Latest get-rich dream: flipping Web sites

Dave Hermansen did not own a bird or a cage when he bought bird-cage.com, an online store, for $1,800 three years ago. He simply saw a Web site that was "very, very poorly done" and begged the owners to sell it to him.

He redesigned the site, added advertising and drove up traffic. Last December, he sold it for $173,000.

Hermansen, 30, is among the latest wave of entrepreneurs who, like the stock day traders and real-estate investors before them, are looking to make a lot of money without much effort.

They use little more than home computers and free software to buy Web sites that appeal to a small and specific niche. Then they fix up the sites with hopes of reselling them for far more than they paid.

But while their dreams are fueled by high-profile Internet deals — Condé Nast's $25 million purchase of Wired News, People.com's acquisition of Celebrity Baby Blog and, most recently, a deal this month between Guardian News and Media and the owner of PaidContent for a reported $30 million — these entrepreneurs have smaller ambitions for their sites.

Many end up settling for just hundreds, sometimes thousands of dollars.

"Everyone with a site is saying, 'If I can get it to the right value, I'm out,' " said Gene Alvarez, vice president for research at Gartner, a technology consulting firm. "I call it the burger-flipping model: You build up volume, you build a community and then you try to sell it while it's still hot."

Some Web sites begin as labors of love. Take Celebrity Baby Blog, which creator Danielle Friedland, has said she started after reeling off facts while watching the 2004 Golden Globes "about who was pregnant with twins or had recently given birth."

People.com bites

Four years later, People.com bought the Web site after it noticed an unfulfilled niche: "a very passionate community of young moms," said Fran Hauser, president of People Digital.

Hauser would not comment on the sale price. Industry insiders speculate it was in the low millions.

Most flippers aim a bit lower. They troll the Internet for sites that, according to Mike Lyon, an investment banker at Palo Alto, Calif.-based Arbor Advisors, are "undervalued property" — poorly designed, with little visibility on the Web.

While there is no data on how many people flip Web sites, the number sold on eBay has doubled over the past three months, the company said. At SitePoint's marketplace, a similar forum where users can auction off Web sites, sales have quadrupled in the past year, said Matt Mickiewicz, a founder of the site.

The changing economics of the Web have made it easier to find and exploit niche communities on the Internet.

The Internet boom of the 1990s spawned companies such as Pets.com that were Web versions of brick-and-mortar stores. They required stockpiling products and shipping them to customers. But that model came crashing down with the Web bust of 2000.

Since then, building niche Web sites and small-scale online stores has become cheap and easy. Free software, advertising systems like Google's, and "drop shipping" services that allow site owners to handle products through a third-party supplier, have lowered the cost of doing business.

Instead of selling goods and services, analysts said most flippers are looking into the easiest way to make a quick buck, by tapping into specialized advertising.

Niche needed

Philip Kaplan, who captured attention with a Web site that rejoiced in the unraveling of the dot-com bubble, now helps sites secure online advertising through his San Francisco-based company, AdBrite. He said he has been encouraging site owners to "carve out a focused niche."

"All of our advertisers are saying, 'We want this niche or that niche,' " he said. "They never say, 'We want to advertise on a site about nothing.' "

Hermansen, of bird-cage.com, says he is always looking for areas on the Internet with high search volume and little competition.

"Once I found the bird niche, I knew it was where I wanted to be," he said.

Before bird cages, Hermansen owned — and sold — niche Web sites about paintball, remote-control toys and electric scooters. In 2005, he quit his job as a draftsman to flip Web sites full time.

"It used to be that if you had a site worth a million dollars, you'd hire an investment bank or a broker to sell it," SitePoint's Mickiewicz said. "But if you had one that generated less than that, you'd just have to sit on it. Now you can sell anything for any sort of profit, whether it's $20 or $220,000."

The average selling price of Web sites on eBay was $78 last month. There, sites for sale range from online stores specializing in gift baskets and patio grills to message boards and forums devoted to deep-sea fishing or the online game World of Warcraft.

The marketplace at SitePoint offers sites about chicken recipes, bonsai trees and hiking stories. "Low-maintenance content sites" such as blogs, online communities and directories are the most popular, Mickiewicz said, adding that a Web site's selling price is generally one to three times the value of its annual revenue.

Peter Davis, who calls himself a "Web property developer," said he owns about 20 Web sites, including message boards about model railroads and coin collecting.

Davis said he generally holds onto Web sites for at least a few months before flipping them. Sometimes, though, it's much quicker — like the time he bought a forum about day-care centers for $1,500 and sold it six hours later for $3,500.

"I used to make my own Web sites and sell them, but then I realized, 'Hey, this is much easier than making them,' " he said. "It's as simple as buying a Web site from someone and making it more attractive. It's about creating value where there was none."

Creating the value, though, is the tricky part. Many flippers said they begin by tweaking a site's template and making other superficial changes like adjusting fonts, colors and type sizes. After that, they manipulate a Web site's structure, coding and presentation so it shows up more prominently in Web searches.

In an era when Web use is increasingly search-driven, making sure people find your site makes all the difference, Hermansen said. "Once you beef up traffic, everything else just happens," he added.