How a First-Time Buyer Lost $47,500 On a Website Acquisition

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Starting a new online business from scratch and growing it to profitability can be a grind. In many cases, it takes several years before the business turns the corner.

Buying an existing website that already has traffic and revenue allows you to skip those challenging and frustrating early years. While acquiring an online business can be an excellent investment with high ROI, it also involves a lot of risk. Unfortunately, many acquisitions fail.

While I normally publish success stories, it’s also worth looking at failed acquisitions to see what went wrong and learn valuable lessons. Recently, I came across Dana Hooshmand, who was kind enough to share the details of his own experience with an acquisition gone wrong.

Dana purchased his first website in 2020 after spending months analyzing many sites for sale on marketplaces like Empire Flippers and Flippa. He paid $52,500, and within just a few months, the site had become essentially worthless after losing almost all of its traffic.

“Treat buying websites as risky,” Dana warns. “There’s a significant risk that your website’s value will fall to zero.”

Deciding to Buy a Website

Dana has a traditional corporate background. He worked as a management consultant, which he describes as “a person who uses spreadsheets and an ‘I’ll do whatever it takes as quickly as possible’ corporate hitman attitude to make millions for other people.”

Although he was doing well at his job, Dana said, “I got tired of donating my best hours to optimizing the last 0.5 percentage points of someone else’s business. I decided my metric for whatever I do should be how much I enjoy doing it every day — even if I weren’t being paid. For me, that’s traveling, learning other languages and about other cultures, plus keeping my hobbies alive (motorcycles and combat sports).”

As a result, Dana and his partner considered how they could live their ideal lifestyle, and blogging seemed like the obvious choice. They started building websites in 2018, which led to the interest in purchasing a site that was already profitable.

The Acquisition Process

Although Dana had never purchased a website, he has a background in acquisition due diligence, thanks to a previous role at Bain & Co. He also offers consulting and provides third-party independent valuation and analysis. Because of his background, Dana took the due diligence process very seriously when he was considering potential acquisition targets.

Dana analyzed several sites listed for sale, but ultimately, only one of them matched his criteria. It was an Amazon affiliate site about DIY garage renovation ideas. The site had around 40 pages of content, mostly lists of the best products, for example, “best lighting systems for garages.” Many of the articles ranked on the first page of Google and generated affiliate commissions.

“I liked the industry because it was one I could understand,” Dana said. “Garages! I like garages myself, and I could also see that this industry was underserved online.” He also liked the affiliate business model since he already had a few affiliate sites.

During due diligence, Dana analyzed details like:

• Amazon sales data: making sure the Amazon sales matched the products promoted on the site.
• Search data: making sure the site ranked for keywords relevant to the products that were promoted.
• Traffic: ensuring the search traffic was genuine.
• Backlink profile: checking the domain rating and making sure there were no manual actions in Google Search Console.

Dana had been watching this particular site for a while. When he first came across the site, it was listed for $80,000-$90,000 on Empire Flippers. During that time, the site lost about 40% of its traffic from Google’s May 2020 update.

After the traffic declined, the price was reduced. Dana thought the site might recover in a future algorithm update. He told me, “I thought, naively at the time, ‘OK, so Google has already done its traffic correction on this one, and it won’t get another one.’ Live and learn.”

Based on his due diligence, Dana moved forward with the purchase at $52,500. The first few months he owned the site, it got about 500 visitors per day and made about $1,500 per month.

The Downfall and Aftermath

Around November or December 2020, the site experienced a massive and sudden loss of about 80% of its traffic. After the traffic loss, Dana made some changes in an attempt to regain the search rankings. He disavowed paid and spammy links, fixed broken links, created some new pillar content, and even deleted a few pages. None of those efforts helped.

The site still sits in Dana’s asset portfolio today, but it only generates around $1 per month, down from the $1,500 per month it made at the time of the acquisition. He made about $5,000 from it during the first few months before the traffic dropped, so he lost about $47,500 from the acquisition.

Although Dana made an effort to revive the site immediately after the traffic dropped, several of his other sites took off. As a result, the purchased website hasn’t been a priority, so it sits untouched.

Lessons Learned

Although Dana recognized the importance of due diligence, he missed a few red flags:

• The site lacked unique content. Although many of the pages ranked well in Google, there was nothing original about the content. The pages were basically just summaries of products for sale on Amazon without any added value or insight. This is the type of content Google has been trying to remove from the search engine results pages (SERPs).
• The previous owner had purchased links. Buying links is against Google’s terms and puts sites at risk. The Empire Flippers listing did disclose that links had been purchased, but Dana didn’t place much emphasis on this detail.
• The site had a previous manual penalty. The penalty for buying links had been removed, but the previous owner bought more links from the same agency, increasing the risk of another penalty.
• The site had already lost significant traffic. Dana thought the site might recover the lost traffic, but it should have been a sign that Google wasn’t happy with the site’s content.

Dana purchased this site at Empire Flippers, but this article isn’t intended to bash Empire Flippers. Similar situations happen with sites purchased through any marketplace or broker.

Although Dana overlooked some red flags, he was also the victim of unfortunate timing. Niche affiliate sites like the one he purchased had performed well through the years leading up to the purchase, but Google was beginning an ongoing effort to clean up the SERPs. In fairness to Dana, most content website owners didn’t see the search algorithm changes coming, and thousands of sites were severely impacted (and even more have been impacted by updates since then).

Today, traffic diversification is more important than ever. Sites, like the one Dana purchased, that rely on Google for almost all of their traffic weren’t considered a high risk to most buyers before 2020. The algorithm updates of the past few years have shown just how dangerous it is to rely on a single source of traffic. Unfortunately, there are many other stories just like this one.

When I asked Dana about the lessons he learned through the experience, he said, “The main lesson I learned is don’t buy any online business you don’t fully understand — that you couldn’t have built yourself with time and knowledge you currently have or could potentially have.”

He also points out that “SEO-dependent websites are inherently high-risk. Google makes tweaks to its algorithm that affect middle-ranking website traffic by 20-30% every few months. Sometimes it’s up, but often, it’s not.

“No matter how much you believe in the quality of your text content, I would no longer invest more than 25% of my time and effort or budget into one source of traffic. There should be a balance between organic, socials, and direct traffic (including email).”

Another important takeaway is that it’s wise for new buyers to start small. Dana told me that one of the sites he considered buying would have been a much bigger purchase. Starting small allows you to minimize risk while getting valuable experience. Of course, what’s “small” is relative, but you shouldn’t buy a site with money that you can’t afford to lose, especially if you’re a first-time buyer.

Dana said that now he plans to sell any site he builds or buys (he hasn’t bought any sites since this one, although he’s considered some) within about two or three years. The only exception would be sites that he views as a hobby or passion project.

Today, Dana manages a small portfolio of sites, including Discover Discomfort (a blog about languages and travel) and Motofomo (a blog about motorcycles).

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