Selling a Web Service (TweepML story — part 4 of 4)
[Read part 1, part 2 and part 3]
I never sold a business or a website before so everything about selling TweepML would be a new thing for me. I was determined to sell it through an auction website, but before doing that I thought it would be smart to try to find a buyer amongst people I knew who would find value on TweepML as a complement to their service. So, I created a list with about 50 names of entrepreneurs, executives and startup investors and sent them an email.
In less than 24 hours I’ve got 12 people asking “how much?” How much? How much? The value of a product is very complicated. Just a few things to consider is traffic, brand, team, technology, leverage, lift, revenue and interest by multiple buyers. Instead of using any specific metric, I decide to use my gut feeling of how much they would be willing to pay. Initially I was asking $25,000, but then I raised to $35,000, because $25K for a PageRank 6, good brand, with hundreds of thousands of Page-view service seemed too little.
It took a long time for people to “pass” on the deal. You never know who’s really interested, who’s willing to pay cash or just equity, who’s really interested in hiring you, etc. So I went to every meeting I was invited to “talk about TweepML”. All of those were dead ends. It was time to auction off TweepML, which, by the way, I was very excited about since I was sure I would learn a ton about auctioning off technology assets and web services.
Flippa Sucks
I was in doubt between using eBay or Flippa.com to sell TweepML. At the end I chose Flippa because they are in the business of selling websites, so I thought their own traffic would help me. That was a mistake. People who go to Flippa to buy websites and domains are primarily looking for affiliate/parking-domain value, not for a web service. On top of that, Flippa had the worst bidding system in history!
You know how you go to eBay and say you want to pay up to $100 for an item, but you only pay up to $1 more than the previous bidder? Well, Flippa is not like that. You have to go to the website, make a bid and if someone outbids you, you have to go back and make another bid. Seriously! How many entrepreneurs, founders and investors have the time to keep going back and putting bids on this site? Even today, I’m not sure how good Flippa was at communicating bidders about new bids on auctions they were bidding on, or telling bidders, “hey, only 3-days left”, “only 1 day left”, “only 6 hours left”, etc.
To make matters worse — and I didn’t know that — if someone puts a bid on the last 4-hours of the auction, the auction is extended by 4 hours. I know they are trying to mitigate some problem that I’m not aware off, but the issue is that my auction ended on a Friday night, the worst time for a business person to be buying a domain.
The reason Flippa sucks is not the service is buggy or doesn’t do what’s promising, it’s that it doesn’t do a good job at marketing my auction and making it a painless process for people that want to bid on websites.
The Auction
I knew from reading some eBay auction optimization tips a decade ago that starting with a very low initial price was a good thing. So the initial reserve was $4,800, the initial price was $200 and the buy-it now was $79,000.
First of all, the $79,000 was a back of the envelope calculation of someone paying $1 per unique visitor for a month, which seems like a pretty low value depending on what you are going to do with the user afterwards. Notice that it’s not $1 per user, but $1 for the first month and “free” after that. In other words, if you run the service for a year, you’d probably get half-million unique or more over that period for a one-time investment of $79,000. If you shutdown the service after a year, it would mean you paid less than $0.15 per unique. That’s a lot less than any campaign on Google Adwords.
The auction started slow until 4-days before it ended, when we started to see bids 2–3 times a day. However, I’ve got two offers outside of Flippa, so while I negotiated those offers I also increased the reserve for $10,000.
I sold it and here is a tip for you…
I end up selling TweepML for the reserve price of $10,000 which was a bid coming just a few hours before the auction ended.
If I had to sell TweepML again — and maybe the next service — I could have made twice or three times as much on the sale, because now I have a pretty good understanding of the process and what people are looking for when they buy websites. I’ve made many interesting mistakes selling TweepML on an auction website, some of the more critical ones are:
- I put on the listing we were making $200 a month in Adsense. I should have put ZERO. Once you put such a low CPM value, people who have an understanding of web advertising (i.e., the target buyer for TweepML) start to ask all kinds of questions, which derails the discussion about the real value of the service.
- I didn’t mention what the future of TweepML could have been. I purposefully withdrawn any information that could indicate which features would make the service more interesting. The reason was because I thought there was value in this knowledge to the buyer, so I only wanted to share with the buyer and not with potential competitors. The problem is that it’s very hard for buyers to have the strategic thinking I had for the last 6-months, so I should have put it all out there.
I’m going through the last moments of transferring TweepML to the new owner (to be announced soon) and turned out to be more work than I was expecting because there’s so many little things to take care of, like Facebook pages, blog, the domains transfer, the code and service, documents, database, etc.
Can you make a business of selling web services?
A lot of my friends are entrepreneurs as well. Some of them have small services they might be interesting in selling. A lot of them have side-projects — yes, it’s crazy the number of entrepreneurs who work or founded a startup and still has a side project. I’ve got a lot of questions from them about the viability of selling smallish services. You know, you have an idea, you pay someone to code it, you pay a designer for the logo, you put out there and you sell the service. Can you make $10,000? $20,000? $30,000 for each service you sell?
The easy answer is yes, I think there is a lot of opportunity with respect to create valuable services and selling to someone else that either wants to make that into a business, to incorporate into a suite of sites or products they already have, or to use that as a marketing tool for other services they provide. The hard part is how to find the buyer, but I also have some good ideas on that front and maybe I blog about it some other day.
That’s the end of the TweepML service as I’m handing off the service for the new owner. Tchau.
