This article is part 2 of 4 in a series discussing what it would take to potentially build a new ‘website for sale’ marketplace. If you haven’t already done so, please check out the first article here, to get some background on the series and to understand the references and models discussed in this post.
** Reading Time for this post – Approx 10 mins
If you’re short on time you may wish to
Skip to Model B Research and Analysis
Skip to the Stats and see how 90% of Flippa’s income comes from 20% of its listings
Marketing will be crucial to whether your marketplace achieves critical mass – the point where there are enough buyers for sellers and sellers for buyers. This section is not about grass roots SEO, Affiliate Programs and PPC but more the initial strategy behind defining what the marketplace is, and ideas for its promotion.
Model A – Target Market
Without identifying each marketplace’s potential user, it will be impossible to focus marketing effort and spend. Your target user for Model A is likely to fit into the following categories:
A – Internet Marketing ‘Romantics’
Individuals who have a full time job, but have flirted with the idea of internet marketing (including Ecommerce) to generate a second income, often by fuelled by the desire to live and work where they choose.
Typically, they may have created a blog or WordPress site, or joined some affiliate programs in an effort to get started but most likely lack the tools to make a full time income at this stage.
They will be familiar with internet marketing forums but are unlikely to be frequent users, and more likely found on Lifestyle design Blogs and Forums such as 4 Hour Work Week or Lifehacker.
B – Novice Small Investors
The Global financial crisis has left many who typically would have aspired to invest in property, looking for an alternative or at least an intermediate step. These individuals will often be new to using the internet for business, and looking for a small scale way of achieving a return, not to be confused with more long term investors who will primarily use Model B.
They may have already read some information on starting or even buying an online business, but are more likely to be unfamiliar with the concept and will require some education in both the technical and the practical aspects needed.
This segment represents the largest potential segment of new users and will probably not be found actively on the web with the exception of work at home and small-share investment newsletter subscriptions (e.g. Early to Rise Ezine). There is a high probability that they subscribe to (or previously did before using the internet more) Business Opportunity Seeker mailing lists (postal mail not email) and will put emphasis on what they see in main stream offline media such newspapers and magazines before making a decision.
C – Information Product Junkies and Internet Marketing ‘Followers’
Typically, individuals who have some knowledge of internet marketing and making money online, many of these users will have entered the industry as a result of word-of-mouth, or by reading stories of young companies that have had huge success in this space.
They may have an established site, but will typically lack all the skills required to repeat this process successfully, or even to grow and develop their first project. They would have also, most likely purchased at least one information product since starting and are likely to purchase more, often subscribing to the ideas of internet ‘gurus’.
Type Cs will often frequent IM forums such as the Warrior Forum, and will be the most likely to subscribe to other Internet Marketing mailing lists. This segment will also have the highest split in nationality with many of its individuals being from outside of the US.
Model A – Strategy
With model A, care must be taken not to falsely sell what the product effectively is – a template for a business and not an actual established business. This market will require a lot of education, and so there is some responsibility not to mislead people into thinking a starter site will make them endless riches without endless work being put behind it. The advantage however, is that revenue opportunities exist in educating the marketplace (especially Type C users), once you’ve gained enough trust and respect as an ‘Authority’ site.
Establishing a Gateway Product
Considering the target market, it’s highly likely that your potential user will not want to ‘jump into the pool’ and buy a site on their first encounter so ideally, offering a gateway product to gain familiarity and of course contact details seems like a sensible strategy.
The obvious answer is offering an ebook on something like the basics of website buying and selling websites (it will be quicker to licence one rather than create one from scratch – try Flipwebsites or Killer Flipping Secrets).
There is also the opportunity to think outside the box, and create something other than an information product such as a WordPress Plugin, Iphone / Ipad app or even a browser plugin (all can be outsourced for less than $500), which has the added benefit of high PR links from sites such as Mozilla or WordPress. Whilst the debate about Page Rank and its usefulness continues, my only conclusion is that having a higher page rank can never be a bad thing for a new site providing it’s done through stable, sensible link building a not earned too quickly.
Bearing in mind where the majority of your potential customer base will be, promotion should be split between offline and online activity, with an almost even amount of time and resource being committed to each.
Work at Home List Rental (off and Online)
Working with existing Business Opportunity and Work at Home publishers will give access to a ‘primed’ new market probably unfamiliar with the concept of buying a site but familiar with the mechanics of making money online. In the final part of this post, I’ll try to cover urls of the most popular WAH mailing lists.
Back end ‘sales’ on other information products
This relies on forming partnerships with information product providers, mostly centered around making money online and aimed at new starters. This technically isn’t a sale, and you are giving away your gateway product but it creates value for the partner (possibly an affiliate) who can either bundle your product with their sale, or follow up shortly after with the opportunity
Offline PR with success stories
Offline Press Releasing to business publications aimed at first time and home based entrepreneurs, should be centred around telling a story such as an individual who has found financial freedom through the purchase of an online business (naturally, from you!). For example, “How a teenage Mom of four grew XYZ into a full time empire” is likely to receive coverage within pages usually covered with bad news and stories of closures due to the recession. This is unlikely to work with mainstream business publications, but their readers are not your target market.
Aim for smaller independent magazines and mid size newspapers with small business sections, tailoring the story to the location. (nb. whilst you may apply some creativity to help ‘teenage mom / 13 year old computer genius / homeless entreprenuer’ become established, ensure your story is genuine and will stand up to scrutiny!)
Model B – Target Market
There will be some crossover from Model A’s target customer, but Model B will have a distinctly different set of profiles
D – Professional Bloggers and Full Time Affiliate / Internet Marketers
Individuals or small companies who will probably use the web as a primary source of income, if not a secondary source soon to replace their primary one. Many would have achieved business or professional success in other sectors prior to entering ‘Web’ and currently have at least one successful online venture.
Buyers in this group will typically buy to add to a portfolio of existing sites, however some may buy to supplement existing businesses by providing a ready-made customer base or instant hit of traffic for less than the cost of a PPC campaign (see the post Website Mergers and Acquisitions for more info on this).Typically, purchases will be in the $450 – $7,000 category and will naturally be more thought out, researched and planned than a sub $450 option.
Buyers in this group will be fairly active in forums, but usually in reading and observing more than commenting, only posting when they can add something of value. They are also likely to have a bigger divide between their professional online identity (their site) and their personal one (their forum / social network profile) so targeting this user can prove difficult.
E – ‘Professional’ Website Owner / Investors
Possibly the closest fit to a ‘website flipper’, these individuals will have significant internet marketing experience, and will operate online with the sole intention of buying and selling sites. Many of these individuals will have invested before in either offline business or property, and may still do and would probably use traditional methods such as forum listings and classifieds (online and offline) alongside online marketplaces to source new potential website purchases.
Some of these buyers will also offer services as brokers, and hence this may be the simplest way to target them online. They will typically tend to be active on forums and blogs (commenting) and may maintain their own slightly off topic blog or personal project but not for financial reasons.
F - Medium – Large Established Companies
Whilst being the smallest segment of the current market, I believe this type of user will grow exponentially, not in number of users but in their total spend, with fewer transactions but much higher transaction amounts. These will typically be companies that know the online space, and are keen to expand through acquisitions and mergers. The most common type of company will be media and publishing (e.g. b5media) who have the intention of either increasing their ‘circulation’ or diversification into new niches.
Whilst the companies as a whole will be easy to locate, there will be an individual within that company who you’ll need to identify, make and maintain contact with.
Gain Community Support
Model B cannot thrive without support from at least customer types D and E in the existing community. Initially, before even completing the site, networking will provide the first opportunity to reach critical mass and attract the right people to your marketplace.
Buying and selling websites is still fairly niche and therefore the opportunity to find where groups of sellers gather is still easy to do. The community is fairly close knit with type D and E often having a heavy influence on one another through their blogs and forum discussions. This is also a point of entry for type A and Cs who eventually ‘graduate’ but seek the advice of more experienced users.
Before marketing should come support and acceptance from the few ‘sub’ communities that exist online; three fairly prominent forums in terms of the highest % of type D and E sellers include the Experienced People Forum, the Warrior Forum and Digital Point.
..But avoid ‘crowdsourcing’ your marketplace at all costs
Whilst i’ll advocate community support and many of the ideas here have been stimulated by discussions in forums, too many of those same ideas crammed into one site without any prior processing simply won’t work. As a marketplace, you’ll need to take a side and make choices that not everybody will love (angry people are still blogging about Flippa / Sitepoint making the choice to charge a listing fee, over year since it happened!).
Identify your core customer and seek to make them happy in line with your objectives. If it doesn’t fit with those objectives, don’t do it!
Find Sellers with Gravity and the 90:20 rule
Around the time of publishing this post (July 28th) there were
1,294 Sold flippa listings since July 1st 2010 (excluding private sales)
$1,502,851 in revenue from the sales of these sites
If we look at the top 20% of these listings only
This equals 1294 / 5 = 259 listings
These listings accounted for $1,342,653 in revenue from 202 different sellers.
This means that 90% of Flippa’s revenue is generated by just 20% of its users – Pareto would be getting deadwood at the very thought!
If revenue and profitability is your end game, concentrate your efforts on a few, preselected high earning sellers, to maximise your initial revenue without having to increase initial marketing spend or effort.
…then remove the potential risk
Convincing regular sellers to jump ship from what currently works (for them) is likely to be difficult without an incentive. As discussed previously, exclusivity clauses in most marketplaces’ terms of use, will prevent users from trying out your marketplace.
Initially, one option will be to offer a first-use deal to selected frequent sellers, where they list their site with you for a set period for no listing or completion fee should the listing sell, otherwise they are then free to use their usual marketplace. You could also offer them the guarantee that when traffic increases you can offer a fixed (but limited) period where they’ll still pay nothing to sell their site should it sell, in exchange for their early loyalty.
It would be naive to assume that every established seller will list their site in a marketplace with very few other sites for sale and very little activity, but as with direct sales, you will get the occasional ‘yes’, lots of ‘no’s and persistence will usually pay off. It will only take a few high quality sites to entice buyers with the idea that a quiet marketplace can mean hidden opportunity before it hits the mass market and more buyers will eventually mean more sellers.
The opposite is a final-use deal, listing sites that failed to sell on more established marketplaces free of charge as a way to increase inventory. There needs to be some caution if doing this as there is usually a reason why a site didn’t sell should all things remain the same, and new buyers visiting your marketplace for the first time could be put off by seeing ‘second hand’ listings that are arguably flawed in someway.
Adapting the strategy to change the marketing channel will prove to be a better strategy; with the owner’s permission and a risk free approach, enhancing and relisting higher tier listings from business for sale classifieds or forums, where a site may not have sold due to the target audience or way it was presented could provide seemingly fresh inventory to avoid ‘empty new site syndrome’.
Listing Syndication to Business Media
Most offline business sale agents achieve exposure for their clients through syndicating listings to newspapers and media sites (in the UK, Daltons Weekly or the Times / Telegraph for example).
Offering syndication of selected listings on your marketplace to media focused on general business and entreprenuership provides content for their readers, but wider exposure to your marketplace and a ‘killer-app’ reason for sellers to list with you. If you’re reading this post then you’re aware of and part of a very small community of people who buy and sell web businesses on a relatively informal basis. In relation to the business community on the whole, this is probably less than 0.01% and so a wider opportunity exists to generate awareness.
Spending First to achieve Critical Mass
Whilst discussing grass roots SEO is outside of the scope of this article, it seems relevant to talk about how your ad spend will relate to achieving critical mass.
People discussing marketing a new marketplace, or in fact any web business generally fall into one of two camps:
1) Spend little to no money upfront and grow organically, using revenue generated to fund activity
2) Spend all the money upfront, and wait to recoup that investment later down the line.
If your aim is to achieve critical mass, which arguably is essential for the success of either model, you will only achieve this predictably by option 2. By predictably, this means excluding things that are possible but not statistically likely to happen such as a cover story on CNN, endorsement by Barack Obama or exclusive viral footage of the Second Coming.
The conventional process is to ‘test the water’ and spend a little of your total budget upfront, making changes and spending more as more revenue comes in and the concept is proved viable. Unfortunately, marketplaces will never be proved viable without establishing critical mass first as buyers need sellers and sellers need buyers.
You will need to commit a majority proportion of your year’s total marketing budget to the first three months to maintain momentum and avoid stagnation experienced by so many new forums.
Next Section – Financial Models and Creating Sources of Revenue
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