Exaggerated claims help online businesses sell faster but for less

Exaggerated marketing claims, such as describing a business as "fully automated" or offering "100% passive income," may help digital entrepreneurs sell faster, but at a steep financial cost, according to new research from Washington State University's Carson College of Business.

The study, coauthored by Chase Potter, assistant professor of accounting, and Zhonghua Zhang, a doctoral student in accounting, analyzed more than 2,100 online business listings sold on Flippa, a popular peer-to-peer platform for buying and selling digital assets such as e-commercestores, content websites, and software-as-a-service (SaaS) businesses. Results were published in the Review of Quantitative Finance and Accounting.

The researchers found that listings containing what advertisers call puffery - hyperbolic or overstated language used to emphasize positive aspects without providing factual evidence - sold about 12% faster but for an average negotiated price that was 66% lower than listings without such claims.

"It's a trade-off," Zhang said. "If your goal is to sell quickly, puffery can help. But if you're trying to get the best price, exaggerating your claims might work against you."

According to the research, these puffed-up statements are legally allowed in many contexts because they're considered opinions rather than factual representations. But the study shows buyers don't always take them lightly.

"Sellers may be signaling urgency, and buyers are picking up on that," Zhang said. "Even if they don't believe the hype, puffery might still help generate attention, and then negotiation takes over."

Unlike traditional business acquisitions, which involve formal due diligence and legal oversight, platforms like Flippa rely heavily on voluntary disclosures. Sellers create their own listings and can choose what information to share or omit, with minimal platform regulation.

"Sellers control what they disclose, and there's very little oversight," Zhang said. "Buyers have to verify everything themselves, which makes them cautious and sometimes skeptical."

The study found that experienced "super sellers" - those with multiple successful listings and recognition badges - used more puffery than first-time sellers.

"We initially thought experienced sellers would rely less on exaggerated language," Zhang said. "But they may actually know how to use puffery more strategically. They've built credibility and may feel more confident using attention-grabbing language."

Zhang said sellers should think carefully about how puffery aligns with their goals. Those seeking a quick exit may benefit, but sellers hoping to maximize value should focus on transparency.

Buyers, meanwhile, should treat puffery as a prompt for further questions - not necessarily a red flag.

"Be cautious when you see listings that sound too good to be true," Zhang said. "Ask for evidence. If a business is described as 'fully automated,' ask how that works. What tools are used? Who maintains them?"

Media Contacts

• Zhonghua Zhang, WSU Carson College of Business, zhonghua.zhang@wsu.edu
• Chase Potter, WSU Carson College of Business
• Eric Hollenbeck, WSU Carson College of Business, 509-335-3597, edhollenbeck@wsu.edu