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The maximum value of 'worth' to the owner could be calculated by working out the value of an asset that would generate the same income, including growth - 5% per annum is an approximate figure good enough to illustrate the point. So, a site generating $1,000 per month would need an asset of approximately $240,000 to generate the equivalent income. However, that would be a relatively safe asset (more so than adsense) so the value comes down dramatically because of risk. $6,000 for the same site does, however, seem very low.
Perhaps it's a good time to buy.
Plus the site is a catalog of past work -- and that generates more paying projects.
So I'm just keeping it as passive income for now, no biggy.
For brick-and-mortar businesses, a typical business valued on the basis of its earnings before interest and taxes might fetch 1.5 to 2.5 times those earnings, plus the value of any assets included in the sale. The multiplier would depend upon a number of factors, including the industry. Some businesses might fetch significantly more, perhaps 5 or 6 times its earnings, some might fetch less.
A capitalized earnings approach to valuation (i.e., how much money would it take, if invested, to generate the same return) is going to take risk into consideration. A $10,000/month scraper is worth a lot less than, say, a $10,000/month site on travel which has multiple revenue streams, an established search engine presence, and years of income stability.
Now I think the issue is with websites is the typical webmaster is not maintaining an accurate p&l so the numbers in regards to profitability are just not normally available. So selling basis is going off something else. I imagine most of the transactions are for relatively small sums so it is not even worth the work trying to determine accurate profitability, especially if you are going to do other things with it.
If you are an expert in widgets and keep your site sticky and up-to-date, then it stands a good chance of remaining differentiated.
There are a few competing sites to mine that I'd pay 12 months revenue for, since I know that they have solid and numerous backlinks, and that I could develop content.
Should I e-mail my competitors now and offer 3-4 months revenue? Um . . . .
Personally, I wouldn't sell my site for even three year's revenue. Revenue is growing, for one thing, and for another, it fits into my life neatly. It would be hard to replace.
But someone else would be foolish to pay more than, say, six month's revenue because it would start to lose value once I was no longer involved and adding content.
Anyway, I can see the difference between worth to the owner, and worth when it comes to buying.
I know my site's earnings are up. Just had a promotion in the serps to #1, and an increase in income. To me, that, coupled with 2 years adsense earnings makes it worth a good deal of money.
However, should I decide to sell, potential new owners don't know that the serps position will remain the same, they don't know that the income is stable (despite the history) and therefore buying it would be a gamble for them. Consequently the site wouldn't attract what *I* think it's worth. Somewhere along the lines there is a happy medium, but I suspect that any site that is a good quality earner is not likely to sell too readily or cheaply.
A website, like pretty much anything else, is worth whatever someone is willing to actually pay for it. Unless, of course, it's worth more than that to the current owner.
Websites are a hard case, however, in that the our market is volatile, each website is different, the work to maintain them is mostly unknown -- as are the skills necessary to do that work. And, of course, 'our market is volatile' conceals several dimensions of volatility: unpredictable search engine behavior, shifting fads and trends, constantly evolving monetization options, the possibility of 'banning', etc.
Buying a website is a gamble and most people don't like to gamble when they don't know the odds. The current owner, on the other hand, probably has a good idea of a sites worth.
My websites, for example, are worth far more than 12 months earnings. If you don't believe me, just try to buy them! ;)
By what sensible model would somebody buy a business based upon a multiplier of its annual revenue, as opposed to its earnings?
That's right, site values are often quoted in multiples of net profit. But the people who buy and sell regularly use the correct terminology: net profit. To some others profit, revenue, income, earnings and salary are all the same thing.
I have spent a lot of time over the last two years studying the buying and selling of websites (and other online businesses), and that's what my site is largely about. It's amazing how many people haven't the vaguest idea of how to make even a rough estimate of net profit. Some even get annoyed if you ask them to factor in a fair wage for their own time and to deduct that from the profit. I've been busting my ass off for 80 hours a week... but I didn't actually pay myself a salary, mate!. Arrghh!
That lyrics site is a good example of what buyers should really go into. Examining just the volume of traffic and Adsense cheques is highly inadequate. I usually go into a lot more research; get copies of the stats files to examine for a number of specific factors (including sources of traffic); check WHOIS and WHOIS history; detailed link:, linkdomain:, and site: checks in a variety of SEs; archive.org checks; copyscape.com checks; and a lot, lot more. The most important is, I think, the stats. Any excuses about having changed hosting companies and losing stats causes me to walk almost straight away (even if I believe the story). One expensive disaster was avoided when my examination of stats revealed that 80% of traffic came from a single IP.
Buying is not for the novice webmaster but there are riches to be had via this route.
A sensible price will vary a lot with the site. How old? how much traffic? How many links? Income from where? How much content? Original? Any high-risk SEO tricks? etc etc.
I've bought some small AdSense only sites recently for about 12x monthly profit. Which I feel comfortable with, for the sites I bought.
That multiple would be too little for some sites, and too much for others...
I am in elecronic publishing since the '80s ("web publishing" didn't even exist then), and since then a lot of things have changed.
Most of the contents I developped then is no longer usable today, for a variety of reasons, technical and non-technical.
Only after a few years I learned the golden rule of electronic publishing:
"Your contents MUST overlive the current technologies"
This means that contents and technologies must be well separated and anyway you have to plan everything VERY well.
Always store a copy of your contents as plain-text, image and uncompressed audio files.
And (small detail), do backups, and label some of them as "VIP", and every jan 1st do a new copy of the VIP backups.
Remember that CDs fail too, my first CDs (burnt in 1991-1993) are happily failing :-)
Adapt or die is the usual maxim, I believe. It doesn't apply so much in long-established industries such as property or shares, but in technology terms there might not even be an internet in 40 years, but something else that's much, much better. (And SERPS might be a deadly infectious disease).