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Valuing Your Website

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NOTE: When I started writing this post, I thought it was going to be easy to read, but I think it just became a big jumbled mess of thoughts. Maybe I’m wrong, but you have been warned.

Darren’s post on “How much is an adsense website worth” got me to thinking about how I value websites when I buy them. I thought I’d try and share with the world the crazy little process that goes through my head before I purchase a website.

There are a few factors that determine how I value a website:

Traffic – Traffic is very important. The more visitors you have, the easier it is to start the website on the moneymaking track. What kind of traffic do I like? Well for me, the most appealing traffic is search engine traffic. It is a lot easier to make money off of search engine traffic. Why? Because search engine visitors(as opposed to people who have bookmarked or subscribed to your site) have never seen your ads before. This is an advantage because they are more likely not to have seen the same ads over and over and over again on the site, and therefore more likely to click it. Case in point, CSSVault does terrible on Adsense and Blog Catalog does wonderful on it. This is all simply due to the fact that most of the visitors who come to Blog Catalog have never been there before.

Pagerank & Incoming Links – I know many people think that valuing a site based on PageRank isn’t smart. PageRank will not necessarily live forever and people that sell links based on PageRank risk getting banned by the search engines. Both of those statements are true. However, even if PageRank dies, link buying will not stop. Like it or not, the way that sites climb those search engine rankings is by getting incoming links. Having links to your site will always be important regardless of whether PageRank lives forever or not. Where would the search engine algorithms be without factoring in the links that your site receives. Simple text link selling will never die. The price just might not in the future be determined by PageRank like it is now. I myself don’t like to sell text links that much, but when I do, I like to put them in extremely unobtrusive places(like the footer of a site). A good rule of thumb is to never sell more than 5 on a page. Bottom line is, while I don’t like selling them, they’re an easy way to a few hundred extra bucks a month if you know who to sell them to.

There is another thing about the above 2 points. Both things need to be true. I wouldn’t trust a site with many incoming links but no traffic, or vice versa.

I also like for the site to have good growth potential. What fun is it to run a site if you can’t make it grow.

Another thing I like to know of course is, how much money the site is making. While you might think this is the most important factor in determining a website’s value, it’s not mine. It is only semi-important. I’m sure you are thinking, “but Jacob, of course that’s the most important factor”. It would be, but for the fact that most webmasters don’t correctly turn their traffic into income. For example, when I bought CSSVault at the beginning of the year, I just checked my old e-mails and I never discussed the revenue of the site before Paul and I came to a deal. Not one mention of revenue. How did I come out? It will take me a total of 8 months to make my money back. I’d say that’s a pretty decent turnaround. The only really “rule” I have for myself is that I have to be 99% sure that I’ll make my money back in less than 2 years.

In other words, it’s really hard to have an exact formula for determining a website’s worth. It can be based on a number of factors. Everybody has their own way and own theories on how to value a website. There is no set way or formula to value a website. One person might pay 1 number and another person might pay twice that much. Oh yeah, and btw, I’ll be announcing my new website purchase within the next week :)

Anyway, just thought I’d see what everybody thought of this type of post. Do you like this sort of post? Yay? Nay?

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Categories: Blogging Sense

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Comments

  1. Darren says: 7/8/2005

    good post mate – not jumbled in my mind.

  2. Rob Lewis says: 7/8/2005

    An interesting post Jacob – it’s good to get an insiders view of how some of these deals are done and what you are looking for in deciding what to buy. More like this please!

  3. Chris Meller says: 7/8/2005

    Indeed. I liked it as well. Random links to new themes / plugins / hacks for WordPress are all well and good, but lots of sites are already doing that. I think more posts along these lines would be great!

  4. Leonid Mamchenkov says: 7/8/2005

    Keep it coming. :)

  5. Jon says: 7/8/2005

    I liked it…I’d be interested in a follow-up in how you find the sites you buy and what you do with them afterwords. Do you hire people to work on them, or do all the work yourself?

    Thanks.

  6. Tim says: 7/8/2005

    Jacob, do you buy purely blogs or article/content websites aswell?

  7. Netwalker says: 7/12/2005

    Hi,

    How do you measure the traffic of a site?

    I have installed PowerPhlogger to monitor diferent blogs on my server. Today I installed the short stats plugin for WP. And I’m getting diferent amounts of people visiting my site.

    Which statistics system could you recommend?

    Thanks

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