Why I bought an Amazon affiliate site for $45,000

This month, I acquired an Amazon affiliate site in the “Tools and Equipment” category. The site reviews a range of heavy equipment for electricians, builders and car mechanics. I paid $45,000 for it via a broker called Empire Flippers.

In this post I will explain

  • why I decided to buy a site instead of building it myself
  • why I decided to buy this specific site
  • the pros & cons of the site
  • the risks of buying an Amazon affiliate site
  • the price and valuation
  • how I plan to grow the site

I’m writing the post I would have loved to read before making the purchase. I couldn’t find anything like this online. Most people are very secretive and don’t want to reveal anything.

I hope you enjoy this post and it helps you in your own decision making. Remember to subscribe to my mailing list if you want more articles like this in your inbox.

Building vs Buying – the key difference

Creating a website from scratch is hard. Google takes time to notice your site and then waits before sending you traffic. This is known as the “sand box” effect. You publish a lot of content, hustle for back-links, and then wait as Google prudently starts to send traffic your way. It’s a slow process. And like any startup venture, there is a risk that it might not work at all. You could put in weeks of work and get zero traffic.

On the other hand, buying a website usually means buying an existing stream of cash flow. The engine has already started. There is traction. Money is coming in. The risk profile is lower. You pay for this privilege, but it can help accelerate the upside and reduce risk of failure.

Since I am already starting a new website with ChanceryCollection.com, I wanted to diversify my portfolio. Buying a site would allow me to go faster. Psychologically, it is also reassuring to be investing time, money and effort behind something that is already generating money and growing.

What I liked about this site

I was attracted to this website for several reasons: it’s in a large evergreen niche, it’s hard to replicate and it has strong fundamentals.

Large evergreen niche

There are 270 million cars registered in the US. It’s a big market. The car is both a status symbol and a passion for many men. Car owners have been taking care, modifying and improving their cars for decades. There are thousands of hardcore car and truck enthusiasts across the country.

You could argue Uber and others are working hard to deliver autonomous vehicles and this will change car ownership forever. Perhaps – but I don’t see this becoming mainstream any time soon.

Difficult to replicate

The site covers a technical niche. It reviews complex mechanical parts such as engine tuners, carburetors, cold air intakes, and other truck modification gear. Parts most people (including myself) have never heard of. This isn’t like reviewing a protein powder (this is how I made my first ever Amazon affiliate earning. I sold the site since but the article is still online). Reviewing car parts requires technical understanding and knowledge. This is a good thing because it means such a website is harder to replicate.

The car parts sold on Amazon are expensive, often worth several hundred dollars. Fewer units are sold then in other categories (e.g. wireless speakers). Each product available on Amazon has fewer customer reviews. It makes sense for a 3rd party website to exist to provide expert reviews and guide customers to the best products.

Strong site fundamentals

There are several factors to look at when doing a website due diligence, including the trajectory of key metrics (visits, earnings), SEO rankings, quality of content, backlink profile and more.

This site looked strong:

  • Steady growth: web traffic and Amazon affiliate earnings progressively trending upward: no funny jumps in traffic or earnings
  • Strong backlink profile: 34k backlinks from 508 different domains
  • No PBN used: no owner did not rely on Private Blog Networks
  • Solid SEO: first place SEO rankings on several important keywords

There were only two downsides I identified when reviewing the site:

  • Shallow content – some review pages seem superficial. This is both a downside (competitors could come in and outrank me) and an upside (I will improve the content and drive even more traffic)
  • Relatively young site – only 1.2 years. I prefer sites with at lest 3 years of existence. Age is a ranking factor in the eyes of Google.

How is an Amazon Affiliate site valued?

Website are usually valued using a multiple on average monthly earnings. For example, early 2019, Amazon affiliate sites trade anywhere between 30-40 times their monthly earnings.

This multiple is higher/lower depending on the traffic/earnings growth trend (increasing is better), site age (older is better) and general buyer appetite.

In the case of this site, the $45,000 price equated to 32x the last 6 monthly amazon earnings ($1,400 per month).

Brokers and sellers often value a website using a multiple on “net revenue”. (Net revenue = Revenue – Costs). I really dislike this method because the costs are often greatly undervalued. Sellers usually don’t report half of the real costs. It makes it very hard to compared different deals. Some sellers claim to write all the content themselves and/or not to have any tools or costs outside hosting and claim almost negligible costs.

What are the risks?

There are several obvious risks when buying an Amazon affiliate site. This article does a great job at summarizing them.

From my perspective the two main risks are:

  1. Amazon reduces their affiliate program commission or shuts down the program completely. This is possible. Amazon has reduced its commission several times already. It’s a real risk. If this would to happen again, may sites would panic and many would lose a lot of revenue. However, I don’t think the best sites would get wiped out completely. They would signup to other affiliate programs. They would find alternatives.
  2. A new Google algorithm change negatively impacts the rankings of “review sites” and slashed traffic. This is also a real risk. Google routinely updates its algorithm and weaker sites generally get penalised. This happened again recently in March 2019. Many sites in the Your Money Your Life niche (personal finance and health blogs) got smacked.

How I plan to grow the site

I decided to buy the website because I saw the potential to significantly increase earnings. Over the following months I plan to:

  • Publish great content that isn’t just about product reviews. This should increase the domain authority, overall SEO and reduce risk of a Google penalty
  • Create a process to accelerate link-building. Having great content will be key to this
  • Start collecting emails to feed an email autoresponder program or regular newsletter
  • Diversity traffic from solely SEO: I would like to test driving traffic from Youtube and Instagram
  • Medium term: explore opportunity to create additional review streams outside Amazon. For example a membership program for truck enthusiasts

In upcoming posts I will giving you a back stage view of how I am doing this and the results.

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Seb

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