What's Your Web Site Worth?

Other Value Factors

Workload

For Andrew, workload is another important determinant of site value. "Does the site require a lot of man hours to run?" he asks.

"Often I'll see sites that score well in terms of domain value, traffic, and potential, but require a great deal of day-to-day work on the owner's part. If you have a team working for you, or can profitably hire someone, this isn't such a big deal. But the truth is, if you just let the site sit, its traffic and earnings are going to erode (something to consider if you're buying to hold rather than buying to sell)."

Yaro concludes that the best buys often are those that "run off models that don't require much ongoing work or investment from the owner." This is a big consideration for those looking to sell high-maintenance sites: the more you can automate processes, the greater the potential for a higher sales price.

The listings in the SitePoint Marketplace reveal the importance of workload to buyers. "Attain steady income with this easy-to-earn web site" invites one seller whose property -- a movie download review site -- sold the next day. Another seller promotes his offering with the words "No work -- easy AdSense Revenue", while another invites buyers to "Let the site do the work for you". Yet another site offers a script that crawls other sites, with permission, and feeds content back to the main site -- definitely a low-maintenance affair. Just 24 hours after the site was listed in the Marketplace, it was sold. This small sample suggests that low maintenance is a big selling point!

Synergy

"What does the buyer bring to the table?" Andrew asks. "If you study corporate acquisitions, the ones that work out are when they are closely related to the acquiring company. This is what is called "adjacent spaces." If you already run a site in your potential acquisition's niche you may have additional market knowledge and assets others do not."

Obviously, synergy has a close tie with -- and huge impact on -- a site's potential to any one buyer. And the degree of synergy will vary with each different seller who investigates the site for sale.

So what exactly does Andrew mean when he talks about the assets one buyer may bring to the table that others cannot? The answer to this question takes in many factors. "Market knowledge could be a better understanding of how to structure a site to make it more profitable; assets could be a relationship with a deep pocketed advertiser. These are things that bring leverage to an acquisition."

Rob makes the point that in valuing a site, the seller has "to consider whether it's a financial acquisition or a strategic acquisition. The latter usually gets a higher price" -- a point that sellers should keep in mind as they prepare -- and price -- a site for sale. By looking at the potential buyer's other operations and possible plans for your site, you can get a clearer idea of your site's value to them.

Technology

Tim points to a potential burden inherent in a site's sale, saying "the technology behind the site and your license of it is also very important. If the site's using a commercial script then you'd have to continue to pay license fees to run the site. If the site uses well-known open source scripts then it must do more to stand out from the crowd. If the site uses a proprietary script, then is it well made, do you have exclusive rights to it and what warranty do you get with it?"

If you can answer these questions about your site and, more importantly, ensure they don't present hurdles to potential buyers, then you may be able to command a better price for your site.

Of course, technological considerations aren't all bad news, as Tim is quick to explain. "If the proprietary script is of a high quality and sold exclusively with the site then there could be monetary value in licensing the script to other sites, or even making it open source so the development costs will not rest solely with you," he suggests. Astute buyers may well review these kinds of possibilities in assessing a sale, so be prepared to answer technical and licensing questions about your site.

It's interesting to look through the sales of technology -- scripts, script sites, and so on -- through the SitePoint Marketplace. PHP-based sites and scripts seem popular, (one sold for $2200 in 7 days, another for $3000 in 3 days) as do sites that use standard, well-known technologies such as Wordpress and VBulletin.

Comparative Cost

We mentioned comparative cost analysis as a formula for estimating site value, and in fact Dan Grossman says that he uses this analysis as a starting point for a site evaluation. "To get a baseline, I consider what it would cost to replicate the site," he says. "If it's got lots of original content, or a complex service, the answer is probably 'a lot.'"

Dan believes that this kind of assessment can help potential buyers find bargains, as valuable sites are sold for a figure below the real cost of creation. "A lot of times this happens when there's an individual owner or creator who doesn't factor their years of labor into the price," he reveals. "For instance, they may only use the basic revenue multiplier to value the site."

Chris agrees that comparative cost is an important factor in assessing a site's worth, but from a perspective of establishment rather than development. "New sites can often simply be imitated rather than bought," he says. "Sites can be built to function identically to other existing sites, and content can be written that covers the same topics, so all existing sites have is their built up traffic, customers, and link weight." As Chris points out, these are the aspects that take time to establish, and that give a site "a perpetual head-start against any other competitors."

In evaluating these factors for a site, Chris looks at the costs not just of replicating the site, but also, the investment and time required to "promote it to the point where it's doing as well as the one you want to purchase. If the sum you come up with is less than the purchase price, that tells you something."

Sellers must be wary of undervaluing their time. Experienced buyers will expect to pay for the time that's been spent both developing a site and establishing its position within a niche. If a buyer baulks at a price that takes this time into account, you can always present them with a comparative cost analysis that shows exactly how much it would cost them to create and establish the same site from scratch. Of course, if potential buyers can design and build a similar site for less than the asking price on a turnkey proposition -- and they have an equally useful domain, and other assets -- then they're likely to have difficulty seeing the value in the sale.

The Value Factors At Work

Given these indications of what buyers are looking for, you're probably getting an idea of the rough price range in which the value of your site might fall -- toward the higher, lower, or middle areas of the price range. But there's one key element that we haven't considered yet, and that's the type of site you're selling. If we were to compare the web property market with the physical real estate market, a site's type might be comparable to the neighbourhood in which a house was located. And as we all know, that has a big impact on a property's value.

To get an idea of the ways in which the different value factors impact on sites of different types, we asked each of our experts to comment on how they would value a particular type of site.

Valuing a Content Site

Chris Beasley gives us two critical questions he'd ask himself if he were assessing a content site for sale: "What is the site worth to me? How much can I make off the site?" They seem simple enough, but as usual, the answers depend on a number of factors.

"If I have some exceptional synergy such as a related ecommerce business -- and so I could gain both link weight and direct customers from cross-promotion -- then I would likely pay a good deal for such a site," Chris explains.

A content site's value may be a factor of the site's synergy with the potential buyer's current operations, but does this mean a valuation of a content site will always be heavily subjective? Not if the site's being acquired for financial, rather than purely strategic, reasons.

"If I have no synergy with the site for sale," explains Chris, "then I'd have to base the assessment off current income, or what I believe the current income could be if I controlled the site, minus the cost of the time spent bringing the site from its current state to what I'd see as its "optimal" state."

In valuing content sites for financial acquisition, Dan uses a mixed approach. After his comparative cost analysis, he says, "there are a couple key metrics that help you come up with a reasonable value." He considers "whether the content is original, what level of traffic the site receives from search engines and natural linking, and how long you expect that traffic to continue."

The nature of the content obviously has a role to play. "Some content lasts, while other content doesn't, and lasting content that remains relevant for years can be more valuable in the long run," Dan says. Chris agrees that quality content holds value: "If your content is poor, the buyer could likely easily replicate it for less than they'd pay you." However, he believes the importance of quality content can decrease with increasing site stability. "As a site grows older, more popular, and more established, then the need for original content gets smaller and smaller. If your site brings in 10 million page views per day, no one's going to care if the content is unoriginal or not unique, so long as it's legal," he says.

Dan believes that ease of monetisation of the site is another key consideration. "If the site's traffic is already being monetized, I look at whether I can see ways to monetize it better, which might make it worth more than current revenues."

Content site owners will need to consider the nature of the potential -- or most likely -- buyers of their sites in valuing those sites. Obviously, the reason for acquisition can impact on the relative importance of the value factors, and as a content site seller, you'll want to consider both strategic and financial acquisition types if you're going to get a fair price for your site.

Valuing a Blog Site

"Blogs are tricky to evaluate," Yaro Starak warns sellers of sites in this blossoming genre. "The value really depends how entrenched the audience is with the current writer or writers, and if you were to buy the site, whether the current writers are coming along with the sale too."

For most blogs that are run single-handedly, the answer to Yaro's second question would be a resounding "no!", but does that mean a one-person blog has no value? Absolutely not. "Some blogs have a brand with no specific personality attached it," Yaro continues, "in which case it's easier to assess the worth of the site using the standard metrics we mentioned above."

Of course, blogs that are driven heavily by the author's personality -- like Yaro's own site -- are a different case altogether. "If the site is driven off the back of one or several particular writers," he says, "unless you can retain them or bring in people of equal talent, you risk losing a chunk of the audience with the change of ownership."

That's a big risk factor for anyone buying into this shifting market -- it seems likely that the more unique and personalised the blog content, the greater its potential for success -- and the more difficult it may be to sell if the writer doesn't come with the site. So are blogs a catch-22? Not if the writing team is part of the deal, or if the value of the site lies in the nature of the blog content, or topics covered, rather than the personalities and writing styles of individuals who work on it.

There are other potential pitfalls for the would-be blog seller, though, the most prominent being the workload involved. "Blogs require a constant flow of content to keep traffic and revenues growing," Yaro warns. "If you have good writers available it's not an issue, but if you don't, there are better web sites you could buy that run off models that don't require as much ongoing work or investment from the owner."

Rob agrees that the amount of work involved in running a blog may also be affecting this segment of the web property market at the moment. "According to our data," he says, "blogs have sold on average for about 11.56 times revenue over the last year. Sites with more static content have sold for an average of 14.37 times revenue. They attract a price that represents a higher multiple of revenue because they're less work. But, if you look at the graphs, blogs are easier to get to higher monthly revenue figures than static content sites."

Bloggers wishing to sell for the highest price would do well to automate their operations as much as possible, focusing on developing the revenue potential of the site and preparing it as best they can for easy monetization. It's also important to pursue a business strategy that relies on good, focused content, rather that enticing personalities.