The Difference Between Bonds and Websites

The more I think of it, the more I see a strong similarity between bonds and websites.

Perhaps I look at these things a little differently than most people. I spent 20 years as either an institutional bond broker in top-tier Wall Street or a bond portfolio manager with $280 million and $1.5 billion funds.

Basically, I look at bonds as reasonably safe producers of passive income. You buy a bond and you put your faith in that issuer, be it the US government or a corporation, to pay you timely interest and principal.

A few months back, I started working with a new client: Latona's, a web property brokerage.

Brokering web properties hit me right away, for some reason I didn't understand at the time, as being very much like the bond business -- which I loved!

As I have discovered during my months working with Latona's, it truly is a lot like the bond business, and I believe its growth and development will eventually result in an important investment tool.

Websites are an interesting property. I never thought about them much until I got into this business. They were just online brochures for me and my business. And they were places to go shop, read the news, pay a bill, check my bank account, etc.

Since working at Latona's, helping to scrutinize the listings and design their marketing approach, I am realizing that every day I visit a bunch of small websites that I find interesting and add them to my bookmarks, so I can find them again when I am looking for what they provide.

Somehow, when I think of the Internet and my usage of it as a whole, I totally forget them. But now I see them every day. They are little islands of value. Some of them get millions of unique visitors every year. Some get a few hundred a month, and some get a hundred thousand uniques a month. Some have over 50% return users and others have 15% return users.

For the most part, they require at most a couple hours of time a day to maintain their operation and the income they produce.

As people visit those websites, they see advertisements. They might be in-line links, pop-ups or the boxes around the edges. Each of those ads is a link to an ad network that placed them there. Google Adwords is probably the best well-known. And you can see what a big business it is by the mere fact that Jeff Bezos has decided to create a new company, presumably Amazon Adwords, to provide the same ad network services.

What does this mean? Of course you know the ads are paying the website and so on. Do you realize how much?

Some of these little websites that you hardly think of are raking in $100,000 a year just off ad network income, alone. And they have very few expenses: web hosting of a few hundred a year, domain name registration, and the time and effort of the website owner.

Few have employees. It just takes a couple of hours by the website owner to publish new content and answer emails. That's pretty much it.

HOWEVER, it isn't really as easy as all that. You see, it takes an incredible amount and effort to discover a good niche, choose a name, design a business model, develop content around that niche and business model, develop and implement SEO marketing, develop and implement social media marketing, (both huge tasks in themselves) tweak and tweak again until you get it right, and wait for the tipping-point when the site pretty much runs itself and draws in fairly reliable, stable traffic.

It's a lot like putting together a startup business in the real world. In fact, it differs only in that it is a digital startup business.

Did you know there are a lot of people 'out there' who make a great living off of creating websites, developing them until they have reached that passive-income-producing stable phase, and then selling them?

Who do they sell them to?

Well, some people are looking to buy a business to work in, themselves.

Others are accumulating a portfolio of websites that are producing income. Those who only own a couple websites usually manage them personally. Owners of larger portfolios hire people to do the management. There are individuals and companies all over the world offering these services and most of them do a great job of it no matter where they are located. The Internet connects us all in a standardized way.

So why do I think of websites as similar to bonds?

They pay their owners passive income. Well, not all websites have been managed to generate income beyond being a brochure site for some business. They are not the investment-quality sites I am talking about. Those, that are operated as businesses themselves, do result in passive income.

Some result in more income than others. That's were quality comes in.

When you buy a Treasury bond, you are pretty much assured you will receive your timely interest and principal payments. When you buy a corporate or municipal bond, your timely interest and principal payments are reliant on the performance of the corporation or municipality that issued the bond.

When you buy a website, your stream of passive income is dependent on the marketing skills of the operator of that web property. Like I said earlier, there are people and companies all over the world that specialize in operating websites for the purpose of generating revenues, and they don't cost all that much to hire.

The important difference, as I see it, is that if you own a website you can change the quality of management, so you have control over the vulnerability of your income and asset value.

With a bond, you just have to hope the managers of the issuer are doing a good job and will pay you your interest and principal in a timely fashion.

Oh, and I forgot the other main difference: Return on investment.

Right now, bonds are yielding pretty much zip in interest.

I am seeing websites being sold that will return as much as 50% annually on the investment amount. Most of them return about 30%, but again, the return is dependent on how they are managed, which is not difficult when all the pieces are already created and in place.

What this means is that you can buy a website, neglect it or mess it up, and your return will go down. It also means that you can buy a website, put in some improvements yourself, or hire someone to do that and manage it for you, and your returns will likely rise. Not only can the income fluctuate depending on how seriously you take the investment, but the value of the web property will fluctuate, too.

Many people invest in modest web properties, add SEO and social marketing, spiff up the site itself, and then sell it for a big profit -- having received increasing income while working on the improvements.

So, you are probably wondering why web properties are such a great investment deal.

A huge part of the reason is that investing in them hasn't hit the mainstream, yet.

Don't expect the fabulous returns to remain so fabulous in the future! I am already seeing them start to slightly trend down in just a few months. As bond yields remain low, and the stock market is getting scary, more and more people are looking for alternative investments.

And many are finding a good one in web properties.