Retweet.com is a site that is famous for stealing code from its competitors [1]
They claim to have millions of visitors. They clearly don't. At best they could claim this traffic on compete.com if their retweet widget had massive distribution, like the successful original Tweetmeme - except Retweet.com doesn't. Have you ever seen their button in use?
So we know that Retweet has a "shady" code base, we can be pretty certain their traffic is false. Their popular url shortner? http://search.twitter.com/search?q=RT.nu compare that to any of the popular services. Not so much.
They had a contest for visitors when the site launched. They never hit the 1M or whatever unique users, not even close.
Guys, this company can't even spell "All Rights Reserved" correctly - "All Rights Reservered" A simple google search would come up with the amount of ridiciulous-ness this company has created.
But it has a bid! So it must be true. Except all you need is a verified phone number to bid. Yeah.
Your very insightful comment highlights the broader problems with trying to buy or sell a website via public bid.
A website (or at least one normally worth buying at all) is a going business and not a mere item of tangible property.
When you buy an item of tangible property (say, a car), you have expectations that the item will be delivered to you as described. You will be concerned that it will be in the condition represented and that it will be the make, model, and year advertised. For the most part, that is it.
The issues are far more complex when it comes to selling a going business, including one that takes the form of a website.
Here are just a few of the issues that might arise:
1. All sorts of people might have rights to the IP underlying the website and its development, and to the business concepts underlying it. In a bona fide sale of such an asset, the buyer will want to conduct due diligence to ensure that all such rights belong to the selling company and are properly transferred to the buyer in the sale. An auction sale of this type affords no opportunity to do such due diligence.
2. The IP rights connected with a website also can create liabilities. For example, suppose a company doing a SAAS business has been accused of violating some IP rights of another company, whether patent, trademark, copyright, or trade secrets (for example, if someone claims that a renegade ex-employee stole code and used it to start an illegitimate site - this, for example, is what a former doctor and clinician at the Mayo Clinic is accused of trying to do with respect to software that helps with insurance billing and disease tracking, see http://www.law.com/jsp/article.jsp?id=1202445949066&Mayo...). This type of issue is handled in a bona fide sale by having the selling entity (and the seller's principals) give warranties and representations attesting that no such claims exist and that they have no reason to believe that any problems of this type exist, and this is coupled again with due diligence to examine the records of the selling entity to ensure that this is so. Again, with an auction of this type, a buyer has no chance to protect itself on such points.
3. If a selling entity is swamped with liabilities that far exceed its assets, and fails to pay its payroll taxes, sales taxes, etc., a buyer who acquires the assets of such an entity as a going concern will often have what the law calls "successor liability" - meaning that, you might think you are buying a mere website but you might wake up to find that you also "bought" potentially hundreds of thousands of dollars of unpaid tax liabilities formerly owed by the seller alone but now owed by both seller and buyer.
4. One of the critical factors in any bona fide sale is for a buyer to examine and approve the financial statements of the seller. A website business will have associated financials reflecting a track record of some kind. In less conventional situations, such as retweet.com, the seller may admit not to have monetized its website but, even then, there will always be something of value that needs to be verified to ensure that what the buyer is buying is what the buyer thinks it is buying. Is it the volume of daily traffic? Is it some other metric of value in the social networking world? In such cases, in a bona fide deal, the buyer goes through the records to verify what is or is not the case and, further, requires the seller (and its principals) to warrant that their claims in writing.
5. Even if there are no hidden liabilities, the parties to a bona fide sale will always negotiate such things as whether a buyer is expressly assuming certain liabilities or not, and these are spelled out in advance prior to a closing. Not all liabilities are bad in this sense. Maybe there is a long-term arrangement for data storage with a third-party vendor. This would naturally be assumed to be transferred to the buyer in connection with a purchase. But what if a website has many such items and the parties are not clear on what liability is or is not to be assumed by the buyer. If the deal is silent on the point, as it would be in the case of an online auction, then the liabilities likely would remain with the seller if a buyer refused to assume them.
6. In a bona fide sale, if a seller sells a business based on fraudulent misrepresentations, the seller is potentially liable for the damages stemming from the fraud or may be forced to give back the buyer's money if a judgment of rescission is entered against that seller owing to the fraud. In the real world, however, this remedy is meaningless if the seller is itself a mere shell with no assets. That is why, in a bona fide sale, a buyer will want in all such cases to make sure that the principals behind that shell are individually on the hook for any fraudulent misrepresentations, and every asset sale worth its salt will therefore have significant deal terms connected with who makes what warranties and how much this exposes them to potential liability. With an online auction, on the other hand, the "seller" might be some worthless entity that will be judgment-proof when it comes time for a defrauded buyer to attempt to gets its money back.
7. Almost all bona fide sales will have "conditions to closing," meaning that the deal will be set to close, and will close, once everything has been properly positioned and not otherwise. For example, if the seller has key contracts that are not transferable without a third party's consent, the sales agreement will typically specify that the deal will close if and only if the needed consent is obtained. If it can't be obtained, and if it is critical, then the parties can walk away from the deal. With the online auction, the format does not even take such basic items into account.
8. This is not even to mention the major strategic factors that go into an acquisition, i.e., whether it is best structured as a stock sale, an asset sale, or a merger and whether it should be done tax-free or otherwise. None of these factors are even remotely considered in an online auction.
I could go on and on, but I'm sure this is already much too long as it is.
The essential point is this: to me, the flippa.com approach to buying websites appears to be trying to simplify a sales process that is inherently too complex to be simplified in this manner. Maybe I am missing something, but the terms of use at the Flippa site seemed to provide, in highly simplistic terms, e.g., that a seller commits to sell and a buyer commits to buy but without specifying more about the structure and terms of any given deal. I think this misses the mark for the sale of any even remotely sophisticated website unless a buyer is willing to fly blind in making the purchase.
All of which raises a broader question - what does this type of online auction site aim to achieve? Is it a place for desperate sellers to sell to naive buyers? Is it aimed to facilitate honest deals but only very simple ones? Is it aimed to provide a "finder" function by which companies can let it be known that they are available for sale even though the true sale would only occur by a more conventional means following the auction itself?
Looking at flippa.com, it is hard for me to see what makes sense as a business model for this type of auction format given the legal issues involved.
I sold a site at sitepoint (before they moved to flippa domain last year) for 25k. I set up the auction at night, went to sleep, woke up next morning with several bids and many PMs. Several of them offered me more than my BIN price. The site was sold is less than 24 hours. My investment: ~$25 to setup the auction.
Just a wordpress blog.
I think they changed some of the terms since moving to flippa and it is still ridiculously easy to sell a site through flippa.
Looking at this auction, I have my doubts. Something is not right. It is also possible that the buyer is an idiot with extra cash lying around.
That was painfully well written and you bring up very valid points, so thank you.
Your facts would lead an economist to conclude that, theoretically, anyone selling through Flippa is sacrificing some value they have created in exchange for less friction in the disposition process.
I've always liked the real estate simile for websites. A domain name is like an undeveloped parcel of land and the software running the website is the structure built on it. Perhaps there is room for a more commercially focused class of service providers for transactions in this area? But it looks like you are already helping to fill this void.
As the complexity of the transaction increases, it would more closely resemble a traditional business acquisition like you describe above; however, with barriers to entry falling I think there is room for the Flippa's of the world.
People think this kind of trolling on ebay, etc. is funny, but I don't think they realize that they just made a contractual offer. If their offer is accepted, they're legally obligated to pay up.
If the sale price is $250k, and they already have a verified phone number, the legal fees to sue for breach of contract (and recover damages) might be worth it.
The sale of Retweet was heavily publicized in all the major tech blogs.
Why are people skeptical about the final bid price? They played the press right and skewed the value, resulting in a bidding war. When there's an artificially perceived value who's to say someone's going to make a rational purchase decision?
For all you know the new owner could be the teenage son of a Russian oil magnate, who's dad bought it for his kid's birthday after he read about it on Mashable. Cheaper than a Ferrari
I wouldn't be surprised if its fake because Kevin and crew likely didn't want to admit failure, so put in a fake bid looking like they had a "win". Lets watch and see if the domain details change (hosting/ip/etc.)
Mesiab labs ( the company that owned/owns retweet ) also runs hummingbird, the #1 twitter spam tool so dont congratulate them too quickly.
One final note: Even if the purchase is real- The buyer is going to be very disappointed when he finds out that 95% of the claimed traffic is from the iframed retweet buttons and not run-on-site traffic. For a semi accurate analysis of the traffic, just look at alexa (which doesnt count iframes) - It barely registers
$500 is not for bidding, but for the listing fee and the "Success Fee" (commission). The creator of the auction pays this amount; if that happens to be the same as the winner of the auction, then they lose this amount.
Also, Flippa verified that the seller had access to the site. Now, you might argue that the bidder will fail to pay up, but I don't think this is "fake".
Actually, I doubt the buyer is fake, and I really doubt that all the bids leading up to $200k were fake. $250k is not a tremendous sum of money for a site with this kind of traffic, traction, and with so many blogs and sites all over the web using it. I wouldn't buy it, but I have no trouble believing that someone who knew what they were doing could easily make a good return on that $250k.
I've perused the listings of flippa a few times. Its usually 90% affiliate marketing (really badly done) if this is real its a huge win for Flippa.
On an unrelated note, I was once amused when a lady posted her health related blog (It made about $100 a month or something) for $65k. When people corrected her saying oh you mean $650 she was a little more then offended.
with this in mind clistctrl, I'm curious as to what other (or more "trustworthy") online marketplaces exist for listing a Web site for sale. And, when are they the best route to take, and if not, what other routes should folks take?
I own a couple domains, well, online businesses, that generate some fairly significant revenue - not affiliate marketing, not buy-my-ebook stuff, but real freemium subscription businesses that are content oriented and have highly specific demographics. No, no porn either :)
Retweet.com is a site that is famous for stealing code from its competitors [1]
They claim to have millions of visitors. They clearly don't. At best they could claim this traffic on compete.com if their retweet widget had massive distribution, like the successful original Tweetmeme - except Retweet.com doesn't. Have you ever seen their button in use?
So we know that Retweet has a "shady" code base, we can be pretty certain their traffic is false. Their popular url shortner? http://search.twitter.com/search?q=RT.nu compare that to any of the popular services. Not so much.
They had a contest for visitors when the site launched. They never hit the 1M or whatever unique users, not even close.
Guys, this company can't even spell "All Rights Reserved" correctly - "All Rights Reservered" A simple google search would come up with the amount of ridiciulous-ness this company has created.
But it has a bid! So it must be true. Except all you need is a verified phone number to bid. Yeah.
$250K. Honestly.
[1] http://www.techmeme.com/090727/p56#a090727p56