EP24: Flippa’s CEO Blake Hutchison on Industry Trends and Deals – Domain Magnate

EP24: Flippa’s CEO Blake Hutchison on Industry Trends and Deals

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In this episode of the Domain Magnate show, Michael chats with Blake Hutchinson, the CEO of Flippa. The #1 platform to buy and sell sites, stores apps and digital properties. Tune in as they talk about the effects they’ve seen due to COVID, changes they predict in the marketplace and the new exciting features at Flippa

GUEST BIO:

Blake Hutchison is the current CEO of Flippa. Under his direction, Flippa has undergone great strides in improving the processes, experience, and security measures of the marketplace. Before joining Flippa, Blake developed an impressive executive track record at global brands like Xero, Good44, Luxury Escapes, and Lonely Planet.
Connect with Blake: Email | Twitter | LinkedIn

SKIP TO THE GOOD PARTS:

  • 1:29 – 2:46  Blake elaborates a bit more on Flippa’s new Mantra.
  • 7:00 – 11:18  Michael and Blake chat about changes they’ve seen in prices due to COVID-19.
  • 11:37 – 16:19 Blake talks about new features and changes at Flippa
  • 21:46 -23:03 Blake gives advice to new buyers coming into the marketplace.

SHOW TRANSCRIPT:
Michael Bereslavsky 0:09 Welcome to the next episode of the Domain Magnate show. Today we have Blake Hutchison from Flippa returning for a second discussion. Hi, Blake!

Blake Hutchinson 0:19 Hi Michael, how are you?

Michael Bereslavsky 0:21 Good. Thank you for joining us again. So we last spoke nine months ago, had a really interesting conversation about Flippa covered a lot of basic tips and also more advanced advice for buyers and sellers. I’d love to hear a quick update first. How are things going with Flippa lately? What has changed in the last nine months?

Blake Hutchison 0:44 Yeah, no problem. We’ll great to chat again. No doubt you’re working from home just like the rest of us around the world. We’ve seen huge amounts of change at Flippa in the prior nine months, both as a team but also the platform as a whole has changed a little, evolved some of the feature sets. And of course, through this odd period that we’re all very familiar with now. We’ve seen even more change in just the way that buyers and sellers are operating on the platform. Do you want me to start out with some of the product changes that we’ve made?

Michael Bereslavsky 1:25 Yeah, sure that sounds interesting. And I love your T-shirt by that way.

Blake Hutchinson 1:29 Oh, yeah. Thank you very much, our new feature. So that’s kind of our, I guess our tagline moment. And it’s very much about this journey that we’re all on to take greater control of our future. And we find that people who look at Flippa for a few reasons. They’re either looking to start something in which case they’re buying something relatively inexpensive. They want a good site from which to grow from. All they’re looking at supplementing their income with an income producing asset. And something that’s got some heat to put in each of those cases, either starting or acquiring something with traction, it’s very much about taking control of your future. It’s very much about looking after yourself, investing yourself using your skills using your subject matter expertise and your drive to grow something that you own, or that you’re passionate about, and that ultimately, you can realize value from. And I think that’s going to be a very, very significant change, not only through this time right now, but for the next five years. We’re going to see more online business owners than ever before. And so that’s the only future mantra.

Michael Bereslavsky 2:47 Yeah, absolutely. I think the future of work is changing. We are seeing a lot more people looking for remote jobs now. Looking for a remote opportunity and also people…so many people are laid off and so many people lost their jobs in the past months that many of them are looking to start a business to acquire a business as well. Now, I think Flippa might have a lot of new customers now.

Blake Hutchinson 3:15 Yeah, it’s been super interesting to watch. You and I have been sharing some emails back and forth, and it’s been super. It’s been a boom time for one of the better description for buyer demand. And so what we’re seeing right now is probably as a result of the uncertainty in global economies. We’re seeing a lot more people register on Flippa and begin their browsing experience. So they’re looking for something to acquire. And they you know, like, any large group of people, there is a mix between those people who have got not a lot to spend, but one is that there’s a lot of uncertainty around traditional asset investment. And so we’ve seen people who have said, things like I was going to buy an apartment or home and now I feel more comfortable buying a digital asset and investing my, in the case in the example that I’m talking about right now the individual said, I feel more comfortable investing my SEO expertise in a number of digital assets that I can grow and run and build value on. And then there’s other people who have said that the stock market right now is, you know, fortune five us favors the brave, but it’s a very, very delicately poised market. The reality is it’s mostly overpriced, and you’re unless you know exactly what you’re doing. There’s a huge amount of uncertainty. And so again, we’ve heard anecdotal feedback from some of the buyers joining that they feel like now is the time for them to invest in digital assets for the very first time. So it’s quite exciting for all of us.

Michael Bereslavsky 5:13 Right. So yeah, you were saying that there are many new buyers coming to Flippa now that are interested in supplementing their income. And what kind of sites that are looking…is it still the same mostly content sites? Or is it something different now?

Blake Hutchinson 5:27 Yeah, look, it’s very similar. The shape of what people have looked for from a business model standpoint is the same. But what has changed is the vertical. So there’s some really obvious changes like travel has fallen out of favor and people are less inclined to look for travel websites. On the flip side, and it sounds very obvious but anything to do with health and wellness, anything to do with finance anything to do with home repairs, cooking. These are the types of digital assets right now which a lot of buyers are looking at out for. The business models are relatively flat, people are still looking for that great business that they can optimize further. there’s fewer and fewer of those for people to acquire and if anyone has a good SaaS business, I think it’s a good opportunity to, to realize some value but that hasn’t changed. Ecommerce as we know from all of the reports that you and I no doubt both read. Ecommerce is flying right now. And if you’ve got a good ecommerce asset, with the exception of dropship, which has fallen out of favor, if you’ve got a good ecommerce asset, now’s a good time to sell.

Michael Bereslavsky 6:48 Yeah, good point. So how are you seeing the changes in the global market reflect the prices our prices going down now or are they going up the average multiples?

Blake Hutchinson 7:00 Yeah, it’s not very exciting. Unfortunately, we haven’t seen a great deal of change. The reality is that there are mobile buyers, and so arguably, competition for good quality assets has increased. But at the moment, we haven’t really seen the pricing change on those assets. Now, that could be for a few reasons. One, it might be too early to tell whether there’s any contraction in the market from a sell side. The second reason might be that a lot of the assets that are sold on Flippa obviously smaller, less than a quarter of a million dollars. And so I think that where you’re likely to get valuation change is around the high value asset. I think assets that have been around for two to three years…that are less mature? It’s less likely I think that you’re going to get either fraction prices or you’re going to get huge amounts of increased competition or therefore pushing prices up. It’s unfortunately a boring answer, but it’s a bit too early to tell.

Michael Bereslavsky 8:21 Yeah, I think that’s also similar to what we are seeing, we are seeing some drop in prices on some of the smaller assets, smaller websites. And some of that also has to do with the recent Amazon Associates commission drop. So you’ve probably noticed that as well a lot at Flippa.

Blake Hutchinson 8:41 We’ve seen that a lot as well. And that’s one of those, you know, niches that is obviously challenged right now and buyers, our buyers are waiting. They’re not…they’re not biting right now. For the assets that our Amazon Associates — time will tell. And I think what buyers will look for is at least another 6 months, maybe 12 months, or an additional, I guess, operational runway for one of the description to understand how impactful that is. Yeah. And we did see some deals fall over for Amazon Associates businesses, deals that had confirmed offers. And after Amazon made the announcement, those buyers have obviously gone a little cold on those assets.

Michael Bereslavsky 9:35 Yeah, I’m thinking that in the next 6r to 12 months, we might also see some changes in the market. I expect that the changes in the global economy will the global economic crisis that’s unfolding now, along with the COVID-19 situation is going to affect prices quite a bit. Because on the on the larger scale, that means that people will have less money to invest, they will have less money to buy things. And many people will have some bills to pay, some cash they need so they will be selling more. So I am frankly expecting that the prices would go down. I wonder if you if you agree or if you have a different opinion?

Blake Hutchinson 10:17 I think that — there’ll be a contraction overall. But a good quality asset, in a tech niche, is less likely to see an impact. And so like always, quality wins. And so something which is 3 to 5 years old, generating steady income, there’s always going to be a buyer for something which is consistently performing. And I think where it’s a consistent performer that be enough buyers in the market to protect price points. But in general, I do agree. In general, I think that buyers will be more picky as to what they look at. And it’s more likely to be a buyers market.

Michael Bereslavsky 11:18 Sounds good. So it’s been nine months since we last discussed some features on Flippa. I’m sure you’ve had quite a few innovations. What are some of the most notable changes? Or interesting features that can benefit buyers and sellers currently?

Blake Hutchinson 11:37 So there’s a couple of really big things. The first one relates to search and what we call best match. And that has dramatically changed in the last month or so. And so what we are doing is quite rightly rewarding quality assets such as, quote, assets, were rewarding quality assets with good quality listings. And of course, you can have a great listing, that’s a poor asset. And you’re gonna have a great asset, that’s a poor listing. And so what we’re working on, and what we’ve done a very good job on it, is not only improved the search experience, but improve the search results, such that good quality sellers are rewarded. And buyers are able to find those quickly and conveniently. And what that comes down to is over 150 different points of reference. So is there enough detail on the description? Has the silicon acted Google Analytics? Have they connected 12 months worth of financial data? Have they gone through ID verification? Is it priced within what Flippa would consider a degree of reasonableness based on the flipper index based on 50,000 assets being sold on the platform over the last couple of years. So that’s something that behind the scenes we’re very proud of. And it’s actually difficult to see as a standalone buyer. But what we can tell you, which is really, really exciting is that all of the leading indicators for Flippa are up and so as a result of our best match algorithm, we now have more people watching listings, we have more people, saving searches, so that they’ve got a list of assets that they can consider and compare against. Overall, we have more people looking at more listings. And so these are all leading indicators for us. We’re quite excited by the level of engagement our search has now. And it comes down to two things, it comes down to how it looks and feels and people can play with it. But it also comes down to the actual quality of the results that people are finding. So that’s fantastic. Probably the second biggest feature, which is launching this week and no doubt live by the time we’ve published this podcast, were launching an integration with SCMrush. That SCMrush integration is highly strategic because so many buyers have told us that they want additional detail around the traffic performance of a site and where it stands against its competative set which keywords it ranks, well for, what’s its backlink profile? And what are the referring domains? And so very shortly, and as I said live this week, the SCMrush integration will be on every relevant listing. And SCMrush has fantastic coverage, as you probably know yourself. And so that module provides the buyer really, really strong insights. In addition to that, a buyer will be able to, for a very, very small fee, get huge amounts of additional insights provided by SCMrush the top of the insights that would require you to pay for a premium SCMrush subscription. Now available on Flippa for a fraction of the price, literally today $10 — $10 will get you every possible data point you could ever want to know about a site’s traffic performance. And we’re really excited about that. We think our customers will love it. We’ve tested it with a number of customers and the feedbacks been outstanding.

Michael Bereslavsky 16:19 That sounds great. I think SCMrush will be very useful. Quite a large number of listings currently get SEO traffic. So that will allow people to confirm it. And that algorithm that you mentioned that has 150 points of reference to evaluate the listing is the index or is the value public? Can people see like how good the listing is? Or can people figure out how to improve it based on those numbers somehow?

Blake Hutchinson 16:56 Yes, so certainly. We have a published a description of what you can do to improve. But critically, we do not publish the actual score. And that’s kind of our secret sauce. And we will continue to improve that score over time. And what we don’t want is for people to be able to gain that score. But what we do provide are some recommendations we do to improve the visibility of the listing. And some of this is obvious and some of it’s a little nuanced. But we can go through that some of these things. So for example, we, we want people to provide the industry that their asset is in. We want people to have descriptions and long descriptions about how the asset performs, how it makes money. What do they sell? How many customers do they have? What is the average order value? So we’ve given some score based on a descriptions, detail. And of course, that’s taken some work and that’s all algorithm driven. But the basics you know, what do you do? When was your business started? What industry do you operate in? How do you make money? Moving on to operations? What are the products that that you make? What is your average unit cost? How does fulfillment work? Where are you customers based? How do you handle returns? So when you answer these questions, Flippa is looking out for keywords and running a score according then we look at financial performance. And so we will look at obviously, revenue, inputs, expense, inputs, net profit, and Flippa then from there we can create a price range. And that price range is a behind the scenes guidance to Flippa, so that we can assess the degree of reasonableness of a seller. We then look at popularity. So if a listing is being found by lots of people and watched by lots of people, then we assign a score accordingly. In turn, choosing given a huge amount of by attraction, the score declines, cell responsiveness. Does the seller respond to the buyers that have inquired? If you don’t respond to the buyers that have inquired, you get penalized. If you do respond to the buyers that inquire, you receive a benefit, proof of revenue and expenses. Have you attached a profit and loss statement? Does their profit and loss statement match the detail that you have provided in the revenue and expense inputs? Proof of traffic connecting to Google Analytics — price we mentioned price. So it’s important that people price something with a degree of reasonableness listing image. Have you actually given buyers some insight into what you’re actually selling through appropriate merchandising. Image, really important they attract our attention. So we reward that. Some verification and a track record on Flippa. So if you’ve provided identity verification, obviously email, which is very basic, sign up, verify your email, phone number verification, but then a track record. Have you got a track record of buying and selling on Flippa? If so, we reward that. Now that’s not to say we penalize first time sellers and buyers because there’s so many different ways in which you can improve your listing and improve score and therefore improve your rank and ultimately popularity. But we do take into consideration track record. So that’s just I guess some tips and insights. There’s a blog post, which details all of this on our site. We can check that out. But we won’t reveal the actual score the numerical score, because that’s a moving face. That’s an ever changing algorithm based on how we want to reward good quality.

Michael Bereslavsky 21:18 Well, thank you that’s some really good tips for sellers. And it’s great to hear that you’re innovating so much and really putting a lot of effort into making the marketplace more convenient for buyers and sellers as well and protecting buyers. So any final thoughts or advice for new buyers coming into your marketplace and feeling a bit lost right now?

Blake Hutchinson 21:46 Yeah, look, it’s some it’s a really important time and it’s really important that people place safe bets. And we would never encourage a new buyer, who is new to the digital assets system to buy immediately. Take your time to browse, take it on to narrow in on what you are looking for. Second biggest tip for new buyers is to think about your own subject matter expertise. So what can you add? And that might be that you’re fantastic at content, it might be that you have a very good ability to sell. It might be that you have existing supplier relationships that you can tap into. But you need to have some subject matter expertise that you can apply to the digital asset that you’re about to take over. And then lastly, think about your passion. So is there a particular industry that you can imagine yourself working on for the next 12 to 18 months? Because as you and I know, these things don’t just grow without effort, and they don’t grow overnight. And so we typically worn off buyers who tend to think that this is simpler than it really is, and that it’s going to take some time and effort to realize return.

Michael Bereslavsky 23:10 Well, thank you, Blake. Thanks for sharing some really useful tips for buyers and sellers. And see you next time.

Blake Hutchinson 23:18 Thank you, Michael. Thanks very much.

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