In the previous article in this series on How to Invest in Websites, I discussed how to generate upside from acquiring established sites, ones generating revenue. In this article I talk about how to generate ROI from investing in a starter site, one that has been built out with content that may be ranking but is not yet generating any significant revenue.
This is the second option for investors (which I set out here) where you buy the foundation of a profitable website which is priced on the value of the content and backlink profile, i.e. on the potential to generate income in the future. This is the strategy I personally choose as I follow Warren Buffett’s rule No. 1 of never lose money.
What is a Starter Site?
With a starter site, if you are pricing it correctly, you are effectively buying at net asset value (or below). Put another way, you could liquidate the asset for at least the amount you paid for it.
Starter sites are typically valued on the quality of the content, priced by word. If the content you are acquiring is the best quality you could buy from any individual freelance writer or content agency then you could value at around 10¢ per word. If instead, the content quality is only adequate, perhaps created by non-native English speakers, you would price at 3¢ or lower.
As such a 50K word starter site with decent content which would cost you 5¢ per word to replicate would cost you $2,500. If the site is already ranking for a number of keywords then the price would be higher as it’s demonstrating that Google is happy to show it in its search results. If the site has 50 decent backlinks that would cost you $50 each to acquire, then you can factor that additional price / cost on top, pricing the asset at $5K total. A site’s design, in terms of custom review pages using a tool such as Elementor, would also add some incremental value. But ultimately, starter sites are primarily priced on content, in the same way that aged SEO domains (I get mine from ODYS) are priced on the quality of the backlinks.
How to Generate ROI
Generating ROI from starter sites all comes down to investing in new content and new links. Starter sites are typically built out on brand new domains, and as such, typically have very low domain authority (DR in Ahrefs). As such, to get them to rank you need to invest in building links, whether through outreach or paying suppliers.Generating ROI from starter sites all comes down to investing in new content and new links. – Richard Patey Click To Tweet
There are many examples of content sites which pull in considerable traffic with zero link-building been done, so you do not need to build links if you are expert at keyword research and on-page SEI and you cover a topic in its entirety. However, sites with a higher domain rating (due to more and better links) do correlate with better rankings and more traffic, so not attempting to build a similar level to your competitors will hold you back. To understand how quickly you should invest in backlinks on a new site, I recommend Matt Diggity’s Backlink Blueprint Timeline.
Assuming the existing content you have acquired is on-point (if it’s not, run it through a tool such as Surfer SEO shown in the previous article, it all comes down to creating new content and working out the ROI on this.
Paying subscribers of my Website Investing publication have access to my Standard Operating Procedures (SOPs) and one is called +EV Topic Keyword Research. I’ve set out a process you can follow to work out the profitability of completely covering a new topic on your content site, using an expected value calculation, something I learned from playing poker. You total up the total search volume a topic has, work out the % share you can expect, work out how many words it would take (based on the competition) and finally work out the future revenue and asset value you will create. If the expected value from the invested is positive (+EV) then it’s worth commissioning the content.
What I love about this approach is that you eliminate almost all downside. When buying an established site, you can get negatively hit by the next Google core algorithm update and lose 10%-20% or even up to 80% of your traffic and revenue. If you’ve bought a website for $100K, the next month it could be worth $50K. This is the game we play and why the yields from content sites are so high compared to other asset classes (if you’re buying at a 30x monthly net revenue multiple then it’s paying out at 40%).
But with starter sites, you’re not buying based off a price to earnings ratio as there is no material revenue. Instead you’re buying potential and valuing the site based on the cost of creation, getting it to that point. As such, if you were to buy a $3K site and invest an additional $2K in good content, its value may have also increased by the same amount. Perhaps you could sell for $7K or get out at $4K for a small loss. Either way, the downside in terms of dollar value and % is so much smaller than when buying an established site. Making small bets with disproportionate upside is my preferred strategy.