How Much is My Site Worth?
by Daniel Scocco This post is part of the weekly Q&A section. Just use the contact form if you want to submit a question.
Will asks:
People regard the amount of subscribers a blog has as a good indicator as to how successful the blog is in terms of popularity and monetary values. However I was wondering what your view on a blog’s value.
I am not sure if people really regard the number of subscribers as a good indicator of the monetary value of a site or blog. At least they shouldn’t.
I think the number of RSS subscribers is a good indicator of popularity and reach, but not of the monetary value of a website. A large RSS subscribe can add a premium to the valuation, but it is not the main factor affecting it.
So how much is a website or blog worth? The basic answer, which my friend Yaro Starak gave a while ago, is the following: Your site is worth as much as someone is willing to give you for it.
I agree with this definition because value is something subjective. For some people the ticket for the final match of the World Cup is worthless, because they don’t like soccer. I am a soccer fan, and therefore I would be willing to pay quite a sum of money for the tickets (especially if Brazil was playing in the final!).
The same is true for websites. A specific site might be worth $1,000 for someone and $10,000 for someone else. It depends on how well the site fits with the person’s business and future plans.
That being said, there is one factor that will have a large impact upon the valuation of your site: its earnings.
The most common mistake that I see people making is to assume that their site is worth a lot just because it has “potential.” Potential does not sell websites, earnings do.
Of course there are extreme situations where the potential could be taken into consideration. For example suppose you have a website that generates 50,000 daily page views but does not make any money because the owner never monetized it. That site certainly could be sold based on a estimation of how much it could earn.
But even in that case buyers would get suspicious. They would ask themselves how come the owner never tried to monetize such a huge traffic, and they would also need to estimate the potential earnings on the lower side.
Earnings equal revenues minus costs. Most websites have a really lost maintenance cost, though, so usually the revenues and the earnings will produce almost the same valuation.
Now, if my sites earns $x monthly, how much is it worth?
A good starting point is 24 times the monthly earnings. That is equivalent to two years of earnings. If your site earns $2,000 monthly, therefore, its initial valuation would be at $48,000.
Notice that this multiplier is usually applied to established websites, though. If your website is less than one year old, then you probably would need to consider a smaller multiplier, say 16x or even 10x monthly earnings. A site that was launched six months ago and makes $500 monthly would therefore be worth around $6,000.
Premium websites, on the other hand, can use larger multipliers, including 36x or even 48x monthly earnings.
On top of that initial valuation you can obviously include other factors, including the quality of the domain name, the existing brand, the number of RSS or email subscribers, the amount of organic traffic and so on.
So if I have a website I can sell it for however much someone wants to buy it for. How is that a good plan? Don't we have the capability of finding out exactly how much all websites have been sold for and generating an algorithm by it? The free market will just try to get it or sell it for what it's NOT worth, right?
