Friday 16 March 2012

Valuing A Website

The only true and certain way to value your website is to receive a genuine offer that you agree. The agreed price would be the market value to you at the time of the agreement. The way a website builder feels about his or her site has a major effect on its value. A valuation is not an objective process.

If you treat website building as an enjoyable hobby keeping you occupied and making some money along the way, you won't be inclined to sell it unless the price is high; higher in fact than a conventional valuation. Buyers don't pay over the odds for a site so in practice you wouldn't sell it. If you are fed up with your site you will be inclined to sell it cheaply. This is mainly because you will stop building pages and when than happens the site is not being maintained and it will lose value gradually. "Maintaining" a website it not tinkering with it from time to time but actively building it day in, day out.

You can value your website online. The range of values that valuation websites throw up is so wide as to be almost meaningless. I can only conclude that the formulae used are often inaccurate or the data used is very variable. I have just used four valuation websites to value my site: and the valuations ranged from $67 to $123,000. It was pretty much a pointless exercise. The major criteria for valuing a site must be the kind of data collected by Alexa: pageviews, unique views, Alexa ranking and estimated revenues. The current and projected revenue must be the key factor.Clearly, as at 2012, the valuing of websites is not that refined.

As it happens I have been approached on several occasions by buyers and they have offered prices varying between $28,000 to $100,000. Armed with that information I am able to make some sense out of the online valuations. My guess is that I could possibly get about $80,000 for the site. The valuations online don't, as far as I know, include subdomains and this subdomain has 1,500 pages and has a value in itself which should be added on.

Incidentally, I realise that people have approached me to buy my site because they believe that they can make more money from it than I am making. They are correct. In other words, they hope that they can buy it cheaply as the current market valuation is low because the revenue is lower than is should be. A site that has maximised its revenue will therefore be more valuable but less saleable.

The value of my site (and I am sure this applies to other sites) does not come near to its value as a reflection of the effort put in. For the average webmaster, if you divided the site's value by the hours put in to build it, you would shocked at the low hourly rate. Website building is not an easy or very fruitful way of making money in my experience, although there are exceptions, of course. The site makes about $2,000 per month as mentioned on the page about maximising AdSense revenue.

For me a simple way of valuing a website is to compare its revenue with invested funds. $100,000 invested at say 6% will earn $6,000 per year.  A site making $6,000 per year net would be worth $100,000 less a sum to account for the work required to maintain it, say $40k. The resultant figure is $60k - too high a figure. I think the disparity between my simplistic method and the online figure or the offered figures is reflected in the poor value of websites generally (as an asset) except for the top end sites.

I have just learnt that, a tech and social media blog said to be one the world's best and with an Alexa ranking of about 200 is said to be worth $200 million (USD). CNN wish to buy it off the person who started it. He is set to make about $100 m. He has a staff of about 40.

I think you will find that the value of websites climbs rapidly towards the top end but is relatively flat and cheap at the bottom end. As an asset, your website may have a disappointing value. However, its value is not just as an asset on the open market. For retired people it is something that keeps them occupied and brings in an income that can be much better than a financial investment (March 2012).

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