How Much Is A Web Site Worth? 193
BluSkreen asks: "We've been approached by someone that is interested in buying our five-year-old site. Using the metrics from the Andover purchase of /. and Freshmeat (from the Andover 10Q filing), and scaled to our traffic level (about 1.5 million page/month), I've come up with a value of about US$250,000 or so. They were shocked when I mentioned this figure. We figure we have at least US$60,000 in costs over the last five years, (not counting hundreds, if not thousands, of hours of labor) and gross about US$20,000 in banner ads a year, though I've 'pitched' nearly US$100k in banner sales in the last year. How does one go about determining the value of a site?"
Re:Worth of Web Site (Score:1)
Instead of attempting to figure out what someone else is willing to pay for it; calculate the value based on what it is worth to you. If you believe you labor should be valued at $40/per hour, sell it for that price. If no one buys it, so what? On the other hand, maybe it is worth exactly $220,000 to you; then don't accept a penny less. Your labor and energy created this site (perhaps others as well) and only you know it's price. You can know what it is worth to you but you can never know what it is worth to others.
You can drive yourself completely mad trying to figure out someone else's method of determining value. At the end of the day, the only thing that really matters is that you exchange your labor and time for something that you find rewarding. Some things cannot be sold at any price, some things are only 99 cents.
Every exchange for money is truly about time. Each minute spent working is a minute that could have spent someplace else. You could be painting, playing in park, or cuddling with your kid. Trade your time wisely and only trade it for things that truly add value to your life.
Web Site Worth (Score:1)
Re:Nothing according to most /.ers (Score:1)
Re:Nothing according to most /.ers (Score:1)
Let's say someone copies your site word-for-word, and let's say that for some odd reason you don't sue the fsck out of 'em. Are your losses equal to the full value of your site?
Well, your product's now less unique. That's certainly a Bad Thing. However, you keep your customer base, your experience, your connections, your developers' skills. All your new competitor has is a web site -- and if much of your content is dynamically generated, they don't even have that. I'd say what they're able to take is only a very small percentage of your true value.
However, don't get me wrong. I like copyright. (I agree with the folks who say "it's not stealing", because it's not stealing. It's copyright infringement, and that's wrong too).
Re:As someone who sells businesses for a living... (Score:1)
I agree with you (I'm not a big investor, but I refuse to ignore P/E) However you seem to have messed things up a little. P/E is Price/Earnings. The P does not stand for profit, it stands for price. AFter paying all the emploiess, depts, and power, water, and other bills, Earnings is what you have left over. Price is what your paying for your share of the earnings. Divide Price by Earnings, and you have a simple you historicly useful measuire of the company.
I'll agree that PE isn't the whole story, but if this figgure gets high (The historical average is about 15) that means someone is paying extra for the profit, if it gets low, that means your getting a bargin. The critics point out (correctly) that a company that is growing fast will have a high PE, because looking to the future you can say expect the earnings to grow to make the PE more reasonable, while a company with a low PE is generally in trouble, and you may only own a share of those earnings for a few years before bankruptcy. Of course this is simplified, but you get the idea. If your going to invest money do some more research.
Investing in the Market Re:What is labor worth? (Score:1)
The PE ratio of the market as a whole is about 44. That is to say, the total investment in the market is making a return of slightly over 2% per year. How to beat the market consistently and legally is an unsolved problem. So, unless you are hoping to make money off of new investors in the pyramid, you might be better off buying his website after all. (Of course, he didn't tell us what his costs were.)
Cheers,
Tupper
Re:So what about domain name prices? (Score:1)
Re:OK, I'll bite (Score:1)
HA! (Score:1)
I prefer fsck just because it doesn't look as rude and doesn't make a poster look like a jerk. A word heard, read or said is quite a bit different than a word in your head.
Ha-ha! (Score:1)
Sorry, couldn't resist.
--
Re:The true answer. (Score:1)
Re:As someone who sells businesses for a living... (Score:1)
I do understand the high P/E for growing companies and low P/E for troubled companies. Unfortunately, day-traders are screwing up P/E ratios for many high profile companies. No one is going to be able to convince me that Rambus is worth its 829 P/E or Yahoo worth its 1770 P/E. Rambus is at about 300 right now, and it was at 500 a couple of weeks ago! What the hell is up with that?
There are many factors that enter into these really historically staggering multiples for companies like Yahoo. But there's a great deal more market force at work here than can be attributed to the infamous "day traders". There really aren't many of them; multiples this high indicate either an extraordinary thin market (certainly not the case with typical Internet-related IPOs these days) or gargantuan institutional pressure. Folks, it takes massive, massive amounts of buying pressure to generate market caps like that.
So why do they do it? Who's pulling the trigger to continue buying into stock valuations that are this, well, nutty? First, I ain't Warren Buffet, so I don't claim to have all the answers. But there's a factor here that is working overtime to jack up these prices and keep them much higher than the current model of economics and business will support.
That is, simply, that there are a lot of people who suspect strongly that the current model is on its way out. Kaput. Done for. Over with. And in the Brave New World, who knows who will be on top? Thus, part of the reason people are thus placing what seem to be extraordinarily high bets on companies like Amazon and Yahoo (and Cisco and Micro$oft, while we're at it) is the presumption that these companies are going to be on top, however the New Economy ends up working.
That's why people are buying eyeballs at an exorbitant rate - they figure that, whatever else happens, you still gotta have loyal customers. So, since we don't know what the new model is going to look like, or who the real competitors are going to be, the only place to put your money if you want to play, is on the companies that own eyeballs.
Thus, taking the astonishing step of actually getting back to the original thread, I think they key to look at in an acquisition of a web site is whether or not the buyer is buying a current business (in which case, current business-model multiples and rules and so on apply, or should), or whether they're stocking up on ammo (eyeballs/users/views/loyalty/goodwill, as in the case of the Andover/. deal), in which case you can pretty much flush single-digit multiples and earnings and all of that right down the proverbial toilet.
Which brings us back to one thing that doesn't seem to change, no matter how many Industrial Revolutions we live through, and that is (as has already been pointed out in this thread) - there is no objective "worth"; you just gotta know how bad the buyer wants it. And knowing what he wants it for is critical in that determination.
--
Swampfox
Real Hacker (tm) Wanna-be
Re:What's their problem (Score:1)
Re:Standardized formula? (Score:1)
Same as always, Supply vs. Demand
They have the only one of that particular website, so it all depends on just how badly someone else wants it.
Re:"...we could all agree..." (Score:1)
Re:$250 K is a insult to Slashdot. (Score:1)
Re:"...we could all agree..." (Score:1)
That is such a hideously stupid idea that it might very well work--Hey, in a world where every negative report about the future of Rambus sends its stock climbing to new heights...
(if you're really serious, e-mail me. What the bleep, it's only a buck.)
Wishful CPM thinking (Score:1)
The actual CPM rates after discounts and unsold ad inventory has been figured in is another.
Or, to use an analogy: If you are going to sell your house, will you list it at the price you want to sell it at? No. You publish a higher price, and let people think that they're getting a bargain when you accept (possibly much) less.
Average reasonable CPMs for reasonably targeted sites go from $5 CPM to $20 CPM. Most webmasters would be very happy with $10-$15 CPM.
hard to say (Score:1)
Re:x4 (Score:1)
Other than that, theyve been right...
Re:So what about domain name prices? (Score:1)
EJB
Re:Price and earnings (Score:1)
Re:You're joking, right? (Score:1)
Looking at today's bottom line for a site valuation just doesn't make sense.
Neither does looking at "future, potential profit" which may never materialize. Let's face it: is Amazon going to be in business in ten years? Will they be making a profit, then? Do you have anyway of knowing? If you're looking to buy a business, is that any way to spend your money? You might as well plunk all that cash down on a roulette wheel!
The only sane way to judge a company's value is to look at what they're doing now and what their plans are for the future. When you have an outfit like Amazon that's losing money now and their plan for the future isn't much different from what they're doing now, you have to wonder. I certainly wouldn't put my money in them, not for the long haul. (Heh. A little day trading with the extra cash is a bit exhilarating now and then.)
I wouldn't give this person $20K for their site, but then, I don't know anything about their site other than what they've so far revealed.
Selling a website is like selling a building. (Score:1)
Selling a website with a history, a current flow
of traffic, and with banner recognition is like
selling a building which has been doing business
for about a few years. People in the area who
frequents your site knows you and has a certain
opinion about you. Your building's appearance
and location(domain name) is to be taken into
account. How well does the name work and how well
does the site achieve it's main goal: awareness
generation for the company.
It isn't how much you will be making from the
site which determines it's value, but the potential
growth factor and the awareness and visibility
benefits the company will gain through the
website.
Depending on your site's info, detail, and whether
the current staff will stay on long enough to
let the new members from the buying company
learn the ropes, your site could be worth the
$250K or more. But it all depends on the details
and on negotiating.
You said they blanched at hearing the price, it
could be that they are new to the business of web.
And thought that since the only physical costs
were web hardware, that it would be more like in
the tens of thousands, not hundreds. That has to
be explained to them.
You are selling a product which is quite large
and much like producing artwork or a building and
then selling it, the value isn't simply what the
last business's profits were when _they_ used it.
It is the percieved potential profits which the
new owners will be able to reap from it.
If I had a site like good-bikes.com(for example),
and I used it to describe my collection of good
bikes, but a biking company wants to buy the site
out, should I judge the selling price at what I'm
making off of the site? Hell no.
You need to evaluate the potential the site
presents to the buyer. They see value in the site
and they want to buy. It is your job then to
determine what the site is worth to them in the
long run and either convince them of that or
decide that the buyers aren't serious enough or
are not savvy enough about the web to understand
the potentials.
The idea that you might be charging too much for
the site is a possibility, but then again, always
get a second opinion from other people and
companies if possible before settling for less
since the whole "shocked" thing could be a facade
to weaken your resolve so you will lower the price
far below what it could be worth.
Good luck in your sales of your domain/website.
Wing.
TheReaper@ourmag.com
- Wing
- Reap the fires of the soul.
- Harvest the passion of life.
Here's what determines the value of your site: (Score:1)
Re:OK, I'll bite (Score:1)
A website's value. (Score:1)
Well, you did your homework he right way..But you made one false assumption--You assumed that Slashdot, and Freshmeat were accurately valued at the time they were sold.
During Propaganda's peak of popularity (summer '99), I considered putting it up on the auction block just to see what I could get for it..At peak, we were doing a little over half a million pageviews and 1.0-1.2 million hits per month. For a few weeks (and over several dinners with friends of mine) I asked them what they felt Propaganda was worth--These being IS/MIS professionals themselves, I figured I would get a good solid figure. Between 7 or so people, I heard values ranging from $50K to $450K.
Pricing a webpage is fairly difficult to do accurately. There are so many ways to think of a page's current value versus potential value that you're best off settling on an average. In the case of Propaganda, there are pluses and minuses to think about. Propaganda is currently included in every major Linux distribution in the world. A good thing. Propaganda is comparably high-exposure but low-traffic. A bad thing. See what I mean?
Content versus potential growth. I could easilly turn Propaganda into a cottage industry if I really wanted to..You may want to take that route instead.
One thing you might want to do is email Trae McCombs at VA..He sold themes.org to VA about a year ago. He was doing about half a million pageviews a day at the point where he sold it, but you'll have to ask him how much VA shelled out for it. I dont know that figure.
Good luck,
Bowie J. Poag
Dharma's store (Score:1)
There is value in anything that attracts eyeballs. Banner revenue may not be guaranteed in the future, but it is a useful measure of eyeballs and how well your site can attract other to associated sites.
Re:As someone who sells businesses for a living... (Score:1)
You make a claim of turning away $100,000 in potential revenue. Is this because you felt the ad would have driven away your core market? You would have to make a strong case for how much growth your site could get in revenue - and so far the evidence is you are loosing $40K US or more currently. Consider the costs the new owners would need to incur - professional staff, etc.
There are things you could do to build this up and make it worth more. You should invest some time in the business section of the Library or book store.
Website value in today's economy (Score:1)
1. Can your product or service scale with HUGE volumes of traffic? By this I mean, if some large company with traffic which dwarfs yours were to point a large chunk of it's visitors at your site, would you crumple or take it in stride? If you would crumple then you are worth less because they have to invest in you post sale to make you scale. If you can take it then that can keep your value the same or actually raise it if you do it well.
2. Do you have any large outstanding debts? If you do then the aquiring company will have to take them on and this could hurt your worth.
3. The first 2 factors are really just modifiers. This third factor is actually the measuring tool. The worth of websites today are based on "visitor aquisition cost." Every website out there has a cost to aquire a new visitor. Of course there are different types of visitors (viewers, buyers, members, etc) and these are worth different amounts. Say a major website normally spends $75 to aquire a new member on it's website through various marketing activities. Now say that your site has 10,000 active members. You can easily make a case that your site is "worth" at least $50 per member or $500,000.
Personally I don't know what your membership level or traffic level is and I definately don't know how factors 1 and 2 affect your business, but with this information and a little homework in the cost of customer aquisition for your potential buyer you should be able to come up with a fair value of your company.
--Alex
Re:What's their problem (Score:1)
-Andy Martin
Having looked at what I *think* is the site... (Score:1)
IF - The buyer is industry-related, but can keep the site unbiased. i.e. If it's a manufacturer, it would be fairly difficult to keep things neutral, but a *reseller* could remain neutral. To the right company, this could be worth a lot of money - There are a lot of eyeballs coming through every day, and it *is* kind of a niche. It would never be Yahoo!(tm), but you're not asking 10 figures either.
/. is actually a pretty good analogy to use. If VA Linux, Red Hat, or whoever had purchased
If you want to try to sell the site, point out the number of eyes going through daily. Check some of your competition and try to see what they are receiving by way of hits. If you're #1 or #3, that would be a good thing to point out to your buyer.
Finally, as long as the buyer is neutral(ish), I think there is a lot of room there for more banner income at any rate. And for a reseller, having buy/sell/trade on there would be mighty nice
For what it's worth. (Score:1)
Can't you generate more revenue? (Score:1)
I'd load the site up with as many affiliate programs as you can.
Also unless you've been an extremely hardball negotiator, you're probably getting screwed on the rates you're getting.
Maybe, they just want the domain name. (Score:1)
$40k for one (Score:1)
Code is garbage in garbage out.
Languge is garbage in, non-sequitor out.
Re:Its worth whatever! (Score:1)
Economics 101 - ANYTHING is worth exactly what it will sell for. If no deal can be made, the seller valuse the item more than the buyer (which may or may not be reational, but, I digres)
Re:18MM PV/Y >> $250K (Score:1)
I hope you're just trying to go to an extreme on examples. I would LOVE to see someone offering 30 cpm, or hell, a site that makes 30 cpm on impressions. Last I checked even Hotmail was only able to pull in approx 15cpm.
Just a question, ignore if you will.
Go buy a book (Score:1)
-- Greg
selling your site (Score:1)
However, since you only grossed 20K last year you probably will not be able to command the higher valuation levels.
That said, $250,000 does not sound unreasonable.
Please consult a CPA or attorney before you cut any sort of deal. And don't forget the potential tax implications of a sale. You can lose as much as 50% of the price in taxes if you don't structure it right.
Re:The true answer. (Score:1)
{Laughin hysterically}: Ok, first of all, why would you buy a house in SF?!?! And most importantly, if you *were* to do so, you wouldn't get much for $500k. You'd be looking at a basic starter house for that much... :)
I'd personally go for a nice house in the Santa Cruz mountains [assuming we're staying in the Silicon Valley area, otherwise I'd move to Colorado :) ] Nice sized house would run you a couple mil...
But then again, I never was very good at saving money.
Ender
Re:go IPO! (Score:2)
what the market will bear (Score:2)
Unique users (Score:2)
They reckon (for a US based site) that $470.50/unique user/month is a fair figure.
...j
So what about domain name prices? (Score:2)
Every few months I get some little mom and pop ski shop asking me for my domain. I tell them that there's no way I'd give it up for less than $20,000. Partly this is because I don't want the hassle of moving all my stuff over to another domain, and partly it's because I was really boned by the Toronto Sun Publishing Company when I gave my previous domain, canoe.com to them for the promise of theatre tickets that they never gave me.
Some of these companies are shocked at how much I want, and others (generally the more savvy ones) understand.
But I don't want to be accused of domain squatting - I have this domain because I use it, not because I want to sell it for megabucks.
Re:Nothing according to most /.ers (Score:2)
Whether or not the author still has it, copyright is still being infringed. I object to the RIAA because they're claiming that the MP3 format itself should be outlawed, because it makes copying music too easy. I personally still buy the CD, even if I could theoretically download it from the net instead. I do download MP3s, but only to see if I like the band enough to buy the CD.
I wouldn't condone copying MP3 music, just as I wouldn't condone cloning a website. It's absurd to claim that a site has zero value, just as it's absurd to claim that an MP3 doesn't have value. Claiming that MP3 as a format is inherently evil is an entirely different matter, however...
Old Economics and "New Economy" (Score:2)
So to the basic principles: The point of owning a company, or an asset generally, is to make money off it. The idea of liquidity of capital says that money should go where the most money is to be made. That is, if my $1M invested in Foo Corp is likely to make me $100K/year, and my same $1M invested in Bar Partners is likely to make me $50k/year... the good money is on the latter. Of course, that principle has indeed gotten a bit muddied in internet stocks where huge *losses* attract investors.
But I still think that in selling your website, you really should try to sell its likelihood of making money for investors, not some indirect concept like page-clicks. Lots of (e.g. non-commercial) sites have more page-clicks than yours does (whatever it is) without making a dime, or having any hope of ever making a dime. On the plus side, you have actual revenue to point to. On the other hand, it also appears you have actual costs (i.e. labor in maintaining the site). The buyer presumably wants actual profit, not just revenue... if you have $20k/year in ad revenue, but it will cost them $25k/year to keep the site running, that isn't all that appealing.
On the plus side for your sale, you don't have to sell only your past profits (in fact, that's not *really* what you are selling at all), but rather your *future* profits. If you can make a good case that next year (or the one after that) will have $100k/year in revenue, that seems a lot more valuable.
So in the end, it seems to me that here's what you have to argue:
1. My site is *likely* to make $X in actual profits (revenue - costs) in the future.
2. The going rate for other investments is a Y% annual return on capital.
3. If you pay me $Z for the website, then $X/$Z is more than Y%.
Of course, the one other wrinkle is that some investments are riskier than others. Your buyers could buy T-Bills which pay quite a bit less than Y%, but have very little likelihood of becoming worthless. So realistically, you have to argue not just that you are likely to make $Z, but show *how* likely this is.
Yours, Lulu (I am not an economists, but I sometimes play one at academic conferences)...
Re: Free Promotion (Score:2)
Re:OK, I'll bite (Score:2)
It costs... (Score:2)
just like acid.
--
Re:Think of it as a company... (Score:2)
--
Re:Price of radio stations (Score:2)
The license, of course, is not the station's to sell, it's the government's to assign, revoke, or transfer, but it's the surrender of the license by the seller so that the buyer can get it assigned to them that the buyer is really after.
Web sites, it would seem to me, aren't dependent on the acquisition of a license, but have value relative to other web sites based on the desireability of the domain name (Ford would probably much rather have ford.com than curtis-mathis.com or steinway.com) and the desireability of the current "audience". In this there is some relevance in a "radio" analogy.
Compare ROI to others; you want earnings not sales (Score:2)
Why work like crazy to make so little?
--
It's arbitrary. (Score:2)
Although it's kind of extreme, look at the market caps vs. actual revenues of Lycos vs. Yahoo... Yahoo has like 10x more visitors, 10x more market cap, but only 2x more earnings... So it's hard to quantify what makes a site valuable.
Re:18MM PV/Y >> $250K (Score:2)
Check out Altavista's rate card (provided by DoubleClick) here [doubleclick.net]. For banners with section-specific but not viewer-specific advertizing, $30 sounds like about an average rate.
Just because you have fewer visitors than Altavista doesn't mean your rates should be any lower -- it's simply that you have less inventory to sell. $30 CPM for banner ads has been about a market average for the last three-to-four years.
This is my opinion and my opinion only. Incidentally, IANAL.
Ahhh, All-Too-True, But... (Score:2)
That said, there are a number of value-adds you can give advertisers as throw-ins INSTEAD of cutting rates... reward people who make BIG ad buys with an 88x31 (I didn't make up the size, it's a CASIE standard) button on every page. Create affinity pages on your site, where the ad clicks to the affinity page rather than directly to their site. Run promotions -- drawings and the like, to encourage click-throughs (these are also a great way for the advertiser to collect information [read as "leads"] on the people who are clicking through in the first place). All of these are tools you can use to help close ad sales WITHOUT having to "give away" inventory.
This is my opinion and my opinion only. Incidentally, IANAL.
go IPO! (Score:2)
Re:OK, I'll bite (Score:2)
Now, the interesting thing is that you can't copy a web site the way you copy an MP3. When you get right down to it, a lot of the value of a web site is the address. The same content at a different address is probably worth a lot less because no one knows it's there. Say I snuck into CmdrTaco's house one night and dd'd the drives that contain Slashdot. Then I make that copy available under my own url http://nowhere.org or whatever. Is that copy worth anything? Not really. The interesting thing is that domain names are much more like real property in that you can't just copy it. There can be only one slashdot.org. If it points to my servers, it doesn't point to andover's servers anymore. Also, most web sites that are valuable are dynamic. Having a copy of slashdot from six months ago isn't very valuable. Having a web site that changes constantly means that you get regular repeat visitors. If you just have static content, people can read it once, and never bother coming back. In order to copy a dynamic site, you need to copy the process that changes the site, which in many cases is difficult or impossible.
$250,000 is LOW!!! Ask For More...Here's Why! (Score:2)
With that said, I've sold domain names alone for more than than what you're selling your whole site for...seriously regardless of what people tell you, your site regardless of its content is worth more than $250,000...heck even as a forwarder to an adult site, it's worth more. Add in the content and the fact that you have paid advertisers, that really increases the value...
I'd say $500,000 USD for sure.
If the domain name is simple and unique and/or protected...that is you've bought up variations of the domain and/or registered it as a service mark then the value goes up even more.
I'd say those above protections add at least a few hundred thousand dollars in value.
Now you're approaching seven figure territory...
If your site is trully unique and is in a niche market, then it's worth even more yet...
So in summery, if it's a music site as some have said it is, then I'd say go for around $500,000 and negotiate from that.
If it's in a unique niche with few other players, then $1,000,000+ USD is reasonable, but without knowing more about the site I can't give a more precise figure.
Even though you've already made an offer of $250,000 you can always revise it...either downward (obviously) or UPWARD...simply explain you've reevaluated its value and it's worth $500,000 or whatever amount to you. If they balk, then try to negotiate...at least if anything you'll feel better about the sale in the end knowing you got what the site is really worth...and I bet you'll be able to get more than $250,000...heck even $300,000 is an improvement.
Lastly, don't forget about taxes...your $250,000 will quickly become much less...so in the end you could have little to show for all your work.
Bottom line is ask for more...if they're serious and you play it cool, you'll probably get much more than the $250,000 you are now asking.
Good Luck!!
Ron Bennett
p.s. If you need any help selling the site or want more help pegging a price, feel free to email me.
Re:Worth of Web Site (Score:2)
That's exactly the thing. There isn't a hard and fast rule for this. All of this notion of "what did it cost us to make the site?" really doesn't tell you what the site is "worth". In my experience, doing a valuation on a web site does not really so much have anything to do with what it cost to build the site, ie what it's "worth" to the owners of the site. Rather, consider the "worth" to the potential purchasers.
Consider the case of a site that implements a feature that your site does, only not nearly as well as your site does. The other site approaches you to do an acquisition, and wants to negotiate. Suppose your engine cost you $25k to build, between your time and materials (not an outlandish figure). What will it cost the other company to duplicate the level of functionality you can bring to the table now, today? If they need it in a hurry, and it will provide serious ROI for the purchasing company, that worth could be as high as $1 million, maybe more, maybe less.
The moral of the story is that you need to consider not just what the site is worth to you, but what it would cost the prospective buyer to duplicate, as well as the ROI they will get for their purchase.
--
Re:Nothing according to most /.ers (Score:2)
--
Base it on projected profit/revenue (Score:2)
Make up a mock business plan showing what they could do with all that traffic. The traffic alone is worth the money. I'll assume that 1.5 million page views a month is 0.5 million visits per month (adjust as necessary). If they are buying traffic (e.g. with pay-per-click banners) at five cents per visit (the lowest price possible, usually -- your traffic is worht alot more, assuming it's targeted to their market), then a year of your traffic would be worth $300,000. (But, as I say, your traffic is probably worth several times that if it's in any way targeted).
========
More on valuation (Score:2)
Having been on both sides of these transactions you would be amazed how quickly past purchases become the touchstone for future purchases. How much did Competitor X, Y, or Z go for per unique user? Do we have anything meaningful (e.g., tighter or more affluent audience, obvious stuff to flog, etc.) that would make us worth more? You may disagree with what someone paid for a similar site, but like having a house on your block sold for firesale prices, it matters.
There is remarkably little science here. You are genuinely worth what someone else will pay,but you need to keep in mind comparables, unique visitors, audience demographics -- and what the most recent similar site went for.
With this biz droid interlude out of the way, I now return you to your regular programming
P.
Re:The only interesting comment on this thread (Score:2)
The Unbearable Ignorance of ACs who just drop by. Fuck off and go away, or Login so it'll be easier to ignore you.
They know that you learn more by asking than by telling,
Like the guy who "asked Slashdot"?
--
Re:Um... No. (Score:2)
Sorry, I thought this was a discussion on how much a web site should be worth and why.
Copying the content does nothing to copy where it gets its value from (the attention). This is the same reason why copying MP3's adds value to the artist, rather than taking it away. (if you accept the no-cost to increase supply infinitely argument, which many don't)
If you don't believe me, try putting a value on a human life (your own, for instance).
Hehe. MHO [wahcentral.net]
--
OT, I'll bite back (Score:2)
Yep, try comment #262 moderated +5, Insightful.
Just read the article and shut the fuck up.
Thanks, Jack, but I'd rather form my own opinions.
There's a lot of stuff in there most geeks (and even a lot of amateur musicians) don't really understand that this sheds some light on.
And there's a lot of stuff in there straight (and I mean word for word) from here [riaa.com].
I'll spare you my opinions on the whole copyright/MP3 thing for now, because doing so would probably confuse you.
Thanks, I have to deal with enough ignorant opinions on
--
Re:OK, I'll bite (Score:2)
Or, and I know this is a tough one for some folks, it might make them a few bucks. Free promotion and all that.
--
Re:As someone who sells businesses for a living... (Score:2)
Re:As someone who sells businesses for a living... (Score:2)
I do understand the high P/E for growing companies and low P/E for troubled companies. Unfortunately, day-traders are screwing up P/E ratios for many high profile companies. No one is going to be able to convince me that Rambus is worth its 829 P/E or Yahoo worth its 1770 P/E. Rambus is at about 300 right now, and it was at 500 a couple of weeks ago! What the hell is up with that?
What I'm really curious about now is the original subject of the post. What makes a web site worth $$$? Where did mapletree (sorry if I'm wrong on the name) get his/her 3-5 multiple?
Re:As someone who sells businesses for a living... (Score:2)
So, you say multiples of 3 to 5? On what are you basing these numbers? I don't have any experience with this sort of thing, but why would this differ from "normal" multiples, such as Yahoo's? What difference does it make if the site in question is actually a functioning company, rather than some guy in a basement cold-calling potential advertisers to make some cash on the side? What other factors would be involved in the valuation?
Re:OK, I'll bite (Score:2)
(Aside: You can't really say "crack into," can you? I hate to misuse "hack," but...)
Post name of site /. effect will ++ traffic & ++ $ (Score:2)
Re:Its worth whatever! (Score:2)
I would be personally interested in exactly what kind of site it is. I mean it may just be something like say http://www.fucksluts.com or something like that. Usually unless you are doing something really popular like slashdot the only thing that gets that kind of hits are porn sites
In a related note I am wondering how much it would cost say to have a nice dedicated connection that allowed me to get a server up in the Western US geographical location. What kinds of things are we talking about for connectivity and what would be the lowest cost solution?
earnings, not sales (Score:2)
I think you mean Sales rather than earnings. Sales is your gross income whereas earnings are what is left over after you deduct all your expenses. Yahoo (YHOO) trades at a p/e of 1719 but the p/s is 159, a much smaller number (source).
Nope. I meant earnings, NOT sales. earnings = profit. Usually in an acquisition, the figure that is used is EBIT or EBITDA (earnings before interest and taxes, earnings before interest, taxes, depreciation). The reason for this is simple. Profit margins vary considerably. Say you were running a trucking company where you had $20 million in sales and your profit was $500,000 yearly. Now compare this to a distributing company with high profit margins that has $1,500,000 in sales and makes $500,000 in profits. Now consider how much money a buyer would get out of these companies if he bought them - the exact same amount, $500,000 per year. Why would he pay more based on the volume of sales when that number does not translate into an increased return on his investment?
Re:World's most conservative broker. (Score:2)
That's very true - and a lot of what I said might not apply to specific situations. I'll bet there are rules of thumb for valueing web sites that I don't know about. And if, for example, your teeny company had a great product or held a valuable patent, you could expect to get a lot more and the price would have a much lower relationship to earnings. But web sites don't usually have products or patents (usually....groan).
A systematic approach (Score:2)
Here's a systematic approach for valuing your website. Rather than talking about what you should ask (which is more a question of strategic negotiation), I will discuss what you should (privately) be willing to accept.
I'm assuming that this is a pure business decision, not personal. In other words, if you are attached to your site out of love, then you may not want to sell it at all. Or, if you are bored with your site and feel that you will probably just let it go to hell if you don't sell it, then now is the time to sell and you may want to be willing to accept a below-market price before you ruin the site. :-)
There are several factors to consider.
1. What kind of traffic do you have? This is an indirect way of asking 'What is a realistic CPM (cost per thousand) for the ad space on the site, if sold professionally?'
If you have 1.5 million pageviews per month, that's a page of 18 million a year. Revenue of $20,000 puts you at just over $1 per thousand. That's a fairly low rate, and if the reason for the low rate is that this is an adult site or bikini site or something advertiser-unfriendly of that type, then you can't fool yourself into thinking it will ever be much more than that.
On the other hand, if the reason for the low revenue is that you have done a poor job of selling the space, you should adjust your estimate upward.
2. What will the costs of maintenance be to a buyer?
If this is a content site for which they will have to hire a writer on an ongoing basis, then just maintaining the site's popularity will be expensive for them. On the other hand, if this is an automated or semi-automated site that can be run with just an hour of attention per week, then it will be fairly cheap for them to keep running it.
Remember that valuing based on revenues is only a rough rule of thumb. The real value is from profit, excess of revenues over costs. If the costs are low, then so much the better, from a valuation perspective.
You will want to think about two components of cost -- fixed and variable. Fixed costs are those which stay the same no matter how much traffic you have. Variable costs are those that increase with traffic. For example, it costs pretty much the same to create content, no matter how many people read it. But bandwidth costs go up directly with traffic. Other costs may be partly fixed, partly variable. Use your judgement.
State the variable costs in terms of a CPM.
3. Is the site growing quickly, or does it have stable traffic? Also, how big realistically do you think it can get?
Remember to answer this question honestly, and remember that since you are calculating the bottom price you should be willing to accept, the right number to use is the number you honestly think you can achieve with your current resources. It is best to be ruthless with yourself here, because if you love your site (don't we all?), it is easy to overestimate its potential.
---------------
Now you have three things in hand. A realistic CPM. A realistic estimate of costs, both fixed and variable. And a realistic growth rate.
I'll make up some numbers for you to illustrate the next step in the calculation. $2 CPM. Costs of $15,000 per year fixed, and 25 cents CPM on the variable costs.
Therefore, your rate of profit for the coming year is:
PROFIT = (TRAFFIC * ($2 - $.025)) - $15,000.
(TRAFFIC stated in thousands!) If your traffic is stable, then you have for the upcoming year, a projected profit of:
PROFIT = (18000 * $1.75) - $15,000 = $16,500.
Now we look at this in the context of a growth rate and a discount factor. (We are implicitly making many simplifying assumptions!)
PRICE = EARNINGS / (R-G)
If your growth rate is 20% a year, and the investor wishes to get a 40% return on their money, then substituting, we get
PRICE = $16,500 / (.40 - .20) = $82,500.
But please notice how sensitive this formula is to changes in R and G! If your traffic is growing at the same rate as their desired rate of return, then the price should be infinite. :-) Don't make that mistake...
A better rule-of-thumb approach, then, is probably to assume a reasonable P/E ratio and multiply that. Keep in mind that you will not likely be able to ask for a stock-market-sized multiple for such a small business.
I would use a rule of thumb of 10-20 as a P/E ratio.
Therefore your price should be in the range of $165,000 to $330,000.
--------
Notice that the number I come up with above is strictly dependent on the particular example I gave, particularly with respect to costs and traffic and CPM. You should run through these numbers for yourself.
The general principle that we are getting at here is this: how much money can you make from the site if you keep it? You should be willing to sell if that amount of money is more than you can get by selling today. The difficult part is relating the value of future cash flows to the value of cash flows today, and in making realistic projects of those future cash flows.
--Jimbo
My Thoughts (Score:2)
The Inherent Worth of an Investment (Score:2)
If you take in as much as you spend, over the long run, the site is worthless even though you may have sunk millions of dollars into developing and promoting it. Some ventures are worth more if they are ended and the assets sold for their scrap value.
You may be able to get more or less than this inherent value depending on how the market for web sites is. If someone needs an established website quickly, they may be willing to pay a premium because they can't wait to have it developed.
Any business plan venture needs to show pro forma income statements on a likely outcome basis to be taken seriously by any serious investor. What is the likely revenue? What are the likely expenses? What are the characteristics of the risk (i.e. ad values drop to nil) and how are you adjusting the US Treasury rate (a risk free rate) to represent the risk of the investment. The potential acquirer may very well take your pro formas, replace your risk-adjusted rate with their own hurdle rate (the return they desire on investment) and calculate their own value to decide if the proposition is more or less valuable to them than it is to you.
Anomalous: inconsistent with or deviating from what is usual, normal, or expected
Be sure to take your growth into account. (Score:2)
Odds are, you're experiencing some growth, and, assuming you're going to keep putting work into the site, you'll probably keep seeing growth in ad revenue and page views. You should be sure to take projected revenues into account, along with your current revenues. (If you think of your asking price based on your projected revenues, it may not seem like such a high multiple anymore.)
If you're serious about your website, you're probably in it primarily for the growth potential, not to merely maintain your current revenue stream. Your asking price should reflect that.
Re:Site valuation (Score:2)
The true answer. (Score:3)
I thought we were above this.
If you're doing web sites for the money, you're doing it all wrong, and you will fail.
You got to do it for the love, man, for the love.
I mean, a website isn't about your stock options or your new $500,000 house in San Francisco or venture capital. It's about the feel of the keyboard beneath your fingers as you fly over fields of Perl and HTML, the glow of your monitor at 4am as your new servlet takes its first, faltering, tentative steps into true, functional life, the music in your headphones as you grok Python. It's about the beauty of yet another dawn, the inner warmth that comes from a properly configured server, and the oneness with the smooth, cool curves of the mouse under your hand.
What is this compared to the crass concerns of money?
There's the whir of the power supply fan, the rich smell of coffee at 3am, and the camaraderie with your fellow developers, who are in it with you all the way. There's the moment when you know your design is perfect, the instant that your last method falls into line, and the second that you ferret out that stubborn little bug. And, most importantly, there's the all-encompassing, glowing warmth that comes from knowing you've done your part, done it well, and that there's nothing that can ever, ever take that away from you.
Money may feed you and clothe you and shelter you, but money as and end to itself is a destructive aim. It is a never-ending vicious circle, a spiral into greed and lust and wantonness. It will not nourish your spirit, or shelter your soul.
Sure, you can do it for the money. But you'll never make it.
Just remember: you got to do it for the love.
Re:go IPO! (Score:3)
The figure was based on an industry standard multiple of yearly gross billing. In this case it was close to a factor of ten. In the larger American markets, the factor can exceed twenty. Buyers have little chance of recouping the purchase cost in under a decade and look at the investments as either long term ventures or as a way to make a quick buck by flipping them.
For a web site, as in radio, the value of the property far exceed the capital investment. Just because it's a new industry doesn't mean there aren't reasonable guidelines for assessing value.
Nothing according to most /.ers (Score:3)
Given the apparant majority view here on /. the value of a web site is nothing. How do I arrive at this figure?
Well, every time there's a story on the RIAA or MP3s, there's always a million posts saying, "It's not stealing because the author still has it". Therefore, it's not wrong to completely copy your web site. After all, both a web site and a piece of music in digital form are both nothing more than information, and both take a lot of hard work and talent to produce.
Since the parallels are clear anyone should be allowed to copy your site, and hence it's real value is zero in practical terms - after all, why pay a penny for a site when they can just copy it?
Site worth (Score:3)
Site valuation (Score:3)
Note: I'm not a financial guy, I'm just pulling this crap out of my memory
They take the average number of banner click-throughs and multiply it by the average cost of the stuff the banner advertises. They add this to the sum of the cost-savings of using electronic forms over using the staffing, manpower, and materials of achieving the same objective via paper. Finally, they add to this the cost of developing and maintaining the site per year.
I don't know if this will be any help, but, hopefully someone has something that makes more sense than this.
-Jer
Re:Nothing according to most /.ers (Score:3)
The value is not in the media itself, but in the attention given to it. You should really do a bit of learning before you make ridiculous claims.
How much is 30 seconds of "Friends" worth? (Nothing)
How much is it worth if 14 million people are watching? (~$250,000).
Does this clue help you?
--
Re:Yep, go see a pro - Highly recommended (Score:3)
Although many people here are offering you several rules of thumb, you should realize that rules of thumb do not take into consideration all of the unique qualities of your business. Call me biased if you must, but I, too, recommend engaging the services of a business appraisal firm. One common idea I see floating around here is correct...valuation is by no means an exact science.
By hiring a professional and experienced business valuation firm, you'll hopefully get a value based upon evidence and analysis which is comprehensive, unbiased and pertinent.
If you want to get into the "nitty gritty" of important considerations, I refer you to the following 8 salient points from Revenue Ruling 59-60, which set the groundwork for modern business valuation:
Depending upon the capital structure of your company (C-corp, S-corp, LLC, limited partnership, etc.), there may be some other considerations.
Let me point you in the direction of the American Society of Appraisers [appraisers.org], the industry association to which I belong. There, you will find some helpful articles and info on business appraisers who may be able to help you. Email me at the address above (after removing the appropriate words) if you have any questions. Good luck!
Re:Worth of Web Site (Score:3)
But what the website is WORTH comes down to the basic laws of economics. No matter how much money it makes or doesn't make, how much time or money you have invested in it, etc., your website will only ever be worth what someone is willing to pay for it. Your task now is to find suitable figures and/or information to convince the potential buyer to purchase at your named price. If you can make them realize the value of the labor that you invested, actual capital expenditures, etc., you should have a good case.
Good luck!
Re:What is your labor worth? (Score:4)
If you spend 2 years creating a site that's not use to anyone, then that site has little value. You past investment is, basically, your problem.
Your site is worth what someone is willing to pay. You might like to think that this will in turn be based on how much revenue your site can generate.
I can't imagine why anyone would pay 250,000 for someone else's web site, but then I'm not a VC guy. I can get a per annum return of 10 per cent by investing very basically in the stock market. So, unless that site generates 25,000 PROFIT (not revenue!!) AND there is a way to get the principle (i.e. original lump sum) back out fairly easily, then the price is wrong - because I'd make more money putting the same 250,000 in the stock market.
So, ask yourself how much PROFIT the site generates, whether it is readily re-sellable as a going concern, and figure out what its worth.
Or, if you prefer, decide that you have a cool brand, that your site represents valuable digital real estate on the wired e-market, and that your years of cool hacking just have to be worth loads of money to some loser suit, so hey, make me a dot.com millionaire baby!!
Price and earnings (Score:4)
Negotiate down a little, but not too much. If they can't see value in the investment, and you want to sell, find someone else to buy it. That shouldn't be too hard.
__
(oO)
You need to do some introspection. (Score:4)
Ask yourself the following questons.
1. How much banner sales are you expection to make this year?
2. How much time will it take for your banner sales to touch 250K?
3. Do you have a predictable growth rate?
4. Are you still in love with your website? Or, after spending so much time you want to move on.
5. If you are going to handle the website (ala
6. If any company in the similar category has been sold, then how much was it sold for?
7. If you think that you are a bottleneck for expansion of the site (in terms of providing finance/hours for more content), then have you thought of financing.
8. If you are an ecommerce company, is your growth rate comparable to the industry?
I had some more stuff in mind; but can't recall it now. Meanwhile people can add questions to this list as appropriate.
Hope this helps.
CP
Selling a website: a case study. (Score:4)
So I've worked on this web site, SkiIn [skiin.com], for a few years, until last year. Mostly a labor of love (duh!), I started it at a time where I did'nt even really know Perl, in those old ages MySQL did'nt exist yet, no Apache but the venerable and buggy NCSA server. Long time ago ... I had some experience with Linux, just fiddling around with that bloody slackware thing, but I was'nt a convert at that time. Actually, I remember that at this time I was waiting eagerly for the official release of NT4.0. (I was young and innocent!) Let me drift out of the topic for a minute.
I had been hired as a contractor to write some tools to generate the pages automatically from a FileMaker database. My tools were in Metrowerks C++, with some experimental object oriented GUI (what was the name of this funky framework again?). Oh and a few clumsy MacPerl scripts.
Then we bought a PC to run some piece of sh^Hoftware on it. I install that very first NT4.0, limited 30 day versions. Spent a whole day installing it (the bloody 3 floppies thing ...) I left late in the evening ... and when I came back the next day ... the bloody thing had BSOD'ed. Duh. So I reboot. It would'nt!! We thought of bringing it back to the shop, but before I wanted to try that funky RedHat distro (4.0?) I just got ahold of. Later I installed the first 2.0 kernel, then it stayed there as our inhouse testsite running 2.0.something up until now I think. It's probably rolled over the jiffies a couple of times. I was a convert. Anyway.
Back on topic: we did quite a good job on the site, had lots of good ideas, the graphic designer did a very good job, I did'nt do too bad, and we won an award or too.
Now at that time, finding paying customers (advertisers, etc ...) for a website in Europe was a real bitch. And we did'nt even really think of venture capital either to begin with. When we started, even with the CEO's connections, it was a real bitch too.
So now I'm back on topic ... what have I learned at that point? Well when the Internet actually hit France (2 years ago), we could actually start talking with investors. They would all praise our business plan, which was original and well thought out at the time. And the talks went quite far, as far as to the investors and potential buyers to talk seriously in the $10 million range maybe. However ... and that's the bottom line, none of the potential deals succeeded. It was all or nothing. They were interested in our business, would have put a lot of money, or nothing.
I left the company a bit more than a year ago, now they have merged with another one, so it's not lost; and I really don't know what to advise you, besides talking to as many people as possible. Investors might help you valuate it, but that value does'nt mean shit: it means that, if someone buys it, they will gladly pay that much, or not buy it at all. Cause there's no real point, I guess, in buying such a business too cheap (since they're likely to pay in overvaluated stock anyway).
18MM PV/Y >> $250K (Score:4)
A lot of internet companies have market caps on the order of 20-something-times-revenues (not EARNINGS, but REVENUES). Which would value your site at between $400-$600K. Your upside potential is higher than that, because at one ad per page (more is possible... MSNBC for example) and $30 CPM, your 18MM impressions a year represents $540K a year in inventory.
I wouldn't sell out for $250K, just because the first person to approach you about it has no idea what it's really worth, unless you have an overwhelming desire to "unload" it. Those 18 million page views a year are worth substantially more than that in-and-of-themselves. As far as cost justification, you figure you've had $60K in expenses, and put in "thousands" of hours... five people working on a site half-time for five years represents 12,500 hours: at a conservative labor rate of $100/hr. (remember, this is a "charge out" rate you're figuring, not payroll) that represents $1.25 million by itself. Or put another way -- for every thousand hours you figure were put into it, your site has added $100K to its cost base.
As a final thought: if you were doing production web development for a customer whose site received that much traffic, it wouldn't be unreasonable to be billing the customer $300K per year to maintain it -- they should be spending AT LEAST that much on upkeep for a site that busy.
This is my opinion and my opinion only. Incidentally, IANAL.
Think of it as a company... (Score:4)
Or, in the case of Yahoo...multiply by 1770!
Its worth whatever! (Score:5)
-=Bob
Try ebay (Score:5)
Then you will see what people
thinks it is worth
Knud
What? You're not public yet? (Score:5)
As someone who sells businesses for a living..... (Score:5)
20x earnings is an absurdly high multiple for any business. The problem with this discussion is that you are comparing this web site to the market valuation of public web sites - also absurdly high. Typical valuations are at 3 to 5 times earnings. Given that this site is grossing $20,000 yearly, I'd say an asking price of $650,000 is off by a factor of ten at least. Think about this logically. Any buyer is in this as an investment. If they aren't getting a good rate of return, why not invest in a mutual fund? 'Potential' for huge future earnings is all very well, but you have to consider where those earnings will come from - probably their financial investment in the site - and whether or not your website has any more potential than the 100s of other similar websites.
You might be able to get more money by structuring some kind of earnout, where your compensation is linked to some specific performance index.
Re:As someone who sells businesses for a living... (Score:5)
That 3 to 5 number is a rough rule of thumb. Usually things just work out that way. The problem with 'normal' multiples such as Yahoo's, is that they aren't normal. The valuation a company has on the stock market has little or no connection to the valuation process a prospective buyer goes through when considering the purchase of a company (that is, a buyer who knows what he/she is doing).
In calculating the value of a small business especially, you have to remember one thing: the buyer, any buyer, is in it for the money and they will consider primarily the return they will get on that money when deciding how much to offer for a business. Leaving aside synergies, etc. let me lay this out very simply, lord knows it took me a while to understand it: A buyer has, say $500,000 to invest. He has several options on what to do with it. He could invest it in the stock market - pretty good investment, these days. He might expect to get 15% to 25% back on that money every year depending on what stocks he picks. Or he could invest in bonds and get 10% a year. Now why would any choose to get 10% a year instead of 15%? Because bonds are much safer than stocks. You invest in the stock market, you risk all sorts of nasty things happening to your money. For whatever reason, our hypothetical buyer is considering buying a business with his money instead of stocks and bonds. Buying a business is extremely risky. Businesses fail all the time. For that reason, a buyer demands a very high rate of return. They will expect to get around %17 back yearly on their money.
How is this calculated? It involves a lot of fiddling with financial statements and predictions about the future. But let's assume for the sake of this example that the web site cited above had earnings of $20,000 last year. Let's assume that profits grow 15% a year over the next five years. That means in 2000 it will make $23,000, in 2001 it will make c. $26,450, in 2002 it will make $30,417, in 2003 c. $35,000, in 2004 $40,000. Total earnings over the next three years: $134,150.
Return to the 3-to-5 times earnings multiple. Consider the high end - 5 times earnings. If our buyer invested $100,000 in the stock market and got an ROI (return on investment) of 15%, he would earn $152,000 in the next three years. So why should he pay $100,000 for your company and lose $17,000? He'd probably want to pay a good deal less for it.
There are always strategic fits, synergies, and 'potential' that might induce a bueyr to pay more than the strictly financial value of a company. But don't count on it. If it's a publicly held company, you might think they have tons of $$ to throw around, but if they pay you 20 times the value of your business, they will have to explain it to their shareholders. And sure, maybe your website has tons of 'potential'; but how much money are they going to have to spend to realize that potential? They need to spend a ton of money on advertising and expanding the site? That will affect their ROI significantly. Your users might call you a sell-out and desert you? High rate of risk - they will want a higher ROI.
That was a lot more complicated than I wanted it to be, but you get the picture - it's a complicated scenario, there are a lot of factors, but anybody with enough money to want to buy your company is going to know what's up and they will not want to over-pay.
Worth of Web Site (Score:5)
The thing about a website is it is worth whatever somebody wants to pay for it. The trick is convincing somebody to pay a lot.
You have to evaluate many things when coming up with an asking price. The number of hits, etc isn't as relevant often as the user base (i.e. slashdot == geeks == people with buying power == geeks that hit other sites == high value) and the amount of "impression" time your site generates.
Banner Ads as a source of revenue should not be taken seriously by a buyer who is in this for the long run. This is because the revenue stream is potentially unstable in the future.
What revenue/value does your page bring? Is there an intrinsic need for it?
--