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How Flippa hit $100 million in turnover in its first four years

Thursday, 2 May 2013 | By Oliver Milman

At a time when many Australian exporters are suffering because of the strong dollar, one start-up is making it big online.

 

Melbourne-based Flippa has just broken through the $100 million turnover milestone just four years after it launched. Almost as impressively, just 5% of its traffic and business comes from Australia.

 

Founded as a spin-off from Sitepoint by Mark Harbottle, Matt Mickiewicz and Dave Slutzkin, the venture allows for the “flipping” of websites by creating a marketplace for them to be bought and sold.

 

The business, which has 14 employees, posted revenues of $3.2 million last year and was highly placed in this year’s StartupSmart Awards.

 

StartupSmart speaks to Slutzkin about how Flippa has attracted an army of customers with almost no marketing.

 

What’s the philosophy behind Flippa?

 

We think that our customers have the best ideas. Sitepoint had a lot of clever people using it who sold websites on its forums. It made sense to formalise that role and create a proper marketplace with a structured place to sell a website.

 

So four years ago, we spun Flippa out and it has grown strongly. We’ve made it 10 times better than it was at the start, I’d say.

 

How many sites have been sold through Flippa?

 

About 100,000 sites have been sold. At entry level of the market, have lot of sites selling for $300 to $500. There is a good group of sellers there but the buyers quite disparate.

 

And then at the other end, when you’re looking at sites worth $50,000 to $300,000, you have sellers who drop in once, because not many people have that many valuable sites to sell, but buyers hang around. A lot of the buyers are investors and entrepreneurs looking to make money off valuable sites.

 

On pricing, we leave it up to the market because people out there are a lot better at that kind of thing. Safety is the most important thing, so we do a lot of vetting.

 

Once in a while we are proven wrong in value; people see things they really value that we don’t. So it’s best left to the market.

 

If you put a lot of work into something, you value that work fairly highly. A year of your time is worth a lot of money.

 

Around 50% of the market is at the entry level, and then the more elaborate sites are priced at anything from $1,000 to $500,000.

 

What has been the most expensive site sold on Flippa?

 

We sold a site for $830,000, which was a private transaction that only the buyer saw.

 

Other than that, Inquisitr, at $330,000, is a pretty good Australian example of a site that sold for a decent amount of money.

 

Is your pricing strategy is similar to eBay?

 

We take small fee up front (of $29) because you need barrier to entry to avoid being flooded by every site in the world.

 

But it then works like eBay in terms of promoting the site to sell, such as adding pictures and making the listing in bold.

 

We ask almost every day ‘what would eBay do?’ They are a great company, so it would be folly to ignore them. They’ve got a few more people than us, so I think they know what they are doing when they change something in the selling process.

 

We don’t slavishly follow them, but we certainly note what doing.

 

What’s your selling process like, then?

 

You have to prove you own the site, which you can do by adding a meta tag front tag, or by sending an email from the domain address. That takes 30 seconds.

 

The seller has to write a pitch themselves to says what the site is, why it’s good, and why they are selling.

 

‘Why are you selling it?’ is a big question. It might be just because you’re bored. But we encourage people to put as much information as possible.

 

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What have been the main drivers behind your growth?

 

When we started, the idea came from our customers and we’ve been adamant in listening to them.

 

We want to make it easier for them, so we are careful to test everything. It’s far too easy to think you’re the expert. The customers are the experts, so they need to test these things out.

 

One thing we have tried out is an evaluation tool, as are frequently asked how much is a site worth.

 

Sellers want to know how to value a site. So we have created a tool that uses mathematical modelling so that you can type in a domain name and be given some sense of what it’s worth.

 

We went around in circles seeing how people used it and then tweaked it. It’s like the lean start-up cycle – we refine as feedback comes in.

 

It’s a great way to get people into the market, because it shows your idea has value. If you’ve got 1,000 people reading your site about cats, it gives you an idea about value of that site.

 

On top of this, there’s definitely a broader trend towards the democratisation of work, where people are working for themselves rather than large companies.

 

Our site gives people the tools to work for themselves. You don’t have to buy too many site that earn you $100 a week before you make decent living.

 

Much like Odesk, eLance and Freelancer.com, this can give you a good supplementary income stream.

 

What about marketing?

 

Marketing is something we’re looking at now. I’m a software developer by background, as are a lot of us, so I like building features.

 

What we’ve never been perfect at is marketing; actually getting it out there and advertising ourselves. We are hiring people on that side of things now. We aren’t experts and we are lucky we haven’t needed to be.

 

We are now at the point where we think ‘we’ve got a great product here, let’s tell people about it.’ Word of mouth has driven us so far, which is a wonderful thing. But it’s very hard to gauge that. It’s hard for my computer brain to deal with.

 

How have customer needs influenced your business?

 

We have tweaked pricing a few times and the upgrades. We have a success fee that directly aligns our interests, which is really useful.

 

We have a success fee cap of $2,000, where it’s fixed at the moment. It was $3,000 but we decided to change that. Things can change quickly, that’s the good thing about the internet.

 

Pricing is an interesting one because people want to pay zero. But if people have problems or can’t do something, we want to know about it.

 

As the company grows, there’s the challenge of getting information flowing back to you. We have customer support team, but I want to know what that info is myself, so I can fix it.

 

It’s very important that we have contact with users – we love to know what they are thinking. We survey them regularly.

 

Being the GM of a three person team isn’t really a GM. You are dealing with customers every day. I’m personally concerned about losing touch of that as we grow – it’s important to not forget your roots.

 

How do you filter the good ideas from the bad ones?

 

It’s easy to think you know best when you’ve run a business for a few years, so it’s important to give yourself a reality check.

 

I’m not the one buying and selling sites, so you need to keep in touch with people who are. It’s important to not lose touch.

 

It’s not like we sit down once a year to work out our strategy. We’re a lean internet business, so the strategy is changing frequently to suit our goals.

 

There are a couple of products we are working on now. One is a website portfolio management system, because we know lot of users have more than one website and it gets tricky to manage

.

When you have more than one site, you need data quickly, if you have virus, broken links, rankings and so on.

 

We know that’s what people want because they tell us. At the moment we have a free trial for this tool, as we want customers in and get their opinions.

 

But if it’s a useful product and it creates value for users, they’ll happy to share some of that value with us. So it could be a standalone thing.

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