Notes on Valuation of Websites
Creation:
How much will it cost to create a new similar
(comparative) website today.
While prices would certainly vary from developer to
developer, actual offers from
developers can give a realistic idea about the costs.
Traffic:
While all traffic is not equal, the average of top ten
pay-per-click bids on the site's primary keywords can give a
fair idea as to the value of traffic the site is generating.
If the average value is, say, $0.25 per click and the site
gets 5,000 unique visitors every month then the value of
traffic can be estimated at $1,250 per month or $15,000
annualized. Opinions vary as to whether the annual value is
fair or it should be calculated for a longer period.
Revenue:
If the site is earning a net profit of, say, $1,000 per
month from the sale of its products or services then we can
annualize the value at $12,000. Again, opinions vary as to
whether the annual value is fair or it should be calculated
for a longer period. However, a website that generates
$1,000 with little or no effort will be worth substantially
more than a website that requires, for example, stocking and
shipping of goods.
Service:
The uniqueness of the product or the service itself sold
or provided by the site will, in all probability, require a
separate and equally complex valuation. This will not be
applicable to all sites.
Content:
Original and exclusive content on the site or a database
of useful information or of users/subscribers/clients, if
present, can make a lot of difference and add substantial
value to a site. However, over time, the quality of the
content or the database will surely reflect in the traffic
figure calculated above.
Domain:
Although domain name values have declined substantially
(seem to be on the rise again) compared to the pre-bubble
days, in general, one-word generic and type-through .com
names are still a rare a commodity. If a site is built on
such a domain, it will command a substantial premium.
Obviously, there would be more variables but these notes
provide a starting point for negotiations to begin |
