Monday, March 19, 2007

File Hosting Sites - How to Buy and Sell

I've become addicted to SitePoint, the popular forum where people come to buy and sell websites, typically in the $50 to $50,000 price range.

I've become a bit of an expert on a the ubiquitous single-click file hosting site, the ones where you can upload big files, and then share the link.

A couple things I've learned:

If the site gets any kind of serious traffic, i/e upwards of 30k unique visitors per month, you will a dedicated server with 100mb connection (make sure its full duplex) and minimum 100mb port, preferably with dedicated bandwidth. 4 GB of memory is a must if its going to scale, and a minimum of 250 GB of disk space -- the more the better. Plan on $300/mo for a server like this.

In monetizing these sites, its important to consider where the traffic is coming from. A site that gets traffic primarily from China or Hong Kong will not presently do very well with advertisers. If the site gets at least 25% of traffic from the US, then you can probably earn $3 per 1,000 unique visitors, and possibly more if you are creative. The challenge is to monetize the site without driving away your returning visitors. Pop-ups and -unders a quick way to lose repeat visits.

Beware of sites that have just been launched, where the owner wants to earn a premium.
Here's what can happen to a file hosting site that grows too quickly and doesn't scale.
A quick rise up the Alexa ranks could precipitate a fast fall.

Here's a file hosting site that has a history of measured growth. When you see it like this, its usually "organic" growth. Organically grown sites typically take longer to build, but are more sustainable that the fast growth sites.

There are a million file hosting services on the web. Many of them use a few different scripts, such as RapidUpload, MegaFileHostingScript by, or a variety of others.

I typically value such sites initially by looking at sustained traffic (last month's, never next month's), multiplying it by $3, subtracting server hosting costs, and then multiplying by 5 (10 on a good day). That will give me a sense of how long it should take to recover my initial investment. I am never interested in file hosting sites that have less than 50k visitors per month.

Other things to consider: is there any page rank, so you might be able to sell textlink ads? Has it been banned from Google? How maxed out is the server? How much porn is on the site, and how do you feel about that personally? Are there any paid users? Is the site a haven for illegal warez files? Will you have time to good make a good faith effort to purge illegal files from the system, or do you just plan to let it become a free-for-all?

This should get you started with evaluating the worth of a file hosting site. What did I miss?

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