Website leasing is one of those ideas like mobile gaming or video calling before smartphones and faster broadband came along. It’s been possible for ages, but has failed to take off without certain key elements all coming together at the same time.
The idea is simple; instead of selling your site, you (the lessor) agree to lease the site to an end user (the lessee) for a pre-agreed monthly or yearly amount. The lessee retains full ownership of any data exchanged in this time – most commonly leads, or email signups for example, but sometimes product sales too. At the end of the agreement, the site is still yours and you can choose to extend the lease, sell the site or continue to operate it for yourself.
The benefits to the lessee are obvious – leads or customer acquisition at ‘wholesale prices’ less than their current PPC costs, the tax benefit of capital allowances (UK companies at least), reduced risk of traffic loss versus owning the site and no responsibility for SEO and marketing.
To you as the seller / lessor you have the overhead and risk of operating the site, but this is usually more than offset from the benefit of being paid for the asset on a monthly basis and still owning it at the end of the term, hopefully with some capital appreciation to boot.
Why website leasing was previously a non starter
Leasing hasn’t really taken off in a big way so far but that seems likely to change. For the idea of leasing to work, we need three things that are all just starting to come together:
1) Public awareness and education. Ten years ago, if you owned a company with a telephone number, the chances are you’ll have been cold called from someone trying to sell you a website. Over the next five years, pretty much everyone already had a site so now it shifted to selling website marketing. At one point we had three companies call on the same day who all promised to get us to the ‘top’ of Google – highly entertaining if you’re bored and the person calling has no idea you’re a web company.
Originally, small businesses were just coming round to the idea of needing a site, but now their understanding has become about getting traffic to it. On the whole, businesses now understand the power of the web, and accept that they need traffic so there’s little educating that still needs to happen. Many companies also have some form of online spend, usually in PPC so it’s easy to make a quick ROI comparison when offering a site that delivers qualified leads.
2) Increased PPC costs – remember when you could buy clicks to pretty much anything for around $0.05 per click? PPC costs have continued to rise year on year as demand increases quicker than supply, and will probably continue to do so until people find viable alternatives. Companies who spend on PPC usually fall into two camps – either they want to reduce their spend, or their campaign is converting profitably and they want more clicks. The leasing option satisfies both criteria.
3) Massive distrust in Google traffic. With all the ranking and algo changes happening over the last couple years, building a marketing site and getting it to rank isn’t only difficult – it’s risky, as that top spot can be snatched away at almost anytime leaving you with little return for all your investment. Non web based companies who are savvy enough to have previously built their own feeder sites are now thinking twice about the effort and risk involved and seeking alternatives.
So it seems that if you’re thinking of selling and your site meets the criteria, now could be a good time to consider this as a viable option. I usually make a point of staying away from writing about things I haven’t done personally, but for this article I managed to pry some good advice from a pro, thanks to a cheap lunch and a (broken) promise of beers.
(note – If you’ve ever googled “Website leasing”, you’ll probably be fooled into thinking it’s something that it’s not, thanks to the majority of the search results being from web design companies trying to sell more sites. Leasing a site, in this context, refers to leasing an established site with a significant amount of traffic for a targeted niche. The real idea behind leasing a website (for the lessee) it that you still maintain your main source of marketing whether this be your own site, or a bricks and mortar storefront. What you gain from the leased asset should be complimentary to what you already do and not something your business depends on.)
1) Ensure your business model is right
The most suitable business models for leasing are lead generation sites, followed by dropship ecommerce closely followed by affiliate sites where offline vendors for similar products exist.
Leasing won’t work with every type of asset but this doesn’t mean you can’t convert what you already have to make it ‘leasing friendly’. The key is to make sure your site has a clear ‘action’ to which someone can assign a $/ £ value. This is usually an enquiry, sale or customer sign up, but in some cases lessees are willing to pay for signups to mailing lists and social actions well.
2) Work out your terms
The concept is probably still too immature to discuss ‘standard’ terms, but what’s common amongst finance lead gen is usually leasing over 24 months with an option to buy or renew.
The agreement between you and the lessee will usually be based on the site meeting some minimum monthly performance target – for example, generating a minimum of X leads. A sensible approach is to pro rata payments above or below a benchmark amount. This way, the lessee is protected should your rankings drop, and you have the added bonus of not feeling trapped in an unprofitable agreement should the amount of leads / customers the site generates significantly improve.
3) Know your costs
When working out how much to charge you need to have a good idea of how much the companies you’re approaching typically pay for new leads / customers and roughly how much volume you can generate for them.
You can research this using typical cost per click figures for main keywords (from the Google Adwords Keyword Tool) , working out an approximate conversion rate based on your own site and multiplying this by the number of monthly enquiries your site can generate.
4) Find potential lessees
To find potential lessees, the idea is to look for people high enough in the chain to be generating enough net profit to afford what you offer.
Start with offline competitors for whom doing what you’re offering online isn’t their core business. For example, if you own a dropship ecommerce store, it makes sense to approach a non-dropship retailer rather than a direct dropship competitor, who is more likely to build or buy rather than lease (and their business model probably has insufficient profit margins to support higher customer acquisition costs).
Likewise, if you’re selling mortgage leads, look for an offline mortgage broker with an online presence rather than a competitor who also only sells leads rather than servicing them in-house.
If you’re running out of option, one suggestion to automate the process is using the SEM Rush Keyword Tool, included with your FlipFilter Membership. Simply enter your URL into the search box, and click Potential Ad Buyers to generate a list of possible targets.
5) Negotiate for the best deal
From experience in selling advertising, the best strategy is probably to just ask – “what do you currently spend to acquire a customer and what would that figure need to be to get you to commit to leasing the whole site and ultimately buying wholesale”.
If the figure is too low, advise them you’ll consider it but you’re shopping around so if you find a better offer you’ll go with that as a priority. You’ll often be surprised when that same person gets back in touch with a better offer, especially if they know the value of what you’re offering.
Leasing shouldn’t be seen as an easier alternative to selling a site outright; apart from the legal docs required you’ll also need to do your own hard work in finding a buyer and I guess that creates an opportunity.
With companies looking for a way to increase conversions and to reduce spend, while sellers are actively trying to get a better return from their investments, maybe there’s also scope for a new marketplace to put the two parties together. Fleaser.com doesn’t have a great ring to it, but I’m sure it would catch on eventually.….
If you decide to take the gauntlet, or you have any questions on leasing that I’ve not covered, let me know in the comments.