As we all know, there are two most important rules when it comes to investing. The first rule is, don’t waste money. The second rule is to look at the first rule. Therefore, when you start buying and selling websites, the worst thing you could do is to overpay for a website. Due diligence is a critical process.
In this article I am not going to share a complete due diligence process. I will show you just the first step that often kicks a deal out of my radar.
Today I’ve decided to write about SEMrush for several specific reasons. I won’t go into details of how SEMrush can help grow your website, which it certainly can, as it is the main reason to use this tool. Therefore, it will be covered in a separate article. Today I am going to show you how I use SEMrush when I am buying a website for passive income.
I was going to write this article at some point in time, but the last couple of weeks have prepared the terrain for perfect timing. One is concerning SEMrush itself, and the other is a perfect use case that appeared in the marketplace, that I decided to piggyback on. The third reason is that I am on a writing spree, so I have the fuel to type out another 2000 words.
SEMrush is now a public company
Not that this news has any immediate impact on you as a SEMrush user today, but it is definitely newsworthy! SEMrush raised a total of $140 million dollars which will enable them to further grow the platform. They raised the money in an IPO, so you can buy SEMrush shares, just like those of Apple, Google or Amazon.
So, if you want to own a piece of SEMrush, now is your chance! And now, onto reason number two, why I decided to post this article now.
Buying a website that is tanking
If you are a part of the Niche Pursuits Facebook group, you probably read Spencer Haws‘ take on a particular website that is being sold on Flippa. But if you haven’t, lets rewind.
As an intelligent website investor, you want to be everywhere where you can spot a good deal to buy a website and grow your passive income. One of those places are various Facebook groups (check my list here). In one of those groups, there was an interesting scenario forming. Spencer Haws predicted correctly that one website (during its meteoric rise) will crash and burn at some point, and get penalized.
Barely a week has passed, and that website did get penalized. It was built using an expired domain, and using other… practices. I don’t have time to analyze what exactly was done with the website because it is outside of the scope of this article. I just want to show you that these trends are easy to spot.
Spotting a website with suspicious metrics
Another reason why I won’t go into the details of what exactly happened is to show you that even if you don’t know anything about on-page SEO or search traffic, you will still be able to spot suspicious behavior from a “website investor standpoint”!
So, let’s put things further into context. Let’s say you are interested in buying a website, and you find one website that you like, on one of the marketplaces where you can buy and sell websites for passive income. You go to SEMrush.com and you type the domain name of the website you are interested in.
If you go to “Organic Research” in the main menu, and the graph looks like the one above, you don’t buy the website. Simple as that. If you can get it for pennies on the dollar, and know exactly what to do, then maybe you should still buy it. But in case you are just starting out, you want to stay away. Especially if the starting price for that website is $40,000, as you will find out later in this article.
Pump and dump
The problem with this particular website, as Spencer pointed out in his Facebook group Niche Pursuits, was that the owner of the website put it for sale once the website caught a negative trend. We now know that the website was penalized, but I’ll pretend I don’t know.
So, the website was put up for sale on Flippa with starting price $40,000, and the graph there looks like this:
The graph looks amazing, and nothing short of spectacular. Let’s try to analyze this listing without any SEO or website investing knowledge. I’ll quickly list several points, and then I’ll go into detail on each one.
- Site age
- Astronomical growth
- Small multiple
- Too good to be true test
- Fellow website investor test
As you can see, the website age is 7 months, and the graph has 4 months of historical data. If you don’t understand 100% how this growth was achieved, do not buy the website. 7 months is not long enough for anything. Again, let’s pretend we don’t know the site was penalised (and we don’t even know what penalised means). If you see this graph, can you be sure the website is a seasonal one, or on a growth trajectory?
How solid is the guarantee that the website will continue to produce great revenue 30 or 40 months from now? At this point, you don’t even have to read the ad and what the seller wrote. No one would be selling a website with legitimate growth like this in after 7 months (4 months of growth).
OK, I already mentioned growth during the website age part, but let’s double down. I would rather buy a website that has a flat line revenue graph for 12 months, then a growth curve like this one. As an investor, you are looking at the risk-reward. In this particular scenario, you are risking at least $40,000. That’s the starting price. I wrote about buying a website in an auction, so you know that this price could go up.
Sometimes scammers will create duplicate accounts, or team up, and then build the price up. While you are thinking, “I am buying a great website because somebody else wants it”, think again! Astronomical growth is an opportunity, but it is also a risk. Is it legitimate growth? If so, can you handle the growth?
Buying websites with small multiples
Like the first two, if you see a small multiple the red flag goes up! In 2021 websites are being sold at around 30X profits. Now this is not the gold standard, and we can’t generalize, but if you see an 8X, or 12X then be prepared to walk away from the deal.
Multiples are just one piece of the puzzle. If you used a website valuation tool for beginners, and it showed you a reasonable multiple, it will not show you the dangers and pitfalls of this website.
Too good to be true test
And then there’s the good old-fashioned “too good to be true”. If you think you are the one rare lucky person who spotted this deal in the entire marketplace, I hate to be the guy who breaks it to you.
Let’s take Flippa for example since the website above was listed there. Flippa has over 300.000+ registered buyers. To think that your first of second website purchase is this diamond in the rough… Don’t be naive like I was in my first website purchase. If it is too good to be true, it probably is.
Fellow website investor test
Here’s another thing you can do. If you have fallen head over heels in love with this website, do what I do. Call a website investor buddy, and tell them about the deal. Tell them you are concerned about these 2 or 3 red flags, and asked them what they think. Sometimes website investors think they are like Superman and can go right in, and turn things around.
Sometimes it’s enough to just say it out loud! Has this ever happen to you? You tell an idea to someone, and this was the first time you actually said it out loud. And as soon as it got out there, you yourself realized it was a lousy idea! If that doesn’t do it, and your website investor friend gives you the “red flag”, stay away from this deal. If you don’t have a website investor friend, I’ll act like one until you meet one! Email me, and ask me about the deal you are interested in doing.
Here’s a shout out to my website investor friend Marko, who helped me say no to a bad website deal!
SEMrush analysis for website investors
Let’s get back to the main topic. How else can SEMrush help us. With this particular website that’s on a superb growth trajectory. Let’s see what the experts say:
As you can see by the comments, it’s a perfectly logical assumption. If you see a domain name that has a keyword in one industry, and the website content is in another industry, something is off.
If you don’t know how to evaluate a domain name, there’s an easy fix. You can go through DNAcademy, and in a few days get up to speed with all the nuts and bolts when it comes to domain names. I wasn’t a beginner when I “graduated”, and still I learned a lot and got a ton of value!
With that being said, you don’t have to be an expert to see a domain name doesn’t really represent the website, or check the Wayback Machine to see what the website looked like in the past.
Backlink profile check on SEMrush
With a click of a button, you can list all the websites that are linking to the website you want to purchase. So, if the website has a high authority score (like 50) does it have relevant sites pointing to it? A paid version of SEMrush will give you more info, and in a situation like this, it’s better to pay $100 for a tool, then to overpay $1000 for a website!
Besides, if you do upgrade on SEMrush, not only can you use it for due diligence like this, you can also use it to grow your portfolio of websites by finding 20 Billion Keyword Opportunities, All at Your Fingertips! To top it off, you have access to their academy and Semrush Ebooks.
When you are buying a website for passive income, you want to check what other websites are linking to it. Dig as deep as you can, and check what websites, pages, and images are linking. What kind of context is around that link? Is it relevant, is it positive or negative? Are these links easy to get, or hard to get? Have these links spawned over a short period of time (like few months in the case above) or a long period of time like few years?
The first thing I look in SEMrush when buying a website
The first page that opens up after you type a domain name in SEMrush will tell you a lot about a website. This particular website doesn’t essentially raise any red flegs (except age, and astronomical growth), but it shows enough concern to look deeper. Realistically, it also shows some positives that you want to see in a website that’s getting traffic from Google.
When the first page loads, you want to check the authority score (red box #1). Obviously higher is better, but not a guarantee of a great website. Then you want to look at the graph that shows the assumption of organic traffic. (red box #2). Unlike you, the potential website buyer, SEMrush doesn’t have access to the website’s Google Analytics.
In both (red box #2) and (red box #3) you can see a staggering growth, followed by sudden stagnation. All happening in just 6 months (October 2020 – March 2021). I’ve bought over 50 websites as a website investor, I would never buy a website with this graph. And trust me, I gambled on some websites.
In the (red box #4) you have another interesting dataset. List of keywords for which the website is ranking. This can give you a hint of how the website is getting traffic, and potentially which keywords are bringing in the revenue
And backlinks, lots of backlinks
I haven’t highlighted the box that covers the number of backlinks and referring domains, which is also useful. But, you have to dive deeper and check what kind of backlinks and domains are linking. Also, you have the Authority Score (red box #1) that’s also indicative of the backlink profile.
Save thousands of dollars with SEMrush
One good piece of information from SEMrush can save you thousands of dollars in making the wrong investment when buying a website. Could someone buy the bad website from above that’s listed on Flippa? Yes. Should we blame Flippa when a single check on SEMrush would reveal the risks involved in this deal? No.
In seller’s defence, maybe they knew they were dumping the site, maybe they just overpriced it. Yes, even with such a small multiple. Receiving no offers certainly backs that hypothesis.
Last thing before we close this topic. Let’s say if you were doing due diligence 3 months ago before the stagnation appeared on SEMrush, when the website was at it’s peak. What could you do then?
Well, the website would be even “younger”, and as we learned that’s a cause for concern. We could also witness the discrepancy between the domain name, backlinks, and the content on the other side. Meteoric rise, combined with a “too good to be true”. So, essentially, you wouldn’t see the “fall of the titan”, but you would still get enough red flags to “call your website investor buddy” to advise you if you should stay away from this deal, or go for it.
Will you check SEMrush when you buy a website?
I know a part of this article sounded like a puff piece, but I honestly use SEMrush on a weekly basis, and especially when buying a website. Flippa knows this, and that’s why they did a partnership with SEMrush, and made it easy to check websites on SEMrush, while browsing Flippa.