This is a guest post written by Mushfiq, Founder of The Website Flip.
I’m personally a big fan of the revenue I can make from flipping websites. Ever since selling my first site in college back in 2010 for $25,000 I’ve been hooked. The average expected market multiplier for what a niche site sells for even jumped from 2020-2021, making flipping sites even more profitable.
That’s not the only way to make money with websites. The monthly earnings while ramping a site up are a great source of income. For some, it might make more sense to keep a site rather than sell. Those monthly payouts can be a major benefit.
Building or buying enough profitable niche and authority sites to create a passive income portfolio is a very profitable strategy.
So which strategy is better? How do these two different strategies for profiting from websites compare and contrast? I deep dive into the pros and cons of both to help anyone struggling with this decision.
Let’s get into it!
Selling Websites vs Holding Websites
There’s a very different focus on selling a website versus holding one. I practice both considering the situation, and it’s easy to start with one strategy in mind and then switch as things change.
The strategy of building and holding websites tends to be based on creating a solid monthly income that increases by growing a single site or building multiple sites. Anyone talking about building sites for passive income is looking at this strategy, though very little about it is passive in the beginning.
The same process is used for building a profitable website to sell, but in this case the pay-off isn’t repeated monthly payments stretching into the future but a large cash payment that is often 30x to 45x the average monthly earnings.
This infusion of cash can further be used to invest in a business, build or acquire new sites, or take care of personal debts and expenses. The large amount of money in one payment means more options for how to use it well.
Plus once payment goes through the money is there. No worries about future affiliate program changes (i.e., Amazon commission cuts) or search engines deciding not to rank your content anymore.
To understand which one is the best for any given website build or situation, it’s important to understand both models.
Analyzing the Holding Website Model
When owning a website for the long-term the income model is obvious. Build traffic, monetize, and get paid every single month.
Most affiliate programs and display ad programs pay monthly. There might be a two month delay to finalize numbers before the very first payment, but once the payments start they are consistent.
This leads to monthly payments. This might supplement income to a job, or be enough to go into building websites full-time. Many times with a first successful site many marketers use that to both act as a safety net and provide the income to invest in a second site.
I am looking to flip because I know with the infusion of revenue from a large sale I can further invest and scale other sites.
However, if someone did not have that confidence or was looking for a passive source of income to replace a job, holding might seem like a more attractive option.
3 Cases for Holding a Site Long Term
There are several good reasons for holding not only one niche site long-term, but several. Generally marketers going this route do eventually want to end up with a portfolio of sites that way if one loses traffic it isn’t a devastating hit to the business.
1. Steady Cash Flow
Recurring income from work already done is a major part of the holding strategy. Monthly payments from display ads, affiliate ads, and other monetization methods means a steady cash flow month after month.
More traffic means a bigger monthly income. The consistent monthly payments make budgeting easier, and give an income producing safety net when there’s an emergency or unexpected expense.
2. Can Become Passive Income
While it always takes work to get a website to its full potential, once a site is earning a large amount it is possible to outsource writing and publishing to keep new content coming in.
With a portfolio of sites, once they’ve been built to a high enough income, they can be treated as passive income. It’s like a portfolio of online real estate and the sites are your rental properties bringing in the cash every single month.
3. Freedom of Time
I understand arguments that a single big payment from a website sale can also provide this, it’s worth keeping in mind that planning and action still needs to be taken to replace that income.
For someone looking to have more control over their time, steady monthly payments that take care of all the bills and then some gives even more.
This time can be used for building a business, for traveling, taking care of family, or whatever. As long as those monthly payments keep coming in, there’s nothing that has to be done “right now” to find more income or figure out a new business after selling an old site.
4 Cons of Holding a Website
While a passive income portfolio of niche sites can certainly be a great business model, there are some potential negatives to going this direction.
1. The “Dreaded” Google Algorithm Changes
I’m not as worried about Google changes as many others because I’m very systematic in how I create really high quality sites that Google will love. That doesn’t mean I’m worry free, but there’s less concern.
Google provides the overwhelming majority of search results so if they make a change to how they rank sites that tanks one of my sites, I’m going to feel that impact. The Internet is full of stories of people losing almost all their earnings overnight with a single update from Google.
If I put all my eggs into one basket with a single site, I would be at risk. A portfolio of sites can drastically reduce these risk.
2. Affiliate Program Changes Can Wreck Earnings
Amazon wrecked a lot of high earners’ numbers with the 2020 rate update heavily slashing the majority of their high earning commission rates. Some of the high earning affiliate programs I started with on my original 2008 site no longer exist.
Affiliate programs can change rates, earnings, terms, or even fold up however they see fit. When you get a one-time payment for the site, you don’t have to worry about that anymore.
As long as you’re actively building niche sites you have potential for affiliate changes to cause your earnings to bomb.
3. More Stress
I don’t like stress. There’s a reason I’m so big on systems. Aside from becoming more efficient and successful, having those systems in place cuts down on stress. Don’t know what to do? I check the list.
Even then, there’s always going to be some stress with maintaining a portfolio of niche sites. Google announces an update. Amazon announces changes. A partner I negotiated better affiliate terms with cancels the contract.
These issues will come up and are part of running a website business. Definitely more stressful than the one-time sale.
4. Money in the Hand
I’ve done this long enough to know when a niche has a seasonal or holiday sales boost or not. Whether it’s display ads, Amazon commissions, or information products, it becomes easier over time to accurately estimate how much each site makes based on traffic numbers.
However, estimates are just that until the money is actually put in my bank account. While it’s easy to estimate how much money a site is going to make over the next year or two, until it’s paid out it doesn’t exist.
Any major changes by Google or affiliate programs and not only do those future estimates potentially change, but the amount the site can sell for can drop dramatically.
Analyzing the Selling Website Model
I’m personally a huge fan of selling websites. I’ve built them from scratch before selling as well as bought an existing site, improved it and scaled earnings, and finally sold it for a much higher valuation.
Both methods can work. The goal is simple: get earnings high enough to drastically improve the likely purchase price.
Getting 30x monthly earnings or 40x monthly earnings in a single payment can be an absolute game changer.
4 Pros for Selling a Site
A profitable website is going to be in demand. Selling profitable websites can make for a very lucrative career when done right.
The pay-offs are huge and the demand for profitable sites is only growing.
1. The Life-Changing Big Pay Day
My first site sold for “only” $25,000. But for a young college student that amount seemed enormous. For many people getting that much at once would still be potentially life-changing.
This buys the seller time to decide what to do next. They already have funds to invest in another site to improve and sell (if they want), take care of past bills, put in a retirement account, or start a new business. If the payout was high enough, all of these things are possible.
Once the sale from the site is done the money is in the account. This sense of security is harder to find with a website portfolio.
2. More Options from Pay Out
If a site is earning $3,000 a month, that’s good. It’s also not $90,000 or $120,000. That’s the range of what a site earning that much a month could be expected to go for.
There are limitations to what $3,000 can do in a month. There are many more options for what the $90,000 or $120,000 can do. This means more options for the seller, and more opportunities that might not be available from a small monthly payout.
3. More Insulated from Online Changes
If I’m holding a portfolio of niche sites that are monetized through display ads and affiliate deals, every change to those things can result in losing money. Sometimes a lot of money.
When relying on a monthly income these changes are powerful and affect the bottom line. When selling sites a single change doesn’t severely alter my entire income stream. I have time to adapt and change.
4. Still Collect Monthly Income Until the Sale
While building the sites up for sale, I still collect monthly income they’re earning. Many of the platforms require a 6, 10, or 12 month history of sales to get the “average monthly sales” that are then multiplied to determine the value of a website for sale.
All that time while building up the site those earnings go into my bank account, or get reinvested to speed up the process of making the website even more valuable.
3 Cons of a Website Sale
While I am a big believer in the benefits of flipping websites based on my own experiences, there are potential cons to going through with a sale. It’s important to mull over these points before making a final decision on any transaction.
1. The Monthly Payments Are Gone
While the big payoff is nice, the reassurance that comes with monthly income is gone. If I’m working on multiple sites or continue with a regular job, this isn’t an issue. However, if those monthly payments have become a major part of the budget that can be a scary thing.
Speaking of budgeting…
2. Budget Planning
Budgeting is easier with the monthly payments coming in on a consistent basis. While a big chunk of money all at once is great, it does require smart budgeting and planning.
At first it’s tempting not to worry about these issues. Right after getting a big payment there’s nothing immediate that can cause huge problems.
But without that consistent income, planning for the long-term is critical to get the most out of that money from the sale.
3. Bad Timing
There’s always the chance of bad timing. Website owners who sold in 2019 might be kicking themselves in 2021 seeing as how the market average has jumped from 30x monthly earnings in many cases to up to 40x.
There’s always the chance that the topic of a niche site takes off just after selling it. The potential of bad timing matters, especially if I’m lukewarm on selling a particular site, anyway.
Who Should Flip and Who Should Hold?
There’s no right or wrong answer to this. Many people have sold a site and used that money to build a portfolio of websites for passive income. Many others have built up a portfolio of passive income sites then eventually sold them for a major pay off.
Both methods are viable ways of creating an online business.
At that point it’s up to each individual to know their goals, plans, and temperament. If every single announcement of an affiliate terms of service change or Google update causes heartburn, then selling is going to be a better long-term strategy.
If the dream is world travel while doing as little work as possible, building a portfolio of sites to hold makes a lot of sense.
Switching from One Strategy to the Other
The strategy that works best will vary based on individuals, and where each person is at in his/her online career. In many ways this isn’t an either/or. If I’m building a website to sell, I’m earning all those monthly payments until the moment I sell it.
If I’d rather have the monthly payments, I simply don’t sell the website. If the large cash pay-off matters more, then I put it up for sale.
There are many great benefits to holding websites and letting the passive income roll on it. I’m also a huge fan of flipping and selling sites. This has been an incredibly profitable business model for me.
Both strategies have pros and cons. Now that the benefits and disadvantages of each are laid out, all the information is here for each person to make the right decision for their online business strategy.
Mushfiq has been buying, growing, and selling website assets since 2008. His first exit was in 2010. Since then, he has done 175 website flips with multiple 6-figure exits. His free newsletter, The Website Flip, covers case studies on his portfolio of sites, website flipping guides, and exclusive websites for sale.