What's Your Web Site Worth?

Site Value Factors

There are nearly as many factors that are seen to contribute to a site's value as there are people who have bought or sold web properties. Among the lists of factors that can impact on a site's value are:

• the nature of the online property (for example, blog, informational content site, social network, online community etc.)
• the age of the property and its domain
• the perceived value of the brand, and goodwill associated with it
• the profits or earnings generated by the property, and the revenue model through which they're earned
• the projected life of the site and its niche
• the amount of traffic the site receives, and where that traffic comes from
• the site's SEO strategy, and its PageRank
• the number and quality of backlinks to the property
• the costs of running the site, including promotional costs, time costs, and so on
• the risk involved in purchase -- a factor that may depend equally on the buyers' perception as it does on available critical "wisdom" or research regarding the market segment in which the site operates
• the property's or business's position within the market, its uniqueness, and the levels and types of competition it faces
• the comparative cost to the buyer of developing the site themselves
• the barriers to entry to the market that the potential buyer would face if they were to enter the market themselves, building a separate business from the ground up
• the number and value of perceived opportunities available to the site
• the property's strategic fit within the potential buyer's operations
• the property's appropriateness to the potential buyer's skillset
• the ease with which that buyer can monetize the site further, including the expense of any changes the buyer might like to make to the site after its acquisition

Yes -- that's a stack of considerations, and working out the value of each in reference to your own site will be quite a task. Moreover, this list is far from all-encompassing: different factors may affect different sites' valuations at various times throughout its life.

If you're beginning to think that site valuation is an incredibly complex task, you're right. Fortunately, our experts were keen to wade through the list and identify the factors that they felt had the greatest importance in a site's valuation.

The Top 3 Value Factors

1. Domains and Traffic

Of all the factors, advises Andrew Johnson, owner of the popular webpublishingblog.com, "domain name value is number one. It only applies to a few, but …if your site is sitting on a generic domain name, the amount of money the content side throws off may have no bearing on its sales price."

Yaro focuses particularly on "traffic growth over the long term (sustainability), sources of traffic (do you have to pay for it to keep it coming, or is it organic?) and revenues." And he believes that site buyers are keen to know "how much revenue a site makes, how much profit there is after expenses, how much traffic it gets today." He suggests that they'll want to see "a month by month history of traffic, and if possible, a breakdown of each traffic and income source." Tim backs this position, contending that "traffic demographics are all-important. For instance, advertisers tend to pay more for visitors from western nations, and for users with relatively high disposable incomes." This point may be especially pertinent if, like Tim, a potential buyer of your site believes that "ad targeting is the name of the game."

These arguments are reflected in site sales from the Marketplace. There, sites that receive fewer than 2000 unique visitors per month (a total of 477 sites sold) sold for an average of US$906 -- significantly below the total average sale price of US$1560. By contrast, of the 89 sites that sold which attracted between 20,000 and 30,000 uniques per month, the average price was US$2843. And sites with more than 40,000 unique visitors each month -- all 27 of them -- averaged a sale price of US$17,401, though the highest selling price in that category was US$185,000. Here's the complete breakdown.

As you'd expect, the sales price breakdown was similar when pageviews per month were considered. Sites that attracted fewer than 1000 pageviews a month -- including those who didn't' provide pageview figures -- sold for an average of US$903, and those with four-figure monthly pageview counts didn't fare much better -- US$959, on average. At the other end of the spectrum, sites clocking up hundreds of thousands of pageviews each month sold for an average of US$5563 -- though there were only 289 of them, and the average sale price for the 13 sites that totalled 10 million or more pageviews per month was US$20,186.

Can you produce traffic figures and a demographic breakdown of visitors to your site? If so, you'll be in a better position than other site owners in your niche. Yaro predicts that the importance of traffic will continue to grow in future sales. "I expect more and more large companies are going to go the rout of buying sites as a means to acquire new traffic sources rather than, or in addition to, all the traditional ways to build traffic online, like SEO, PPC and content creation." Chris also supports this argument, albeit more broadly…

2. Stability and Profits

"What I'm concerned with are assets and net profit," Chris says. "Assets would be things like domains, software, intellectual property, and even link weight." If you think Chris prefers older sites to turnkey ventures, you're right. "One of the more important factors for me is stability and age. I would characterize an “established" site as being three years old or older," he reveals. "Stability of income is an unsung hero of web site publishing."

It's certainly true that of the sites for sale a disproportionate amount are recent developments. Of the sites sold in the SitePoint Marketplace, more than 85% were less than two years old. In Chris's three-year-plus category, we find just 110 sites, or just over 5% of the total sites sold. Obviously such sites are rare, which buyers would expect to translate to a premium price.

Tim reveals one outstanding benefit of stability. "Advertisers tend to feel safer with recognised web sites and established brands," he says, "so web sites that are recognised and well established in their niche can be worth more, as they could earn greater profits for the same amount of upkeep."

But stability can boost profitability in more ways than one, as Rob points out. "Sites that require less work, like well-established forums or article directories, command a higher premium," he says, "because buyers want to make as much money as possible with as little work as possible. And as Tim suggests, "web sites that have to attract new customers from search engines are risky investments, because your customer acquisition costs can fluctuate dramatically over time."

Andrew summarises that, "in terms of long-term value, you want a site that has a diversified range of traffic sources that will not disappear over night," and Rob agrees. "In general, I think PageRank is worth less," he says. "Steady organic traffic is worth more, and stable monthly revenue matters a lot." He points out, of course, that the balance between these factors varies with the type of site and its revenue model. But the factors apply across the board, to some degree.

Though Andrew feels that PR isn't as important as other factors, it's interesting to note that there was some correlation between PageRank and sales prices in the SitePoint Marketplace. Sites that listed a PR of zero sold for an average of US$459 -- and there were nearly 300 of them. The 144 sites with a PR of 2 averaged a US$1145 sale price, while sites with a PR of 6 averaged US$12,061 (over 47 sales). Though other factors are inherent in every sale, the statistics do suggest that, if PR doesn't directly impact a site's sale price, sites that sell for larger sums tend to have better PageRank. And despite the opinions of our experts, in the site selling market, it's likely that PR still has a role to play in a site's valuation.

3. Potential

"Has the site owner pushed the site to its maximum income potential?" asks Andrew, highlighting a consideration that many site owners tout as the justification for what often turns out to be an unjustifiable site price tag: that a site has great potential. "In some cases," Andrew explains, "30 minutes of work can double a site's income. That's extreme, but it is reality."

Tim firmly agrees that potential impacts on value. "A site may be worth a purchase price -- even if it will make a financial loss itself -- if it has additional value to you in userbase targeting or spin-off sales from technology." Yaro takes a similar view. "If you can plug a traffic stream straight into your business and make a return, then it doesn't matter if the site makes no money by itself," he says, adding that this reduces the site's value to other buyers, "meaning you can get a bargain."

"A site buyer needs to evaluate a site as if they already owned it," Chris says, "under the concept of “What could I do with this?" rather than only worrying about what the existing owner did with it."

"If it's going to increase your revenue," Dan summarises, "then a web site definitely has value, regardless of its current income."

Getting to know your buyer might give you an opportunity to present them with possibilities for the site's future development -- to illuminate new directions with solid revenue potential. "As a seller," Andrew advises, "I think it is completely fair to reprice your site based on who the interested party is that is buying."