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Old 07-20-2004   #1
Nacho
 
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Location: La Jolla, CA
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Arrow Website Valuation Models

I noticed this very odd auction in eBay today, where a user is selling their website: Gourmet.org:

http://cgi.ebay.com/ws/eBayISAPI.dll...9025 264&rd=1


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?

Last edited by Nacho : 07-21-2004 at 01:07 AM. Reason: Clarification
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