Website Valuation Models
I noticed this very odd auction in eBay today, where a user is selling their website: Gourmet.org:
To value of a website can be a very difficult task, and perhaps there are many more things to consider, but I'm interested in finding out the core basics. What are the most relevant factors that would give value to our websites and businesses. Combining my experience and research for the last 10 years, I believe these are the most important elements:
1) Brand. This is the toughest to value. Most of the time, branding can be measured by traffic, returning traffic and repeat purchases, along with other concepts, but this is very important.
2) Content & Databases. Because writing content takes time and is the most important element for search engines to spider and index webpages, this is one of it’s most important assets. Keep in mind that only if the webpages are indexed by the search engines, then they can be valuable, because they can achieve a ranking for a search query. Dead pages or pages behind secure logins, are worth a lot less, because it requires a lot of work to get them indexed by the search engines, which is what mainly brings traffic to a website.
3) Website Architecture and SEO. How a page looks and how it is search engine optimized is just as important as architecture and engineering for a house or a building. It may look nice, but it can hold? There are many beautiful websites out there in Flash or purely image based that search engines can not reach or determine what they are all about, therefore they suffer the consequences to low traffic. On the other hand, webpages could be very ugly and super highly optimized, but most likely these will be considered as SPAM by the search engines.
A website with SEO is worth for much more. It’s the icing to the cake that can make the difference. It’s about ranking for key terms on the search engines. It’s about location, location, location and real estate space or market share on the search engine’s query result pages. This is and will always be the #1 source of traffic to websites, in my opinion.
4) Link Popularity. The value holds on the number of inbound and outbound links your website has that are relevant to your website theme. Keep in mind that inbound links not only go to your homepage, but may also be directed to other pages within your website.
5) Revenues. Without a doubt, as with any company, this is a very important element. As well as . . .
6) Profits and Financial Company Structure (assets, liabilities, cash flow, expenses, capital, etc.)
7) Memberships & Lifetime Value of Customers. This can also be a very difficult measurement but very important.
8) Traffic. This is a figure that is linked to everything above, but can become an important measurement for detailing the website’s value. It will only be valuable at two main figures Unique Visitors and Page Views. A unique visitor refers to one person, rather that one person making multiple visits.
9) ROI. Return on investment can be the most important figure, because if the company is valued at too much and it will take too many years to recover, then the investor might look for alternatives, such as starting from scratch building its own website and growing what is mentioned above. From what I’ve heard an read out there, plus my experience, depending on the topic and competing keyword terms (ie. “las vegas” vs. “white elephant”), you can achieve top rankings for the average BIG website in about 2 years time with the right investment and management.
10) Does the figure make sense? This was something a finance professor of mine used to say “After you have gone through all the figures, data and information, always ask yourself this question: Does the figure make sense?” This will be a different perspective if you are the buyer or the seller, but it’s something I never forget.
Any of you guys care to comment on this eBay sale, pricing model being used for Gourmet.org or any website valuation model out there. Please share your thoughts and opinion. What other elements should be considered to value a website including the business that supports it?
if I had $400,000 to sink into a website it would probably do much better than that one is.
it has been online since 94 and only has a PR of 5? my sites that are a month old already have over 20 X as many backlinks as that site does (which there site is only at 40 in Google right now)
i would say since many of their inner pages are not indexed
and they have been online since 94 with only 40 backlinks that is likely not a 6 figure business. in fact on $5,000 I bet I could design a site which had more link popularity, better layout, better branding, etc.
they got all those other sites in that package too, but I am not usually a fan of buying used sites.
Hahaha... great link, why risk losing this choice acquisition in the auction when you can buy it now for $3 million! Here's a clue as to their dynamic record of growth: "Sales peak was in 2002 at $229K." ;)
Nacho, I think you have covered the major points - a lot depends on the buyer. If a site will fit in extremely well with existing properties, it may be worth more than if an independent buyer bought it. Clearly, revenue and net profit are major determinants of price in most acquisitions; growth prospects enter into the picture because you are really basing the price on FUTURE profits.
I'd add "assets" or "book value" to your list - inventory, receivables, cash, physical assets, etc. less liabilities. Many websites won't have these, but those that are ongoing e-commerce business may well have sizable sums tied up in assets.
Interesting question, but I also think it depends on what you want to do with your business. In case you want to sell it your list is about right but in case you want to keep it I would add the "fun factor" too. How great a place is it to be? How much "fun" is the work you do, how nice are the clients/members - and your own team?
Such things may not allways be a big factor (maybe not at all) in selling a company but to me it is very important factors of having one :)
Mikkel, you bring up a very good point. :)
Perhaps another key factor would be Management if you where to buy/sell the website+business along with it. Perhaps with a small business it might not be included and easy to replace, but when it's big enough to where "if it ain’t broken, don’t fix it" then talent is definitely worth a lot. Finding the right available key people in this industry with the "Know How" and "Know Who" isn't easy and it doesn’t come cheep either.
Maybe slightly off topic, but Netsol has a free appraisal tool that's pretty handy that most people don't know about if you are curious about the value of your own domains or others you care considering buying.
I have collected lots of appraisal tools that I use for trying to value all of my own domains plus I mod a Domain Game forum (and the affiliate forum) so when people ask me for an appraisal I many times use the one at Netsol just to give them a quick and easy idea. No appraisal is truly accurate and domain value is always in the eye of the beholder... but here it is just for fun if anyone wants to try it.
FREE domain name appraisal tool from netsol.
Just replace "mydomain.com" with your domain name.
Once you follow that link, under the make an offer box there is a drop down asking you if the domain name includes the name of a product or service. Just select "no" from the drop down.
Let's tak a closer look at "3) Website Architecture and SEO" and "8) Traffic".
How would you value your SEPSs? This obviously has a huge value, say if your competitor is willing to buy out your company, right?
Still curious on what you guys think about the value of website architecture and SEO. Any takers?
Nacho, I reckon it is like Real Estate. The value of a property accounts for required renovations and repairs. A website SEO and Architecture is the same. A site that needs drastic repairs is devlaued.
One that is good to go is worth a bit more than one that needs a major overhaul. As with real estate, this is a % factor, rather than an absolute value. So, a site in a good "Location location location" and great SEo and architecture is a good buy, but one with bad SEo and Architecture in "Location location location" is still better than a great SEO site with very little else.
So, thy are worth nothing by themselves, but multiple (2-10 times or 0.1 times) the other values.
Does this model still stand?
Website down w/links, good URL, currently undeveloped
I've never bought a website before but I'm hoping someone has some ideas on the valuation of a URL of a site that used to be somewhat popular in its niche. They went bankrupt and the site went offline for a year. I contacted the registrant and made an initial offer but he thought he could get more. He put up a single page saying this URL is for sale. With the latest Google update, the single page shows a PR6.
The site has been around since 1995 and it's in DMOZ and Y Directory.
According to Marketleap, it has 38 G backlinks, 1,000 MSN backlinks, and 350 Y backlinks.
What makes this attractive is that I can redevelop this site into a different niche than the old business but that it is semantically related and I believe I will get credit for it.
The URL is eight letters, no hyphens and was a well known brand name in a regional market.
Yes, I could pay $20 for an appraisal but at the SES conferences I've heard that the valuation for some of these services may not be accurate.
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