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Thread: Volume and market share in the buy/sell market?

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    Moderator Kay is a Premium Member
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    Volume and market share in the buy/sell market?

    I'm trying to find figures for the overall dollar value of the website buy/sell market. Number of transactions would be interesting too. As would a breakdown of the market share. Has anyone got any useful figures? Any ideas where to dig? I mean real figures not PR stuff posted on websites with the intention of impressing punters.

    If the figures aren't available, where would you (g)estimate the value is in the market? The flamboyant Flippa whose name is on every newbie's lips or the beavering brokers quietly clocking up a bigger share of the market with lower volume higher value transactions?

    Even if you haven't got figures - any observations, comments?
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    aka "meathead1234" Thomas is a Premium Member
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    I keep my own data to myself but it is a very ambiguous question. What exactly is a website? Would that include the IPO of Twitter/Facebook etc? Does it include Joe Bloggs selling template sites on Craigslist?

    Flippa's public numbers are largely fictional so wouldn't pay much attention to those. A good broker doesn't need to publicly shout about the size of the industry as that's not their target market.

    Somewhat on topic, but Justin over at Centurica just published this: http://centurica.com/website-buyers-report - gives a generally accurate overview of the industry and is well put together.

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    Quote Originally Posted by Thomas View Post
    Somewhat on topic, but Justin over at Centurica just published this: http://centurica.com/website-buyers-report - gives a generally accurate overview of the industry and is well put together.
    That was interesting, but seems completely made up!
    "Valuations of Internet Businesses have been rapidly and steadily increasing".
    The opposite is true. The influx of cheap sites created by site flippers and the general increase in supply, the google updates and the higher risks overall attributed to increasing competition for traffic caused the market prices to drop over the past years.

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    Quote Originally Posted by Thomas View Post
    Flippa's public numbers are largely fictional so wouldn't pay much attention to those. A good broker doesn't need to publicly shout about the size of the industry as that's not their target market.
    I agree on both points.

    I haven't seen Justin's report, but from all the monitoring etc I was doing up to last year, the trade in quality sites wasn't increasing at all. I believe the average value of a site sold in Flippa was about $1000 or so. That the price point for newbies who've drunk from the kool aid about websites being a golden ticket and are jumping on the bandwagon.

    If you go by Flippa's own stats, last year this time they claim to have had an average of 1557 listings in the weeks from 21 Jan to 18 Feb. They boasted a success rate of 48% with dollar volume of $2,624,000. I haven't had my coffee yet this morning, but from a quick look at the figures in my database the average prices seemed to have been dropping even then and I wouldn't be surprised if they are even lower now.

    Kay, all the best deals are done privately. It would be impossible to get an accurate picture of the true volume flowing through brokers and as they do the bulk of the higher quality/higher price sites, figures from anywhere else don't mean much. If you do want to make some estimates, here's another tactic you could try: Get total value of businesses being sold and percentage of those businesses that are operating purely online. You could monitor M&A activity and stats, stats from chambers of commerce etc., on the number of small businesses changing hands. I could come up with some other ideas where you could get data worth extrapolating from.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    aka "meathead1234" Thomas is a Premium Member
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    Quote Originally Posted by DomainMagnate View Post
    That was interesting, but seems completely made up!
    "Valuations of Internet Businesses have been rapidly and steadily increasing".
    The opposite is true. The influx of cheap sites created by site flippers and the general increase in supply, the google updates and the higher risks overall attributed to increasing competition for traffic caused the market prices to drop over the past years.
    Justin doesn't "make" numbers up. Flippa make numbers up, hence many have an unrealistic and skewed view of the industry.

    As the data doesn't include very small (<$15k) sites, that discounts the "cheap" sites created by site flippers. At the very low end of the market, prices have definitely dropped if you're looking at a turnkey site. Quality sites (e.g. those not entirely reliant on search traffic) have seen multiples increase. I've probably got more actual data than anyone (from real sales at that level), based on our deal volume, so I would agree with Justin's hypothesis there. Sites reliant on search traffic have probably dropped multiple wise from before the pre-Panda/Penguin glory years (I rarely see these go above 2x annual) at the low/medium (<$100k) end of the market.

    Above that, multiples rarely drop below 2x because you generally get a higher quality of site with a deeper moat. The average SELLING multiple in the market certainly hasn't increased to 2.7x as outlined in the report, but bear in mind it is just talking about ASKING prices which is a totally different measure and definitely signals higher broker/seller confidence at the medium/high end of the market.
    Last edited by Thomas; 28 January 2014 at 5:54 am.

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    [Edit - some of this has been superseded because of what was added as I was posting.]

    That was quick, Michael. I was still looking at the pictures in the Centurica report. Loved the Monopoly board.

    I need to have a closer look before making any comments on the report but I'm sure I'll have something to say and/or questions to ask about it.

    Yeah, Thomas, you're right. My question was a bit vague. I was trying to find some background info for something I'm writing and thought it would be useful to find some figures to give an indication of the size of the market. Just like statistics, I guess you can choose which figures to use according to which points you want to make. Including IPOs would make it sound bigger and more impressive. For my purposes I think it would be better to get figures relating to a slice in the middle, ie not as high as Twitter and not as low as the Joe Bloggs in your example. That's probably asking the impossible.

    Perhaps if someone had been able to compile a report based on total deals transacted by the major marketplaces and brokers, that would be about the nearest indication one could get to what I'm looking for. Then you could try to knock out all the Joe Bloggs stuff at the bottom and be left with some sort of picture of the relevant sector of marketplace.

    I'd also figured out that many figures were likely to be fictional, intended to talk up the business. And it'll be easy to find plenty of people saying that it's a rapidly expanding market. Maybe it is, but I expect some people will be saying that because they want to build confidence in their business. I'd be keen to find some figures compiled by objective market analysts. Until then, as with everything, we'll need a wheelbarrow full of salt to get through it.
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    Quote Originally Posted by DomainMagnate View Post
    That was interesting, but seems completely made up!
    "Valuations of Internet Businesses have been rapidly and steadily increasing".
    The opposite is true. The influx of cheap sites created by site flippers and the general increase in supply, the google updates and the higher risks overall attributed to increasing competition for traffic caused the market prices to drop over the past years.
    Yes Michael, if you're shopping on Flippa. Other than that, you've been misinformed.

    The report DOES NOT include any marketplace transactions, Flippa or otherwise. It only looks at transactions from brokered businesses, or those listed directly on BizBuySell by the owner. Every business was listed for $20K + and the upper end was around $2.5 MM I think.

    Just to reiterate Thomas's point, it also looks at Asking Prices, so it's likely the actual selling price will differ, but ultimately it's about the trend. If the ratio of asking price to profit increases, then it's likely the ratio between selling price and profit will increase too. My guesstimate has the average selling price as 90% of the asking price for any SENSIBLE broker.

    If you go by Flippa's own stats
    Clinton - what's the deal? You spend the last four years telling me how Flippa data is an "unreliable representation of the real world", and when I finally produce something completely void of any Flippa data, you dedicate a paragraph to them?!? If I didn't know better, I'd say you're secretly in love with Flippa and couldn't live a day without them ....

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    As I said, I haven't read your report. When one hasn't read a report it's best not to comment on it

    Shall put reading your report on my ToDo list.

    You've finally given up on Flippa data then, or are you still using it?
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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    A few weeks ago I came across a great infograph/article about websites selling multiples and the like. It was called "What’s your online business worth? Metrics from 250 Companies that have recently sold"

    http://www.digitalexits.com/whats-yo...usiness-worth/

    I thought it had some good insights.

    Shaun

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    Administrator Clinton is a Premium Member
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    That article is by Jock Purtle. I've just skimmed the article but young Jock (who's a member here) has come a long way since I met him in Sydney almost three years ago today. Thanks for the link, Shaun.
    Find the right business brokers to maximise the value you extract from your business and improve the chances of selling your business.

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