Protect Yourself When Flipping Websites

Flipping websites has become a big business over the last few years, with many people choosing this route to make some money online, and others building their website flipping empire into their primary source of income. Part of the reason for this is the media; various media outlets have reported seven or eight figure domain and website sales, making it sound like anyone can do with very little experience.
As with any other popular form of making money online, as the popularity grows people with dishonest intentions inevitably creep in, looking to make quick money from unsuspecting and trusting sellers.
Any method of selling electronic goods such as websites, eBooks or software is very difficult to control and prevent scammers from finding a way to sour the trade and end up with the money as well as the product. However, there are some standard scams which you can watch out for.

Falsified statistics

Statistics are the main selling point for any website flipper; traffic, income and authority define the selling price for most websites, so scammers tend to exploit this by falsifying the website’s statistics. Using Photoshop to make a false screenshot of the website’s earnings or traffic is probably the most common scam, however some website marketplaces, such as the popular auction site Flippa, have taken measures to prevent this, such as uploading PDF files from Google Analytics.
Nevertheless, it is very difficult to verify the authenticity of any statistics, in particular earnings; when the seller displays proof of the website’s earnings, you only have their word that all of the earnings have come from that one website, when in fact the earnings could be a cumulative total from several sites. Give that the sales value is calculated based on the earnings figure, this will result in the buyer paying far too much for the site.
Similarly traffic statistics can be falsified using scripts which load the website over and over, or by showing unreliable statistics such as web counters. Sometimes traffic screenshots will include visits by search engine spiders, whereas Google Analytics tends to ignore these visitors.
The other statistic which is regularly faked is the website’s Page Rank. Many buyers value Page Rank extremely highly, as it gives an indication of the website’s authority within the search engines.

PayPal claims

While it is the most popular payment method for website sales, it is very easy for scammers to cheat the system using PayPal. Deceitful buyers often pay for the website through PayPal and then raise a dispute as soon as they receive the files and domain. It is very difficult to prove during these disputes that the buyer received everything, so PayPal will often refund the buyer’s money. Domain registrars will not usually transfer the domain back to the seller, so sellers often end up losing the money as well as their website as a result of PayPal disputes.
Escrow is a system which a lot of regular website flippers use to protect themselves against these disputes. Escrow will hold the website and payment until both parties are satisfied, significantly reducing the risk of being scammed. However, Escrow is an expensive way of doing this, meaning that although it is a sensible business practice for people selling high value websites, for the majority of website flippers selling low value sites Escrow is simply too expensive to be worthwhile, and they must trust the buyer not to raise a PayPal dispute.

Minimizing the risk

There are some steps which you can take to minimise the risk of being scammed. Firstly, every website flipper knows not to send any files or the domain until payment has been received. Buyers on website marketplaces know that this is standard practice, so if a buyer is refusing to pay until they receive the website then you should be extremely cautious. It is understandable that new buyers will be wary of being scammed themselves, however the risk to the seller is far greater than the risk to the buyer, which is why website marketplaces tend to enforce the payment being sent first.
Screenshots of statistics can be easily faked using various methods, including Photoshop, so you need to check whether the figures add up. Some sellers may be willing to arrange “team viewer” sessions, where you can remotely connect to their computer and they can show you their accounts. However, the best way to verify the statistics is to check the number, and analyse whether they sound reasonable. For any earnings which are claimed, analyse the number of sales or ad clicks against the number of unique visitors, and decide whether the click through rate sounds accurate. To check traffic statistics, analyse the sources of the traffic – for example search engines or referring websites – and then check where the links are in the referring websites, and which keywords the website is ranking for in the search engines.
In many cases you might find that the traffic figures simply don’t match up to the keywords which the site is ranking for; this is because many sellers will list their site for sale once their traffic sources start to dry up, for example if they lose their search engine rankings. This means that although the seller is providing accurate statistics about historical traffic, the reality is that the website will not be generating that level of traffic in the future, which can be misleading for potential buyers. The seller has not done anything wrong – they have provided accurate historical information – so it is up to the buyer to analyse the data and decide whether the website is worth buying.
Buying websites can be something of a gamble, so it is important to protect yourself wherever possible. Many websites will lose traffic and earnings naturally after you buy them, through no fault of your own or the seller, so minimising the risk is good practice. It is worth asking why the seller has chosen to list the site for sale; in many cases they know it’s about to stop earning money for them, so they want to cash in while it’s still profitable. Learning how to spot these factors will help you to pick out the most profitable websites, and help you to develop your website flipping business.