Investing in Online Business – Full Guide

Starting and operating, or buying and selling a business is nothing new. It has been done, in one form or another, for millennia. And, with the digital revolution, investing in online business and websites has emerged as a new asset class. The internet age has changed everything, including how businesses are built, operated and invested in.

Investing in Online Business

Much is written about how best to start or grow a business online, but less is discussed about how to invest in online businesses and where to buy websites. Let’s discuss the benefits of online business investment and where to buy websites. This growing market and asset class offers wide open windows of opportunity to people at every stage of their investing journey.


Is Buying a Website a Good Investment?

Like any investment, cost and profit opportunity, and potential ROI are core considerations. Whether building or buying a website, many business investment considerations are the same. But some factors become critical much more quickly when buying an existing business (versus starting new). These include market or logistical risks, technical requirements, and operational demands.

But the rapid emergence of digital businesses as an asset class has come with impressive investment potential. David Fairley, of business broker Website Properties, estimates that these assets are “generating ROI of 20-35% annually, versus investments in equities, Real estate, precious metals etc.”

“The interest in online businesses and digital assets is exploding.” – David Fairley, owner and founder of Website Properties

Some key factors and considerations related to online business and website investing (relative to other investment types) include the following.

Income and Growth Potential

Online businesses naturally have greater market access since they are usually not bound by geographic or physical limitations. This implies a dramatically higher ceiling on potential revenue growth, which also results in greater assessed resale value.

And professional investors are starting to ‘get wise’ to this powerful combination of a borderless market and low operational costs. These factors are explored in more detail below.

Margins & Scale

In relative terms, online and digital businesses also have lower overhead, higher margins and are far more scalable. A content website can realistically be started with less than US$100 and some sweat equity, and be earning money in less than 6 months. It will not be much money, and it can take much longer, but it can definitely be done.

The low relative costs and high margins of many such businesses are rare in the traditional investment world.

If one person with a few dollars and some time and effort can do this (and there are many such examples), then consider what a more experienced operator or better funded investor can accomplish. This type of low relative cost and high margin is rare in the traditional investment world. And applying more capital in the right places can create serious leverage (and magnified returns).

Increasing Liquidity and Multiples

Buying businesses, including website investing, falls into the alternative investment category. And most alternative investments, at least in relative terms, are considered illiquid. This means it is harder to ‘cash out’ of such investments than it is with stocks, index funds, etc. There is no single, public marketplace – like a stock exchange – to buy and sell online businesses so finding buyers (liquidity) has, historically, taken time.

But all that is changing. There are more and more established market platforms and business brokers catering to this asset class. And this has attracted more (and better funded) investors. The result is that liquidity in the online business investment space has never been better, with 6- and 7-figure deals sometimes closing in just days.

…two years later and multiples have expanded another 10%. Despite market weakness in other assets, buyer demand for income-generating businesses remains strong. 

With more motivated buyers comes buying pressure, and that leads to expanding multiples. On Empire Flippers, one of the largest business brokerage platforms, the average TTM (trailing twelve month) sales multiple in June 2022 was 38.3X, meaning the average business sold for ~38X the monthly profit. That number was 34.8X in 2020, a year of explosive growth for online businesses of every type. So, two years later and multiples have expanded another 10%. Despite market weakness in other assets, buyer demand for income-generating businesses remains strong.

Low Risk, High Flexibility

As with any investment, considering one’s own goals and risk tolerance, and doing appropriate research and due diligence is essential. While it is still early days, many private equity shops and hedge funds have already discovered the green field opportunities that these online businesses can offer.

…investing in websites or other online businesses can generate income and capital appreciation well in excess of many other investment options today. 

In addition to the income+appreciation aspect and the low overhead/high margins, these professional investors are also attracted to the operational flexibility such businesses have. This lends itself to “roll-up” strategies, which focus on integrating multiple, similar businesses in order to achieve better scale and efficiency. But these characteristics, taken together, also result in a relatively low and attractive risk profile.

So, there is little question that investing in websites or other online businesses can generate income and capital appreciation well in excess of many other investment options today.

buying online business trend continues higher over time

Investing in Online Business for Income vs Growth

This is always an important consideration for investors. Just as one’s time horizon is critical to investing decisions, so too is determining one’s preferred components of return. This is just a fancy way of talking about investment income (dividend payouts, distributions, etc) versus capital appreciation (growth in the underlying asset).

Income and Capital Appreciation

The average stock market investor will be familiar with the idea that certain stocks pay high dividends but don’t move much in terms of price. Other companies, sometimes called growth stocks, pay no dividend (and might not even be profitable). Investors typically hold these stocks in hope that the price will go up (and they can sell it at a gain). It is rare that stock pays a great dividend and also sees big price gains.

This combination of income potential and significant gains upon exiting or flipping the business is a key feature of this asset class. 

This is not the case with profitable websites and online businesses. Like any business, profits can and often are reinvested to further grow the business. But, for the owners of and investors in such businesses it is also quite common to take monthly or quarterly distributions.

And as long as revenue expands and profitability continues, the value of the underlying asset also grows. This combination of income potential and significant gains upon exiting or flipping the business is a key feature of this asset class.

How Websites Make Money

So, online businesses are considered great investment assets by everyone from individual operators to private equity firms, and everyone in between. Unlike many investment types, they typically generate cash flow and appreciate in value, both. The way these online businesses make money can vary widely, in both profit potential and risk profile. And this means greater opportunity and flexibility.

Here is an overview of how websites and online businesses typically generate revenue.

Affiliate Marketing

Affiliate marketing is where you partner with companies who offer products and services that you can promote in exchange for a commission or a fee. This is one of the easiest ways to make money because it doesn’t require any upfront investment and doesn’t take too much time to get started.

Advertising & Sponsorship

Advertising through display ads or sponsorships is another online business model that can be used to generate revenue. Advertising using an ad network is a very common and convenient way for online businesses to monetize their traffic. Sponsorship deals can be more integrated into the content and potentially can generate more revenue.

Digital Products

Digital products (including software and apps) can offer businesses high margins and recurring revenue opportunities. These run the gamut from small, niche info products like ebooks and mini-trainings to full-blown courses, software and apps and productized services. Incorporating a membership model with ongoing consultation and an online community can blow out margins and explode revenue.

Other Revenue Models…

There are other variations, including lead generation, software-as-a-service (SaaS), other subscription-based services, Amazon FBA, Dropshipping and Amazon KDP, among others. They all have advantages and disadvantages (which is beyond the scope of this already long article).

For instance, e-commerce is typically associated with direct merchandising (an online store), which can be on a stand-alone website or Shopify site, or on an e-commerce platform like Amazon. Margins and profits can be good, but the model requires all sourcing and support of products, buying and holding inventory, and (usually) paying traffic to the product pages. Paid advertising is required because Google rarely will rank such sites and send organic traffic.

Tried and True Business Models

In fact, none of these business types are actually new. They are really online-enabled variations on tried and true old revenue models. This is a good thing, in my view. An easy to understand, start and operate business is right up my alley.

This approach has the lowest startup cost and overhead, and has lower exposure to supply chain and platform risks. And…the margins can (still) be great.

This is why I focus on publishing businesses — content sites — which are monetized through affiliate marketing, display ads and digital products (in that order). This approach has the lowest startup cost and overhead, and has lower exposure to supply chain and platform risks. And, depending on the niche, the margins can (still) be great. These types of businesses also command consistently high multiples in the aftermarket.

Leading M&A advisor and broker, FE International, recently reported that the split of primary revenue models for content businesses sold in 2021 were 50% affiliate, 29% digital products/services and 21% display/direct advertising.
The wide range of niche markets in which high value, profitable businesses are being built (and sold) is also a strong positive indicator that there is significant growth potential across many consumer and business verticals.

FE International Content Site Data 2021 Slide

Website Buying vs Building

This article is about website investing, and most folks will be here to learn if they can buy profitable websites or online businesses, and potentially grow or flip them later. But building websites is a form of investment too. Let’s briefly look at the pros and cons of building versus buying an online business.

Building Websites / the DIY approach

There are no shortcuts here. It’s not even a race, it’s a game of survival. But, for many that do not have the capital to invest in a cash flowing business, building a website from scratch is the only option. And for folks with a clear vision or special skills or expertise, this approach is often the best.

As usual, time is on one side of the scale and money is on the other. 

On the plus side, it gives you total control over the content and design, and the overall focus of the business. The downside is that there’s a lot to know. If not already familiar with basic web publishing tech, like hosting and page builders, then it will be a challenge. This is in addition to the niche/subject matter itself.

Also, a cold start like this on a new website will take time (from 6-18 months to start seeing serious traffic). Of course, with paid traffic and some other methods that lead time can be shortened. As usual, time is on one side of the scale and money is on the other.

Buying Websites & Online Businesses

Buying a business that already has customers (visitor traffic) and revenue offers major advantages. A site that is already generating  cash flow (and is hopefully profitable) has validated it’s approach and the business/market opportunity.

Buying a website is usually an easier and faster way to start earning online. This is a good option if you want to get started quickly and don’t have the time or skills to build one yourself. In a best case scenario, once transferred over all you need to do is keep operating it in order to start receiving income.

Buying (vs building) is not a cheat code, it’s simply a way to use more money than time, in order to speed up some early steps in the process.

But before you can even think about running the business you need to perform thorough due diligence to ensure it’s what you expect. If additional resources are required to help you operate the business then considering the projected P&L in light of expenses (and any other assumptions) is also essential, in order to assess the potential ROI.

Some of that same tech knowledge noted above may also be required to continue smoothly operating the technical side of the business. Likewise, if you are not a niche subject matter expert then you will probably need one (or a team) in order to successfully grow the content side of the business. Buying (vs building) is not a cheat code, it’s simply a way to use more money than time, in order to speed up some early steps in the process. Most of the underlying and ongoing requirements are the same in both cases.

How To Invest In Websites

If you have read up to this point you will have gathered that there are a variety of ways to invest in an online business. For many, it is direct experience with building and operating websites that reveals the broader opportunities in the space. The first two methods below are the more common ones (and that’s also the focus of this article).

But direct ownership (active or passive) is not the only approach. Here are four ways to invest in websites and online businesses.

…you will be investing time and attention on managing your business either way. 

how to invest in websites

Direct ownership/operation (build or buy)

Whether you build a site or other digital business from the ground up, or buy a mature online business, this is an active investment. You may spend less money and more time to build, or more money upfront (with less time) to buy…but you will be investing time and attention on managing your business either way.

…you get all the profits, and the big payoff when you exit. But you carry all the pressure and stress as well.

Direct ownership is a double-edged sword. With complete control and responsibility for both sides of the balance sheet you get all the profits, and the big payoff when you exit. But you carry all the pressure and stress as well.

Passive ownership w/outsourced operation

A less common approach but no less viable is to buy the asset and then engage an outside operator to manage it. These site operators will usually consult with you to ensure your goals and expectations are understood, and in line with the growth and profit potential of the asset.

Of course, this service comes at a price. Some companies offer a fixed fee service (with special projects costing additional $) and others will draw a smaller management fee but also take a % of profit or growth, as an incentive for good, ongoing work.

The investing time horizon here is typically 3-10 years, and the objective is usually a combination of income and growth.

Fractional ownership/passive investment

This sort of investment is quite common, but it is not widely advertised due to the nature of such investments. Think of a group of investors pooling capital along with a professional operator (similar to the above), and buying one or more large, cash flowing businesses.

The investing time horizon here is typically 3-10 years, and the objective is usually a combination of income and growth. The legal structures can vary (JVs, LPs) but the investments are usually only available to accredited investors.

Investment Funds and Holding Companies

The structure here is a more familiar one, with investors putting capital into a fund and the fund manager making all the investment decisions. Over time the fund may buy, grow and sell multiple assets, and may have latitude in terms of business type.

This is also a strength of the fund model: with a dozen or more investments, a fund will offer far more diversification.

There might even be multiple operators involved. Of course, as in the traditional finance world, fund management isn’t free. And outside operators would  add to that cost.

In the above scenario, the investor pool has a stake in a specific asset or bundle of assets. Fund investors are seeking a return on the overall performance of the fund. This is also a strength of the fund model: with a dozen or more investments, a fund will offer far more diversification.


There are numerous ways to invest in websites and online businesses — and multiple brokers, platforms and other services to facilitate it. The investment methods covered above all have their pros and cons.

I have also created a mega list of marketplaces and resources for anyone looking to invest in online businesses or buy websites. Whether you are seeking to buy or sell websites (if you already have an online business), then there are great options for every level of investor.

But keep in mind that education and proper due diligence is even more important to long term success in online business investment, as with more traditional forms of investing. Let me know if you have any questions and best of luck in your website buying, building and selling!