that it is not ideally suited to large-scale investment (millions invested) as I would guess that the payback / long term potential is not big enough - and there is the difficulty of an already established competitor in Flippa themselves...

the options are:

low investment, long growth period
a balance of more investment to shortern the growth period

it is possible that actually producing a website that offers functionality more in demand with people's requriements can be a disruptive influence and work well - but generally it is a long slog...

sorry - wandered off in my thoughts a bit there - but basically Clinton I think that we agree - just that I would come at it from a different angle...

Alasdair