Monday, April 18, 2011

Many Investors Turning to Internet Businesses

With other investing opportunities drying up and earning little to no returns, investors have recently turned their attention to online businesses. These online businesses are typically easy to operate and return higher multiples (returns) on investment.

In the 90’s the hottest thing going was “flipping” homes. Investors would buy up a run down home, make cosmetic improvements to the home and quickly sell it for many times what they had invested. They would do this again and again re-investing their profits for even larger gains. unfortunately, when the real estate “bubble” burst a few years ago this technique no longer was a viable means of making money. Low Return And/Or High Risk Alternatives Interest on savings and money market accounts (if they even pay interest) are extremely low, and currently are around .5 percent – that is a one half a percent. That means a return of only $5 per year for every $1,000 invested. Many investors are shying away from the stock market due to the uncertainty of the economy. Everyone seems to have a different opinion on when and if a recovery might take place. For the average investor, the risk of losing their investment is not worth the risk of the potential gains they might achieve investing in stocks. Prices of Real Estate at the moment in most markets is down substantially from where it was just a few years ago, and the likelihood of recovery is unsure. Add to that fact that banks have tightened their lending policies making it difficult for investors to get the funds necessary to purchase real estate leave this a less than attractive investment alternative at the moment. When the real estate market is strong, and the lending/borrowing market favorable, investors can use leverage to make incredible investment returns. They usually only have to put up 5% – 20% of the real estate’s value and can control hundreds of thousands of dollars. As the value of the real estate increases their return on investment is tremendous. In the current market with home prices stagnant or even falling, the returns are just not there. Thus, in their search for money making opportunities, investors have found online businesses or websites as they are typically called. Is the Leader is the number 1 marketplace for buying and selling these online businesses. At any give time they have over 1,000 sites for sale and average over 1/2 million dollars of sales per week. They indicate that around 60% of all of the sites listed eventually sell. In addition to selling complete web sites, they also sell domain names. The other 3 popular websites where domains and websites can be found are The Digital Point Marketplace (, The Warrior Forum ( and Automated Income One of the other reasons website investing is attractive to investors is the fact that websites have the ability to earn “automated income”. This means that the site makes income for the owner with no human intervention needed. Income is made through advertising sales or what are know as “affiliate links” where the website owner gets a percentage of any sales made of products that are recommended by that website. At the heart of the system is “Free Traffic” aka website visitors that are directed to the website via the top 3 search engines Google, Yahoo and Bing. When a user types their search term into these search engines the top websites are displayed, and when the user clicks on the results they are redirected to the owners website. While at the website, the visitor will click on the advertising links or order products. These websites are designed using SEO (Search Engine Optimized) techniques to “rank” (appear) on the search engines for terms related to the content and subject matter that appear on the website. The content is usually in the form of informative articles. People come to the websites looking for additional information on a subject, or perhaps even solve a problem they are having. Low Initial Investment Required One of the other aspects that are appealing to investors is the low cost of entry. In many cases, income producing websites can be found for only a few hundred dollars. This is enticing to investors as it minimizes their risk of loss. Investors can quickly recoup their investment, or, if things go bad, they have only lost a minimal amount of money. With the low cost per business it is typical for an investor to buy multiple web properties. Each of the individual web sites may not earn them a huge amount (Say $30 – $100 each per month) but if they own 10 or more the combined income can be substantial. Like any investment, investors are advised to due proper due diligence before buying any website to ensure that the claims of the seller can be verified (such as amount of traffic, source of traffic, and income claims). Source

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