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Is Your Site Worth Millions?
By Shalom Issenberg | June 15, 2008
There are a significant amount of ambitious individuals out there interested in developing websites with the hopes that some potential buyer with deep pockets will turn up with a meaningful offer, preferably in the millions!
So what’s involved? What makes your website worth millions?
Simply stated: Traffic
Not so simply stated: Clear and stable monetization and opportunity
The main issue becomes determining value.
- The site has an assumed value based on traffic.
- Its actual value is made clear by its profits.
- Its potential value is a bit more ambiguous.
“Potential Value”
Your site may be profitable, but may only be profitable under certain conditions, or may be dependant on factors that are not predictable or even worse; unstable.
Example: The majority of your traffic is referred by one medium or source like organic rankings. Well unfortunately rankings change. Therefore the potential value could be less than the current actual value.
Or
Your site may not be profitable but potentially could be worth a fortune for the right buyer.
Example: Your website receives 100K visitors per month and impressions generate $10k/month gross ad sales. A vendor in your vertical could use your website to do lead generation converting 7% of your 100K visitors into leads valued at $50/lead therefore producing $350K worth of leads per month. So you can see that the same site being monetized differently can determine its profitability.
Typically valuing a site involves looking at four quarters of profit. There are some brave or “other” investors that may determine value based on other factors but than it’s near impossible to negotiate prices up unless you have proven the profitability historically or you have other serious offers.
The best things you can do are:
- Diversify traffic
- Effectively monetize
- Keep accurate records
- Create interest/buzz via press to bait more buyers
- Hire a firm that’s handled large transactions
- Be patient – large transaction and website sales can take 6 – 12 months after a show of interest from a potential buyer.
If and when it does sell, be prepared to continue working on the site for the buyer a least for a short term.
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