Flipping Web Fixer-Uppers
The latest rage: Buying cheap Internet sites, building them out, and reselling them.
By Paul Sloan

(Business 2.0) – NASHVILLE IS KNOWN FOR MUSIC. BUT NOT FOR the kind of music Jermaine Jones loves: The 20-year-old aspiring producer is a hip-hop fanatic. Yet even though his locale is far more about Tennessee twang than beats and bling, Jones has found a way to pursue his rap passion and earn some easy cash without having to leave home--thanks to his clever exploitation of yet another method of making money on the Web.

Last August, Jones paid $1,000 to buy 411Hype.com, a website about all things hip-hop. He beefed it up--added some forums about fitness and health, for example--and managed to boost traffic by a couple thousand unique visitors, to 7,000 a month. Then, in late March, Jones put the site up for sale on a marketplace called SitePoint. He was bombarded with offers, quickly closing a deal for about $13,500. "I spent less than an hour a day on the site," Jones says.

For obvious reasons, the big acquisitions by News Corp.'s Rupert Murdoch, the Yahoo brain trust, and the boys at Google get most of the media attention. But every day, scores of small-scale Internet entrepreneurs are buying and selling simple-to-make, simple-to-run sites for thousands, even tens of thousands, of dollars. These aren't just domain-name plays. The strategy involves spotting the potential of an existing website and then rehabbing it for your own portfolio or flipping it to someone else--and it's taking off, thanks to the froth created by high-priced deals like News Corp.'s $580 million acquisition of MySpace. "The feeling is there's massive growth to come," says SitePoint CEO Mark Harbottle, "that it's all just starting to explode."

While several places exist online to buy and sell already-built websites--eBay has a section, for example--SitePoint, a tech-focused publishing company, is the favorite of Web-savvy entrepreneurs. A year ago SitePoint added a market-place where, for a minimum of $10, people can list their sites for sale or auction them off. Demand has soared: In April, SitePoint added about 400 new listings, a figure that's growing by about 25 percent per month.

All sorts of sites are available--blogs, game sites, dating sites, entertainment sites--requiring varying degrees of expertise to run. You can build a site from scratch and flip it, or take Jones's route: Buy an existing site you think you can improve and resell. The key is to understand what you're buying. Start with the basics: See where the site pops up on a Google search. Amazon's Alexa.com ranks traffic. The seller will provide revenue stats, and you can scan message boards at SitePoint to assess a seller's credibility. And, of course, you need a plan.

411Hype.com, for instance, was a basic message board with various topics related to hip-hop when Jones bought it from a college kid who had never bothered to seek advertisers. At the time, the site was getting about 1,000 unique hits a day. To broaden its scope, Jones added topics he thought would appeal to his demographic, mainly guys in their teens and 20s. He spent time on the forums at SitePoint and DNForum, another popular site for small Web entrepreneurs, and posted threads saying he was looking for advertisers. That generated inquiries, and Jones sold some ad spots for $100 a month, quickly recouping his investment. He also used Adbrite.com, which sells space for many websites, to place ads.

Traffic steadily improved. Jones further boosted his ad revenue by signing up with Yahoo's Publisher Network and CasaleMedia.com, an ad network that works with publishers whose sites have no more than 10,000 monthly unique visitors. When he sold the site, it was earning $900 to $1,000 a month. Best of all, for Jones, nurturing the site was a blast. "The key is to be into the topic," advises Jones, who is now at work on an e-commerce site and will start college in the fall. "Then it's easy to figure out what your audience might want."

THE ANGLE: Improving and Reselling Web Properties

1 Search SitePoint's marketplace for a site you can improve, or contact a site's owner directly.

2 Build traffic with ads and through deals with sites that target a similar audience.

3 Once increased traffic makes the site more valuable, put it up for auction on SitePoint.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.