A Brief Insight to the World of Web Brokers
Around 2005 a surge of internet marketplaces began to open their doors to the sale of websites.1 As a powerful tool for creating effective cash flow, website based businesses were being increasingly in demand; yet due to the technical skills required to build a good website there availability was in short demand. Any time there is a sellers' market an immergence of a "broker" sector helps to bridge the gap between those with and without the technical knowledge to ensure the product is properly evaluated and meets the right people to change hands.
There is no doubt that website sales is a growing market, with the modern immergence of sites like Flippa2, WebsiteBroker3 and more; in fact with Flippa's 2010 sales record valued at $24 Million dollars in website sales4 and record shattering $1 million sales week5 it's plain to see that these website market places are nothing short of a huge success.
Yet in any seller's market how does the buyer ensure value and knowledge; and how can a seller ensure they are reaching the right clientele? This is where a Website Broker comes in – until recently the appraisal and sale of all domains and websites was handled by automated web scripts that failed to take into account things like monetization scheme, longevity and validity of the statistics. Web markets were riddled with scams and this created a need for brokers with the proper meld of business and technical knowledge to help properly evaluate them.
One such case study is that of the sale of MacTalk a popular Australian Apple fan website which sold for an estimate in excess of $125,000 to NicheMedia5. Many automated websites would look at the earnings of MacTalk ($6046 per month)6 and report a value price of only $60,000 an estimation of yearly earnings against cost. However, due to NicheMedia's relation in Apple publishing (allowing for additional brand exposure), the growing Australian middle class, the growing market of Apple products and the declining cost in server bandwidth in Australia a broker was able to establish a more accurate value and bring around a better close for both clients.
So how does internet brokerage work? The process differs slightly depending on if you are a buy or a seller. Usually the seller gets in contact with the broker and they agree on an upfront fee or percent of sale for the broker to appraise and sell the sellers website. The seller then sits back and lets the broker advertise the sale as well as talk to previous buyers. A buyer may express they wish to buy the site but might not be fully sold on the price in which case it is the brokers job to negotiate between the buyer and the seller.
It is not entirely uncommon for a good broker to charge between 10% - 15% of the websites final sale price, however due to the tricky market conditions of website sales many people find that their website broker is able to use their experience and craft to increase the sale value of their website by 25% - 30% so it still works out in favour of the seller.