08 May 2007 ~ 0 Comments

How do you value an online business?

Interesting question. The last few years or so has seen a  resurgence of internet properties and some pretty large sale prices and many of the big boys of the industry seem pretty happy to lay some big numbers on the table (think Skype, Youtube etc).

The internet is obviously climbing in popularity again and seems to have had pretty solid growth in acceptance since the dot com crash. Advertising spend online has been growing strongly and to me there seems to be an ever growing number of website owners looking to sell.

So how do you value a website? Thats a tough question to answer, but I found a couple of nice resources to assist.

I think I will borrow this quote that I found on prowebvalue.com:

“The Value of an asset is the present value of it’s expected returns” – Frank K. Reilly, University of Notre Dame, Investment Analysis and Portfolio Management

Valuing a website depends on a large number of factors, such as:

  • Traffic to the site (and trend)
  • Current and past advertising revenue and sources
  • Expenses required to run the site
  • Does the site have unique/valuable content?
  • Does the site have high Google PageRank?
  • How many other sites link in?
  • How automated is the site?
  • Does any intellectual property/brands/technology come with the sale?
  • Is the site a niche leader online?
  • What are other revenue generating prospects?
  • How old is the site?

Each buyer will look at a site differently and analyse what it means to them to own, both financially as an investment, but also possibly strategically.

Therefore, a website might have a simple, rather technical, value based on earnings, growth, traffic, etc (maybe worked out as a multiple of earnings) and also a ‘bonus’ value based on the buyer’s own situation…

Maybe potential buyers can add content to a larger network, further boosting revenue of the site and the network as a whole? Maybe the buyer can make the purchase and improve their position in a market?

If the site offers someone leverage on other areas then you may be able to ask a much higher selling price.

Some more good info here:

It can be an interesting dilemma. There are lots of sites out there to buy (check out www.sitepoint.com for some to check out), you just have to do some researh beforehand and make sure you are getting good value for YOUR money.

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