Category Due Diligence

When purchasing a website, you want to have free traffic from search engines (organic traffic). To see what kind of traffic that is, we want to determine what keywords the site ranks for. There are buying keywords and just research keywords. Having a nice mix of both is great, but the money is when people are looking to make a purchase (end of the purchase lifecycle).

A long time ago, Google Analytics gave us the keywords people used to find a website. You could just share the analytics accounts and be golden. Now that has moved into the search console, which is more of a private area. So how do we find the keywords a site ranks for without getting access to their accounts?

Well, our reliable tool SEMrush.com can do it! They offer a free trial if you want to test it out. There are also a bunch of other similar services (the same services you use to check backlinks). Most of them are paid services as you can imagine this data is worth real money.

To start with, let’s see how many pages Google has indexed for our site. Type in “site:airbnb.com” to see what pages they list (replace airbnb.com with the domain you want to research). Our search came back with over 15 millions results, wow! Approbo.com, a much more manageable <20 pages. With millions of pages, we can expect them to rank for quite a few keywords.

Let’s log in to SEMrush and type in our domain name, and click “top organic keywords” down near the middle; it brings you to this screen:

That is a lot of information, but we can see it is sorted by keyword volume which is nice but doesn’t tell us how we rank for keywords. So first step is to sort by the position, click “Pos.” One interesting thing to note, Airbnb is so popular they rank for www which is crazy! Currently, they are at result number 47.

SEMrush is estimating their organic traffic at 3.8 million dollars! That is a gift that keeps on giving.

Now sorting by position:

We can see they are ranking for a good amount of Long tail keywords, things like “cabins near tucson az” which doesn’t get many searches, but they are the first result (besides a bunch of ads of course).

The best way to massage this data is just to export it (click the export button) which lets you sort however you like inside excel. What we are really looking for is keywords that have a high number of results and high position ranking. NOTE: Not all keywords are alike. There are buying Keywords, research keywords, and what some call consideration keywords. These all target different things in the buying lifecycle. In the example above you can see “hire a beach hut”, these are buying triggers as users already know what they want, just trying to find it.

Another keyword like “Traditional townhouse” is a research keyword, they are looking for information about what a townhouse is, what they look like, etc. Those are nice but far away from being an actual purchase. These are great candidates for ad retargeting which we will write about soon!

 
Contact us to have a quick seller consultation and we walk through your business

Backlinks are one of the highest ranking factors in Google and many other search engines. These are links to your site (or the website you are going to purchase) from an outside site. They often have anchor text, which is the part of the URL that explains what the link is. The better the site linking to you (in the eyes of the search engine), the better the boost/juice you get from them. You can check previous articles on how to research the domain name, or how to sell your online business.

What are we looking for when checking backlinks?

Well we want to make sure they haven’t been using spammy SEO techniques that have links from thousands of bad sources. Once you start to learn what to look for, it becomes very apparent that’s what they did.

For example here is a URL: “<a href=”https://approbo.com/this_is_the_url”>Anchor Text</a>”

There are a massive number of tools out there for this, here are a few:

1. SEMrush  (paid)
2. ahrefs (paid)
3. http://openlinkprofiler.org/r/ (free)
4. Majestic (paid)

Since I have a subscription to SEMrush, here is an example using their dashboard and tools. Note, this is for researching a web purchase, not how to build your own backlinks. You can do the same thing to research competitors and go from there. There are tons of articles on building backlinks, just keep in mind, great content rules!

• In SEMrush go to domain analytics -> overview and type in the domain name you are researching. Let’s start with airbnb.com.
  • In our search it shows:

From here we can see there are 2.6 million backlinks and more importantly, 36.9 thousand domains that refer back. Domains have been shown to be more important from google, since having different web properties link back is a sign of higher popularity/good content. If the same website links back on every page, then it doesn’t get the benefit of each link individually. They are aggregated as one link (we believe).

• Now we click on the 2.6M and start to view the types of links, anchor texts, and get an overall feel for what is out there.

That’s a lot of info!  We can see they get 5.8 Million searches, the backlinks are mainly text based (91%), some images (8%), and it’s about 48% of follow links. Many believe follow links only matter, but it’s possible Google looks at nofollow links as well to guess how worthy a site is.

We can start to see the anchor text that shows up near the bottom. The page score is SEMrush’s belief in how trustworthy the page/site and how much it thinks the search engines like their content. We can also see how many links the page has to other websites (external) and to their own website (internal). The top result has many more external links than internal, which sounds like more of a directory type page.

From here we can click on each backlink and investigate, we want to see what type of sites of are linking to our target. This is often called the smell test, are these stinky sites? Spammy low quality content sites? If so, then that could mean trouble down the road.

It’s also a good idea to run this through multiple tools and see the difference between them. Some tools are better at finding the spammy links than others.

A good metric to look at is the percentage of links to domains. In this example we have 2.6M links with 36.9k domains, which computes to around 14%. This is a decent amount of domain diversity. We typically look for 10-40%. This also applies for the referring IP addresses, we want to see almost the same amount of different IP’s. In this case it’s pretty close, so that’s good.

Anchor Text Diversity

Now let’s click on the Anchor Text tab to see what the top fields are that people use to link to this site:

Here we can see the top result is “airbnb”, which looks pretty natural. The next one is empty, which means they only provided the URL and not something between the <a></a> tags.

So keep going down this list and see if there are any spammy texts, like pharmacy links, or random coupons. We are also looking for signs of a PBN or private blog network. These are going to be random sites that may or may not be in a related industry. Typically these are very thin sites running blog software with a few articles. They are just sending links/traffic to the web property. It is important to ask the seller if they are using these sites, and if so do they come with the sale. If not, what guarantee do you have they are going to stick around? We tend to avoid PBN deals.

It is important to note that the backlink profile isn’t going to be complete. Many sites ban crawlers in their robots.txt file, so you probably are not going to find the good PBNs through this. They are only targeting google and other search engines, so they want to ban the rest.

So these are the main points of a backlink profile, the more you look at sites the quicker you can get a sense for what the site did for it’s historical SEO. Many sites tried to spam comments, find wordpress vulnerabilities, you name it they did it. While that worked for a bit, Google has a ton of PhD’s who’s entire job is to find these issues and weed them out. You can also check archive.org to see if any of the linking sites might have changed in the past as well!

If you are interested in selling your online business, send us a note and we can chat.

What are the tools that we can use to check domain name information and its history? This is important so we can see where the domain has been, how many times it’s moved around (hosting companies) and how long it’s actually been in service. We can also research who owns it, and how many other sites they own that might be a conflict of interest.

The first tool we are going to use is “whois”. You can use this from a terminal (MacOS or Linux), or you can use an online one like:

• https://whois.domaintools.com  (paid)
• http://www.hosterstats.com/historicaldns.php  (free)
• http://whoisrequest.com/history/  (free)

Type in the domain name or run “whois domain.com” from a command line and you can see the details. Important fields:

Updated Date: 2017-01-19T08:19:54.000Z
Creation Date: 2006-01-18T14:10:49.000Z

Here we can see when the domain was last renewed and when it was originally created. If the seller is claiming the business is five years old but the domain creation date is only two years old, they will have to explain. There are circumstances where the domain is dropped and re-purchased from another provider, but that is rare if it’s a real business (everything is auto-renew these days).

Also check the owner of record, this is typically private so you won’t see much there.

The next tool is a whois history. This will show the information above, but how many times the domain has changed accounts and been renewed. Many of these are paid services now, so purchasing a domain report from domaintools is the way to go. If you are doing due-diligence on a website and have already submitted an LOI, this report could save you so it’s worth the $49.

There is some basis for SEO purposes on domain history. It is believed that google looks for clean domain history as a ranking signal. So if the domain has moved around a bunch, it might look spammy to them.

When doing domain research, it is also useful to see other domains registered to the same person or company. This is called reverse whois. Type in a name or email address, and their database will show other domains they might own. If they use privacy mode, then you probably won’t find much useful information.

Reverse whois: http://viewdns.info/

The next step on checking domain health is looking at blacklists. This can tell you if their domain has been reported for email spam in the past and can cause harm down the road.

An all encompassing tool: https://mxtoolbox.com/SuperTool.aspx

Run the blacklist check and make sure it comes back OK for all the lists. If there are some issues here, it could take time to fix them. If the business depends on email marketing, this will cause issues down the road.

The last step we recommend it checking the hosting history. See how many different IP addresses it’s had over the years will tell you if it has been moved around a lot. Ideally you want just a couple moves as this signifies a stable site. If it’s been sold a bunch of times, you will most likely see different IP addresses across many hosting providers.

Tool here: Viewdns Tools

Type in the domain name in the IP history box and it will show the different providers used. We like to see at least 1 year between hosting providers, better if its only a couple for the entire history. If it is an e-commerce site, they are most likely sticking with one of the big players (Shopify, BigCommerce, etc) so they are not going to move the site. It takes too much work and lost sales.

We hope these tools provide some value in your business!

Doing proper Due Diligence on a web site can be daunting. Don’t despair! The more you do this, the quicker and better you get at it. There are tools all over the internet that can drill  into where traffic comes from and what the site has been up to.

The main question we are trying to ask is: “Is the seller properly representing this business, and is this something I want to own and manage”. There are always going to be problems, you have to determine if your level of problem-solving and knowledge matches up with the business you are looking at. If not, can you easily outsource those missing parts? Many times a seller has custom programmed a business from scratch, and they say it’s easily taken over by someone else. That is rarely true, many are not good at documentation, so taking over someone else’s code is time consuming and expensive.

Before digging into the business, thoroughly review what the seller has provided, so you can match it up with what you find and ask pertinent questions.

Let’s start with the “location” part of a web business:

• What software is the site built with or written in? Are you familiar with this type of programming?
  1. You can use web browser tools such as Built With to find out information about a site.
• Who is the hosting provider?
  1. Can this be transferred over easily or is it shared with their other websites?
• Is this a completely managed provider, or does the seller run part of the server? VPS?
  1. Do you have to maintain a server? Do you know how to do that? Might be extra costs if not.
  2. Do you understand Windows server architecture vs. Unix/Linux?
• How many servers does it run on and what are the costs for this?
  1. We are looking to see if the server’s are not sized properly for the application which might increase costs down the road.
• Where is the domain stored?
  1. Verify this with whois information (http://whois.domaintools.com/)
  2. Who is the registrar for the actual domain name?
  3. Can they hand the account holding the domain over, or do you have to initiate a transfer process since they own multiple domains (typical and takes time)?
• What does history say about the domain itself?
  1. If you have a membership to domaintools.com, run a domain history and see where it’s been
  2. Another free alternative is http://whoisrequest.com/history/
• Check out archive.org to see how long the site has really been around in it’s current state, and what it looked like in the past.
  1. Did the seller only add content in the last year?
  2. Was it a spam site before then?
  3. Was it something that company web filters are going to catch and limit your user base?
  4. We are looking for the true site age, if it’s really only a year old then the numbers are probably misleading. This may be due to a PBN (private blog network) providing traffic.

Ownership

• When was the business last sold or when did the seller pick it up?
• What did they pay for it if you can find that out. Many auction sites list old auctions to see this.
  1. In this regard, how many times has the site been sold or tried to sell?
• What things did they add to the business? Did they add value or just sit on the property?
  1. If they state they have not added anything, and traffic is going up significantly, then something is likely amiss.
• Check is the website blacklisted, or spammy content inside the site itself. You can also check the domain name against mail black lists to see if they have sent spam with the domain name. This could give issues down the road if you want to email customers: https://www.dnswatch.info/dns/rbl-lookup
• Also check legality of the site, does it infringe on copyrights?
  1. Does the domain name itself infringe? Do they have permission to use it?
  2. Are they licensed for the software or plugins they are using?

Engagement

Here we need to dive into their analytics report(s), typically start with screen captures that are provided and we can verify these numbers in the Live Screen Share portion. Sellers are able to inflate some of these numbers with scripting so trust but verify.

Metrics that matter:

• What is the bounce rate (this is people who only see 1 page and leave)
• Average time on site / session duration (depends on the site, should be more for apps)
• Pages per visit (do they only see 1 page and leave)
• Unique visitors per month vs. returning (we want unique but also a healthy number of returning)
• Are they capturing any unique events and getting custom data? This is great if so, we can see if people are clicking on certain items, if they are using e-commerce goals, or have some sort of funnel.

Traffic sources

• Only from organic? Did they ever test out a paid search strategy? A single traffic source can cause issues especially if it’s only from Google. What happens if the algorithm changes?
  • Preferably less than 60% organic, and the rest a mix of referral, social and paid.
  • If there is paid, how much do they spend on it? Is this managed by them or a service?
• Unique content? Try some copyscape.com searches and see if anything comes up as a duplicate.
• Check the referral sites, these should be mixed and less than 50% of traffic.  If a majority are from one or two links, that could end at any point so take this into consideration.
  • Are the referral sites relevant or somewhat spammy?
• Check the keywords the site ranks for, you can do this with tools from Moz, ahrefs, semrush
  • Are these keywords relevant?
  • Are they high value or high competition?
  • Are there others you can easily add and rank for?
  • This research should also include competitors, and what you can learn from them.
  • Are there easy wins to add value if you purchase the site?

Note:  Google analytics can be changed with imported data, so it’s not a 100% reliable source. Have the seller add you to their analytics account to verify the numbers, but take it with a grain of salt. Also see if the seller has a webmaster tools/search console account setup, and see what the main keywords they rank for are. If they don’t, this could be an easy way to increase the business traffic if you choose to buy it (add a sitemap, write content to the string keywords, etc).

Revenue

This is the fun part, see what the numbers are and make sure you can correlate where the revenue came from.

• What are the sources? ads, Amazon, affiliates, direct advertising, services, products, etc
• Are they seasonable or temporary?
  1. Will this impact your ability to own the business?
• How easy can they be replaced?
  1. Are there other sources you can swap out if one goes south?
• Can you transfer the revenue source account or do you need to open a new one? What is the approval process for that?
  1. Adsense accounts typically can’t switch so you need to change the Adsense ID on every page, is this script-able?
  2. Many affiliate accounts need approval before you can become a seller, what is this process?
  3. Which country are the affiliates in? Are you allowed to even be part of their program?
• Is the revenue from recurring billing? Can this account be transferred or does that need to be setup again for every client?
  1. If it can’t be transferred, be prepared to lose many clients who won’t re-add their information
  2. Paypal cannot be transferred unless purchasing the LLC, which brings up more issues of outstanding debts. Consult an attorney if you are considering an LLC purchase instead of an asset only purchase.
• What is the repeat customer percent? Is there high churn or do people keep coming back? This of course depends on the type of business.

Live Screen Share

If we have made it this far, then we are very serious about the business. We are going to coordinate with the seller and see a live screen share of their processes and revenue sources. We are looking at their accounts, whether it be Paypal, Commission Junction, Square, etc to see if the revenue numbers match up. This is also the best time to ask detailed questions about what we have found in our due diligence. Does the seller know the answers quickly?

• Check the local DNS / hosts file on the shared computer to make sure it’s going to the internet and not their local “fake” servers
• Watch how they login to the revenue accounts
  1. You click and run the revenue reports (so take control)
• Check period snapshots – 4 months, 1 year, 2 years for the various revenue sources
• Paypal – use caution, you cannot see what site the sales are coming from, it just goes into the account
  1. Do they pay for Paypal? For awhile you were able to get the merchant accounts for no monthly fee, make sure to take the fees into account if you need a new account. There is also an approval process that can take time.
• Check country origin of transactions, are they all foreign or the same country as the business.

Competition – internal and external

• What sites exist that are competitors, does the seller know of them?
  • Check keywords and ads your competitors place with the SEO tools above
  • See the backlink profile on their sites, where does the traffic come from?
  • Can you find other similar sites and get similar links?
    • It’s often a waste of time to try and get the exact same links, instead find other sites that you can work with that have similar audiences
• What other domains or websites does the seller own that could be competition now or down the road?
  • Are there any that have been neglected that could be re-purposed? Make sure they include those in the sale.

PBN – Private Blog Network

Does the seller use a PBN? They can be hard to detect, if there are backlinks from random sites that don’t seem to be relevant, this might be the case.

There are many arguments on either side of why they can be good strategies, from our perspective if too much referral traffic is coming from these sites, it’s a no go. It only takes one Google update to wipe out all of the PBN sites and your main traffic sources.

So does this sound like a lot to check? It is! We can help, contact us and we can take care of the technical due diligence for you.

–We are not licensed attorneys, so please do not take this as Legal advice. Always consult council before signing anything you are not familiar with and do not completely understand. —

An NDA is abbreviated as a Non Disclosure Agreement. They are typically sent by the seller (or seller’s broker) to a prospective buyer.

The idea is to give each party some comfort (these are always weighed more to the sellers interests, however). If the deal falls through, or never goes further, the seller needs some “insurance” that the buyer isn’t going to steal the information and duplicate the business (or improve their own similar business).

The NDA explains who the buyer can speak to about the business, this typically is their attorney, the seller, and the sellers broker. This allows the seller to restrict access to their employees and customers, in case they are not aware of the sale. It could cause harm to the sellers business.

If the buyer is caught in violation of the agreement, the seller can sue. Sellers can get “relief, claims, and damages” which is a fancy way of saying a good amount of court costs. Typically this is handled in arbitration without a lengthy trial, but that is spelled out in the NDA.

Just about every seller and seller’s broker will require an NDA to look at the business details. Once you sign this, they will send the business documents over. This is the only way to really make an assessment of what the business is doing, and you can start your real due-diligence. (Want some help with a web site purchase and due diligence? We can help, send us a note). This is also where you can finally see if the business is worth what they are asking.

What sections are important to read through in the NDA?

Well all of it of course! The items that are typically included are:

• Name, location, what the business does/operates
• The length of this agreement, can vary from months to years (3 years is typical)
• Who each party is, name, address, etc
• What information is covered, financials, contracts, trade secrets, suppliers, customers, employees
• Where and when information is sent – typically this is all electronic, but some sellers might want to use physical documentation

As a buyer at this stage, you should determine how the seller is communicating with you. Are they open and easy to work with? Are they responding with actual answers and not vagueness? This will determine a great deal down the road when you are ready to close and begin the very involved process of the hand-over.