How To Value A Website?
September 14, 2014 Leave a comment
This week I saw an ad in the ET for the sale of a website. The asking price was 29lacs,negotiable and the only other figure declared was 11,000 articles of a literary nature in English . This seemed to be a cost plus model, each article costing 260 rupees apiece.This got me interested in researching what is the international practice in such cases. Here is what I found:
There are 5 valuation methods for websites:
1.Comparable Sales Method:
Go to a site such as flipa.com and find the sale price of sites in your niche that are as close to your site’s age, traffic and revenue as possible. The closer the numbers are for a comparable site, the higher relevance the site has in the valuation. Then average out the sale prices, after omitting the outliers to get a comparable valuation of your site.
2.Revenue Multiple Method:
Using the same list of sites from step 1,divide the auction price by the yearly or monthly revenue, to arrive at multiples. Multiples are affected by the age of the site, whether the buyer has other sites in the same niche and whether they know of better monetization techniques. The average of the multiples of the most comparable sites can be used to value your site.
3.Traffic Value Method:
This method involves researching the top keywords that drive traffic to the website and determining the cost per click for these keywords from the Google AdWords keywords tool. Then sum up the values of these cost per click multiplied by the monthly traffic for these key words. Then multiply the summation by .45 to arrive at your website’s valuation.
4.Reverse Engineering Cost Value:
This is the valuation method apparently used by the people who put out the ad in the ET. The formula is:
Cost to Build Site + Cost to Drive the Same Amount of Traffic + Time Factors = Value
Basically this is the cost a business would pay to acquire your mailing list. Businesses figure out how much business they can generate by sending out e-mails to your readers.