Considering buying a website? There are a few things you need to watch out for when doing so in an effort to avoid getting ripped off. Due diligence when buying a website is an absolute must or you stand a good chance of kissing your hard-earned money goodbye.
Would you buy a car from someone who didn’t own it? Probably not. This type of transaction happens all the time with websites, however, so doing your due diligence is critical. The first step is to check the “who is” information for the domain. If any aspect of the registration is vague, reconsider the purchase.
To further avoid problems, never pay for a site upfront. Insist on an escrow arrangement for the transaction. You pay the purchase price into an account and then the seller must respond by taking certain actions such as transferring the domain. If both parties are satisfied, the escrow can close. Using escrow will prevent 90 percent of the potential complications one runs into with site purchases.
Copyright is a conceptual extension of website ownership. Ready for an eye-opener? Under copyright law, a person who creates a fixed work is given ownership of that work automatically. The copyright holder cannot transfer this right unless the transfer occurs in writing.
How does this impact your situation? Well, you need to check the copyrights associated with the property when doing due diligence when buying a website. imagine a scenario where you purchase a website from someone who had it designed by a third party. Did the designer transfer the copyright to the seller? If not, the seller has a major problem. They do not own part of their site, and the last thing you want to do is purchase that problem!
I should note this is not an issue in certain cases. A blog using a WordPress theme with a significant number of guest posts has all sorts of copyright problems. As a buyer, you may well not care. You aren’t buying the site for the design or guest articles. Instead, you are buying it for the traffic it gets or the potential revenue production. In this scenario, the transaction should proceed regardless of any copyright concerns.
Google penalizes sites and drops them in the rankings. The last thing you want to do is buy a site Google has penalized. To avoid this, you should check the PageRank of the website. If the PageRank bar is gray, the site is penalized. PageRank checks are not the end of the story.
You should also check the statistics for the site. Look back through the 2010 year if possible. Are there any significant drops in traffic? If you see any drops in traffic, Google may have penalized the site. Further investigation is needed.
The platform a website is built on can also be an issue, particularly with e-commerce sites. The problem with this approach is you, the buyer, are often locked into using the platform. While the platform may meet your needs now, you are betting the platform will also be state of the art in 5 or 10 years. If the platform does not evolve, it will impact your bottom line.
How does the site you are buying make money? Strategic alliances are very common online. A strategic alliance occurs when two parties leverage their strengths to produce a profitable business venture. For example, a person with a huge email list might team up with a site selling original products. If you buy that site and the email list owner walks away, the value of your site drops dramatically.
There are plenty of other issues that can arise when buying a website. The important thing is to realize there are numerous factors you need to consider before you slap down your hard-earned money. It is highly advisable you retain an attorney to protect yourself. Contact me today for a free consultation.
Richard A. Chapo, Esq.
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