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How Much Is A Web Site Worth?
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?"
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.
Does this person just want the site design? or are they buying the web end of the business? I would use the figures you mentioned, that's how my group does it if we sell an existing site.
Maybe you're just trolling... but if so, I'll bite.
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).
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.
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
Beta? Phinn? Shouldn't that be "Freaking freeloading Canadians"? You guys are out of practice.
The next Cmdr Taco duplicate will be ready soon, but subscribers can beat the rush and see it early!
So the artists and music companies haven't invested any time and money in their product? Heck, at least a copy-cat website has to do the work of setting it up; allowing people to download music doesn't involve the cost of setting up a recording studio. I don't see how you can say one is OK and the other isn't.
The revolution will NOT be televised.
And signing on as an anonymous coward makes you such a great authority? Log on or put your info in a sig.
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.
Sorry, couldn't resist.
--
Fuck the system? Nah, you might catch something.
You didn't say anything about the sex life. Oups, sorry, I'm off-topic.
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
Swampfox
Real Hacker (tm) Wanna-be
Deals
Anyone who sincerely believes that *everyone* has a collection of Brazilian (or any other kind of)child porn is sure to have many more problems than one.
I see even classic Slashdot is now pretty much unusable on dial up anymore.
"...possible cost formula?"
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.
I see even classic Slashdot is now pretty much unusable on dial up anymore.
Moderate the above up as the most hilarious thing seen around here in a long time.
I see even classic Slashdot is now pretty much unusable on dial up anymore.
Slashdot's worth is better measured by how many of the businesses that advertise on Slashdot get slashdotted, not how many Slashdotters go off to view some other site instead of staying here and viewing the ads on Slashdot.
I see even classic Slashdot is now pretty much unusable on dial up anymore.
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.)
I see even classic Slashdot is now pretty much unusable on dial up anymore.
Published CPM rates on rate cards are one thing.
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.
I would say, figure out a fair price based on how much you think it is worth now, and how much you could 'easily' make it worth in the next 2-3 years. I don't think labor should come into the equation at all; that is part of what it is worth now. It isn't worth more just cuz you worked harder on it. But beyond all else, make sure you're not going to look back in a few years and be upset that you sold it.
Except the time the voices told you to that there was a spaceship behind that comet. Or the time they said to clean the guns...
Other than that, theyve been right...
For $200 an hour I'll spend the next five weeks finding an answer to your question :-)
EJB
LMAO...its obvious you dont have kids. You're forgetting all about the "pester power factor", a.k.a the 'whine' co-efficient, that those 13 yo's will have on their 45 yo yuppie parents.
SELECT * FROM User WHERE Clue > 0
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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.
Just be sure to wear the gold uniform when you beam down -- you know what happens when you wear the red one.
Just my two cents.
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.
- Wing
- Reap the fires of the soul.
- Harvest the passion of life.
The market.
Speaking of which, did anyone else notice that slashdot.com and freshmeat.com actually point to the right sites now? I was shocked. They still didn't get slashdot.net or freshmeat.org, though. I doubt they get many mishits anyway. I wonder how all that came about; IPO money, I suppose (a decent "investment")
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
Bowie J. Poag
Anyone see the Darma and Greg ep about her starting a store? She rented a storefront and had no product. She welcomed people in and they came in. She never decided on a product, but had people coming there. They brought their own coffee and newspapers, and did other stuff. In the end, she sold her business that did nothing for a tidy profit though she had no revenue. The whole time I thought "website".
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.
--- If you don't want to know the answer, don't ask the question.
My website, insuranceanalyst.onesource.com got sold to Sheshunoff and reincarnated as insuranceanalyst.sheshunoff.com for $12.8M US. The team consisted of a business manager, a sales manager, 3 support people, 5 developers and 7 sales people. There was also a CD-Rom based data product. Our income was around $7.0M US. This gives a multiples of earnings of 1.8 for a sucessful and profitable product group.
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.
Determining the website value today is really based on a few key issues:
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
I think it was a joke. Check that. It WAS a joke.
-Andy Martin
-Andy Martin
If y'all don't like me, blow me.
I think $250k is not unreasonable
/., it probably would have killed (or at least injured) the site. With Andover being somewhat related, but not having a direct vested interest, the site remains what made it valuable in the first place.
:)
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
Realistically, the site is worth whatever you can get for it. However, Based on what's been said thus far, and the fact that prospective owners would be acquiring not only the look and feel but also the hardware, service, support, and expertise, a quarter mil is a very reasonable price.
My office has been taken over by iPod people.
$20K/yr for a pretty high volume site like that seems very low.
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.
Everyone is talking about how you can use the amount you make from banner ads, the size of the site, the amount of work that went into the site and the number of visitors you have to determine the worth. Now, what about the domain name? www.car.com, a domain alone will definitely sell for a lot of money, so add that in too.
------ Curiosity killed the cat. {satisfaction brought it back | it didn't die ignorant | lack of it is killing mankind
I know someone who recently sold their domain name for $40k. They weren't selling a website, just the domain name. I was quite surprised that it was worth that much, but someone really wanted it.
Code is garbage in garbage out.
Languge is garbage in, non-sequitor out.
Code is garbage in garbage out.
Languge is garbage in, non-sequitor out.
Gee,
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)
-- 73 de KG2V For the Children - RKBA! "You are what you do when it counts" - the Masso
$30 CPM?
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.
Most business accounting books have sections dedicated to valuing a business (which is what a website selling banneradds is!). After all if we are talking hundreds of thousands of dollars it pays to spend a few days getting up to speed on the business side of it and be as educated as possible about the transaction you are about to undertake.
-- Greg
Slashdot, would a spell-checker for posting be too much to ask? It's not rocket science!
Valuations of as much as 30x revenues are not unrealistic, depending on issues like your content, your name recognition, the number and type of your revenue streams, and the demographics you attract.
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.
{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
Nothing to see here
You mean like a hit counter? ;-)
Seriously, we use an enterprise level tool to view stats in every possible way. We've been active in reviewing stats for about the last four years, though we really couldn't go as indepth as we wanted until last year when we started hosting the site on co loc'ed servers. We are all about stats and demographics.
The average retention time is 23 minutes...
Dave
We also have an online store, that is yet again a separate business, which derives most of its revenue from sales of products advertised on the community site. The thinking is to sell the community, and use the cash to expand the online store, and use it to aggregate pro audio business to business customers, as most pro audio gear is sold to other businesses. The real money is in the sale of goods, not advertising. We do about US$10,000 per month with margins of about 15% at the online store. Pretty much without trying, though I suppose our reputation in the non Internet world is primarily the reason. Our primary brick and mortar pro audio business is able to gross a couple mil a year, with stable growth and decent earnings. We want to go full on "click and mortar", using money from the sale of the community to drive it. We are also considering outside money, but don't want to cut the pie that much.
We just haven't really pursued the banner ad venture, because frankly I'd rather not spend my time selling advertising. I didn't even have a media kit until we had been selling banners for about 8 months. The three major trade rags in our industry easily do in excess of US$ 1 million in ad revenue per issue, based on the most discounted rate. According to the trade mags BPA, our reach is comparable to what the mags claim. I think the reason banner ad sales are slow, is because we haven't focused our attention there. Once the horsetrading, barter and freebies are counted, it's more like a US$16CPM. We only have 7 paying sponsors in the banner pool.
Current rates are unmetered impressions for US$3000/year, or short runs of US$40CPM, minimum 5000 impressions per run. When I talked to a DoubleClick rep last Summer at Internet World, before he politely "blew me off" for being too small, he said he thought that we were charging way too little, and would harm our market. That's odd, because most of the potential advertisers thought our rates were way too much, even when shown data from other Web sites. It's all in how you pitch it, like anything else.
The real benefit of the site, is the loyalty and demographics of the visitors. They own small and medium businesses in our industry, the average visit has a 23 minute retention time. It's real sticky, and they spend money. In the last year, I've noticed that the most sucessful banners are the ones that directly offer something for sale, as opposed to just branding.
Thanks for the equations, it'll give me something to use.
Dave
(Disclaimer: The following information is not investment advice and should in no way be construed as such.)
/(r-g)
Well, using the "income approach," fair market value is the present value of all future benefits. There is a direct relationship between the amount of income a property will earn and its value.
The basic idea behind the income approach is that
V= Be
V= value of the business
Be= expected future benefits
r= required rate of return
g= long term expected growth
r-g= capitalization rate
The first thing that you'll notice here is that even with a "formula," you still don't have an answer, because you must then figure out what your expected benefit stream is, the required rate of return and the long term expected growth rate. There is a lot of quantitative and *qualitative* factors to consider.
FYI: V/Be = the P/E ratio
Bill Clinton: Pimp we can believe in. - The Shirt!!!
While we're on the subject of making money with websites, I have a hobbyist website that is getting quite a number of hits and I wouldn't mind putting some banner ads on there to make it at least pay for itself, can anybody point me to some info / resources for this?
If you categorize the future of the computer and digital industries as being at least partially carried by the momentum and power of Linux and the Open Source movement; and realize that /. is a major portal there, one can see HUGE potential. To me ./ is an aggregate of original realtime developing content, flowing in a kind of open way. "News for Nerds. Stuff that matters." says it all! This particular URL branding of the /. community, /. site creators, et. al. is invaluable as it is and will shape and help dictate future status-quos and cultural norms. (We could all of course move to another URL - that might make it even more valuable as advertisers and marketers and users might feel it was back to the 'true inner circle' and loosing some trolls and wannabes, 'new' or whatever.) My point is that it is worth the most now and in the future staying and growing just as it is.
Next, take the present value of your expected future earnings and tack it on to that figure. Basically, cook up a reasonable growth model, and divide it by the best estimates of current and future interest rates. (Its been a long while since my last finance class, so you're going to have to look it up yourself.) What you end up with should be a good approximation of what your web site is worth. Of course, nowadays, this number will probably be too small, since there is so much hype around Internet IPO's. You might need to figure in stock-market capital appreciation as well.
Try looking at some Corporate Finance/Merger & Acquisition texts, since it basically revolves around valuing and and maximizing the value of companies.
I think you are being just a tad conservative with your estimates. Many businesses regularly have earnings growths of well over 20% per year. In fact, many Internet start-ups have earnings growth rates in the hundreds and thousand percent range.
The S&P 500 has been averaging around 18x - 20x earnings for the past 5 years, why is it so absurd for a high-growth Internet company to be a piddly 20x?
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
Welcome to the 1990's. The high technology market isn't driven by dividends, but by potential. Microsoft has so much cash its literally bursting at the seams, but it has yet to issue dividends, because it feels it still has a ton of room to grow through R&D and acquisitions. Potential is what the markets is all about. If you want safe, steady, earnings, go buy yourself an annuity.
Mutual funds have less risk, so yes, on a risk/reward basis a good mutual fund is the way to go. But it just doesn't compare to the 500% return that you get from an Internet IPO.
It's only a reasonable price if they have $20k in net revenue per year from ads. If their gross is only $20k, then they don't really have a P/E of 12.
'I ain't a liar, baby, and I ain't proud I just want what I'm not allowed.' -- Violent Femmes, 36-24-36
Just a comment about the value of domain names (I know - he's selling an entire site). I'd like to see a shadow DNS system set up. Say you are the owner of axd4zlj.com and would like folks to find your business at www.super.cool you register with the shadow DNS folks. Could it be done? Could a distributed database be set up that is similar to current DNS and yet is independant of it. Groups could be set up to control the four letter top level names. Extentions could be written for bind and whatever it is that runs on Windows that forward requests for any four letter top level to the distributed system and return either the numbers or the original DNS address. Anyhow the idea would be to wrest control from the "authorities" over the whole domain name thing and to allow names like www.microsoft.sucks :)
Then this guys question would be more a function of how valuable his business is and less a question of how valuable the domain name is.
90% of the wealth is in 2% of the pockets. Bummer to be in the majority.
live-audio.com ?
- Do you have a great domain name? Before VA bought them, Linux.com's value was based entirely on the domain name.
- Are you getting hits and more importantly, are you retaining these hits and for how long? Do they have a reason to come back regularly?
- What kind of stats are you gathering? Are you tracking your visitors' paths through your site? Where are they coming from? Where/why are they leaving? Etoys.com tracks their users' paths through the site so they can see what people are interested in and feed them banners/links accordingly.
- Do you have a way to gather information about your users? Do you have quality demographics? Demographics are worth money. Why do you think grocery stores give you membership cards?
- What kinds of click-throughs can you offer your banner advertisers?
All the content in the world is only valuable if it gives your users a reason to come to your site, stay there and come back often. If you have a small audience whose average demographics are low income and short attention span, your site will be worth a lot less than a site who speaks to a large group of well-financed big spenders. Just my two cents!Considering you're asking Slashdot people... selling your domain would be selling out to the Bad People Who Sell Software Which Should Be Free (tm). The answer is simple. :)
Actually, they could copy it, but they can't copy the domain name. So all the people who go to your site still go to your site, and all they have is a lousy mirror.
wow! your logic sucks. remember, unlike CDs, web addresses are limited. you cannot ship www.uRanAss.com gold. there is only one and if you own it then it has some intrinsic value - much more than an song or CD which can be replicated across space and time. quit your bitchin' and go back to the RIAA site.
/* Half alive and half dead too, work is for suckers and the sucker is you. - "Half-life" by Local H*/
The question is: What is a revenue stream of $20,000/year worth today (Net Present Value)?
Well, what is the expected profit on that revenue? Say that you can profit, after taxes, $5000/year.
Obviously, it's worth with less than the amount that you could deposit in a risk-free savings account and that yields the same profit, after taxes. I guess that $100,000 will easily yield $5,000/year in a savings account. So, at first glance, it puts a cap to the maximum value of your website.
If your website is more risky than the bakery next door, that sells for $60,000, nobody is going to give more than $60,000.
So the question becomes: What level of risk is there involved in running websites? What's the likelihood that the owner will not even net 5%, or even lose his money?
Note, that your after-tax profits could be growing substantially. If your after tax profit grows by 20% per year, your profits today could be small, but still represent a substantial future revenue stream. So, what's the expected growth in profits?
I'm quite conservative. A small web site yielding $5,000/year in after tax profits, with no interesting growth prospects seems to be worth a maximum of $25,000.
... what someone is willing to pay. No more, no less.
-- "Vote Democrat. Because the current crop of conservatives are just bugnut crazy."
atleast a thousand words.
maybe more if it's prOn.
maybe less if it mentions 'nsyc, backstreet boys, britney spears, or any of their ilk.
With the number of hits you're getting, you could make as much as the 250 000$ you want to sell your site for with a little marketing...
As for the first poster loser guy, grow up lamer.
http://www.logient.com
You've recieved $20k a year, in five years, the site has cost $60k to keep running. So in five years the site has earned $40k. That's $8k a year in earnings. Better than Amazon, but consider that that wouldn't even pay the labor of one developer. I'd keep it as a side job that earns me a bit of cash.
not anymore. slashdot.com goes to some other dum site now.
::: jane
Even though it was a completely different topic, and we wouldn't lose any of our visitors over it, it still felt like someone came and stole from us the work that we had put into our site. Stealing is stealing. You may have different names for it (copyright infringement, IP, etc) but it is still, in the end, stealing.
------
James Hromadka
"The objective of securing the safety of Americans from crime and terror has been achieved." -- John Ashcroft
--
NetInfo connection failed for server 127.0.0.1/local
Sure you can say: "crack into your bank's computer." If someone can crack into a bank's safe to steal money, why not crack into a bank's computer to steal money?
And that is the point driven home. Valuation is simply what the next guy is willing to pay for it. All comments to the contrary are academic only. What's Amazon worth while it bleeds? As of this writing its worth about $65/share and capitalized at almost 23 BILLION after a net loss of 720 MILLION
It's sheep were up against.... (Housemartins)
WEEEE
that was funny
There is no "standard" of valuation of web site worth. You have done a good job. Right off the bat, your site is worth $20k last year in actual accounts receivable. What do you project for this year? Any potental purchaser should expect to pay at least two or three times annual revenue.
Not knowing anything else about the site, except that it generates 1.5m hits/mo. I would say that it should be worth about $150,000 or so. We also don't know anything about your general financial situation. What is your debt load? If there is any debt, the purchaser is going to take this into account and subtract it from the worth.
"Being Irish, he possessed an abiding sense of tragedy which sustained him through brief episodes of joy." -W. B.
Any business specialists care to offer a possible cost formula?
Got Rhinos?
We just went through this at my company, StockCharts.com, with an established internet venture fund.
Their base valuation was based on the number of page views per month, X 20 to 50 cents.
Then they applied a multiplier from 2x to 10x, based on their view of our future marketability. A concrete list of subscribers or members was a big plus, in their eyes.
But you can see there's a lot of room for play here.
Anita of Anita's BOD and Anita's LOL
Maybe the RIAA FAQ got the quotes from the salon article and not the other way around.
Perhaps this is the impression that the author of the FAQ meant to give by posting a link to the salon article.
Excellent question.
.de and the .com variant - good move )
I currently have a USD 1 bn company knocking on the door since they want my domain (I own both the very relevant
The domain has the magic "e" at the very beginning, it's short and crisp, AFAICT no trademarks anywhere.
Personally, I don't need that very name, though I have a small business running over it. Cashing in therefore would be nice.
What's the "right" amount? $20,000 (that was my initial thought, too)? $200,000?
Yes, I know - find the sweet spot, what they are prepared to pay... It would be nice to be able to point up to them what has been paid...
The guy asked for advice on pricing a website, the slashdotters are giving the best advice they have. Maybe they're right, maybe they're wrong - but the guy's getting the answers he asked for, so what's your fucking problem?
Bow-ties are cool.
If people are willing to pay, then that's what they're worth. I'm no great capitalist, but people should pay what they think things are worth, and their stock price will reflect what the shareholders think. And if they tank, they tank!
--
Max V.
There should be a moratorium on the use of the apostrophe.
Max V.
NeXTMail/MIME Mail welcome
If your site is an e-commerce site of some sort, you need to factor that in as well. If your site is a /. sort of meeting place, I can't imagine that would be worth as much as something that has a tangible product.
Be thankful you are not my student. You would not get a high grade for such a design
if you add the word 'linux' to the title, then you can double that value!
-
http://www.interfacecreative.com/cartoons/gnuecono my.html
(cartoon)
I thought slashdot got soldout to like andover and then va, so whos is it to sell??? \ At 250k I'm sure that us /.er's could shell out between us to create some open source style situation where: noone and EVERYONE *owns* the site. Your'd still have the real value of the effort and content of the site, (like authors of O-S software.)
This UID is 7651 digits too high to subjectively infer IQ from.
I work for a company which makes most of it's revenue through internet advertising, and if you were/are averaging 1-1.5 million page views a month and only made US$20,000 a year... buddy... you was robbed!
...at least, that is what the voices in my head say, and they're always right.
What I have seen in about the last year is that the way to figure the price is to take how much you have made in advertising (your own efforts and third party) and multiply that by 4. So if you made a total of US$125k last year it would not be overpricing at $480k for a selling price. That would actually be a perfectly normal place to start the bidding process.
For an established website, where traffic is pretty much guaranteed simply because it already has a visitor base, what you are quoting is perfectly reasonable to ask. If you can keep maintaining it you are better off waiting or pushing for your price.
Ceci n'est pas une sig.
I'd point out that you haven't given people enough information to give you a valuation. The amount the site grosses is besides the point -- what's the profit after all expenses, including those of your time to maintain the site?
If you are spending a couple hours a day running the site, selling the ads, etc, then grossing $20K a year means you are probably losing money. It depends on how much your time is worth.
"World Domination - a fun, family activity"
I've been involved in some Internet acquistions and generally they've been priced as a multiple of sales.
I tend to agree with you on how these things should be valued, but most of the people I've dealt with are concerned about top-line growth, figuring they can make the profit later.
You cannot however base the purchase of a rapidly growing business, as most Internet firms are, on profits. Not because they aren't making one, which is usually true. But rather because they are re-investing so much of their operating capital into capital expenses like infrastructure( routers, servers, etc.). Most Internet companies would be flush with cash if they suddenly stopped building out.
Some people have a way with words, and some people, um, thingy.
...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.
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).
A valuation of 3 to 5 times your sales is about what you should expect for a normal business. This can vary wildly depending on demand and whether there are underlying earnings.
An important thing to note is that if your sales are trending rapidly upward, it is not unreasonable to base your valuation on annualized revenues of say the last quarter. This is part of what contributes to the high valuations of Internet companies. If your doubling your sales year after year, you need to account for that in your valuation.
Some people have a way with words, and some people, um, thingy.
You are absolutely right that comparable values are important. However, any serious buyer will have done a comparative market analysis and will know what other similar sites are selling for, and will take this into consideration when they are considering the purchase.
The most important thing is to be familiar with the same information they used to arrive at their "expected" price (what they thought they would have to pay for your site based on comparable sales). If you have the same knowledge they do about these comparables, you can find ways to show how your site is unique and/or better than the others which recently sold, hopefully convincing the buyer that these differences add a significant amount of value.
I don't think a lot of people here are condoning running a commercial download site. The important difference is the commercialism. You could say that "copyright" could be interpreted as the right to copy in commercial contexts. This has some base in law, at least in Sweden. There was a discussion about copying music (or computer games) on the radio, and an official from the Justice Department explained that copying one of your CDs and giving the copy to a friend is not illegal, while selling the copy would have been. I'm not sure how this applies to mass distribution, but I assume that at some point, even non-commercial distribution is illegal.
I wish I were moderating today. This is Insightful.
AS once asked of me in one of my accounting classes.
"If you bought the hienz company and you had to pay extra for the name -- would you do so?"
The teacher said that the anser is yes because it is a name that people will buy. Names are one of the most valuable assets in bussness, so what is a name worth... well about 5 to 10 times the price of the company alone.
One word: McKinsey http://mckinseyquarterly.com/electron/vado00.asp
The value is not in the media itself, but in the attention given to it.
Right idea, wrong context. In a discussion of copyright violation, value is irrelevant. Just because nobody likes the book/music/website/whatever, the material is not suddenly public domain. The Golden Rule: He who holds the gold (the content, in this case), makes the rules.
If you don't believe me, try putting a value on a human life (your own, for instance).
-Ryan
Some goes for the web-site. If they coppied it. And browsed it on their HD, that's differnt from them copying it, putting it live on the net, and claming it as their's, and making money off it.
It's not a double standard, so ur post isn't really relivant to how it affects the value.
- - -
I am serious, we all throw in a dollar (use CmdTaco as the moderator), setup a mail list or news group and have polls on things such as
"What server to use in this setup"
0 Linux
0 FreeBSD
0 OpenBSD
0 NetBSD
0 Solaris
0 DOS
0 Windows98
0 DOD Linux v3.2
0 CoffeeMateOS v0.0.00.1 ALPHA
and post such messages as "Where exactly is the web server located at?" and "Who posted porn to the 'Christ for Kids' forum?" and my favorite "Who are you and what are you doing here?"
AHH MY FREAKING EARS!
We could all meet once a year and where name tags like "Hi, my name is BOB, CEO of disorder.com" and "Hi, my name is TIM, CEO of disorder.com" and my favorite "Hi, my name is YOUR NAME TO, CEO or disorder.com"
I would be willing to throw in a dollar for 1/250,000 share of an Internet company, I would be called an equal shareholder! Are the rest of you 249,999 geeks with me? Come on, it is a dollar for a good cause.
I call dibs on the sugar packets in the break room!
The company would probably self-destruct in a pool of it's own anarchy, but hey it is $1 and I bet we would make the 6:00 clock news, plus I bet slashdot would link us, and then slashdot us.
(Everyone wants to be slashdotted atleast ONCE in their life time, come on, now is your chance!)
Send 1 dollar to:
CmdTaco
SlashDot.com
The Internet, USA 209.207.224.
ATTN: regarding post on slashdot
"`Ford, you're turning into a penguin. Stop it.'" -THHGTTG
How about posting the URL? Get some hits up this month for the site, and you can show those nice men a graph chart of the last years hits, and point and say "Look the line has been going up, and here we had a spike in March, line go up, this is good"
Also I say 250,000 geeks from slashdot throw in $1 a peice and buy the site. Everyone would have equal share, and we could run the business from a slashdot sytle forum!
"`Ford, you're turning into a penguin. Stop it.'" -THHGTTG
The value of anything is the total sum of the capital (human, inhuman and otherwise) that has to be expended to repliicate the object within a reasonable amount of time. It does not matter how much anyone has spent previously, what matters is what you would have to spend now. The value of /. is similar to the value of Kellogg's cereals. There is a value in the "brand name" which is hard to replicate without the passage of time. This complicates things. Previous revenue streams are not terrible important. The biz model of the person doing the aquiring may have an entirely different "revenue" stream from what has previously prevailed.
-Elendale (nothing clever to put here)
IANAT (I Am Not A Troll)
A sale of the size you are discussing most probably should be analyized by a professional appraiser, preferably one who specializes in tech or new media ventures.
This does not negate the value of the slashdot forum, however... This discussion may raise some interesting considerations which may have been overlooked previously. These considerations should then be discussed with a professional appraiser.
Just because you can't see it, that doesn't mean it's there...About halfway down in this ZDNet article is an interesting discussion of CDNow's valuation in the face of its recent repricing. http://www.zd ii.com/industry_list.asp?mode=news&doc_id=ZE503657 &pic=Y. Might be applicable. Might not. Interesting analysis nonetheless.
Mambo dogface in the banana patch
Well, it's worth whatever somebody will pay.
Mathematically, though... the question is, how much money *right now* is worth all your future profits? So, if you're currently clearing $5k a year, and we figure we expect a return on investment of 8%, that's worth $62,500 (net present value).
Now, I didn't factor in inflation or expected growth... you can crank through different assumptions with a spreadsheet. $250k might not be insane if you're showing big growth in revenue.
What if you compute the cost of what it will take for them to actually hire the people, do the production, maintain the site, hosting it, doing system administration etc.
Then add the cost of having someone do the business development, sales.
Once you have that - add a margin percentage on top of that cost and you have a figure which you can use as a starting point for negotiations.
I've been told by several people over the past few years that a standard, quick and dirty way to come up with a valuation for buying a business is to multiply last years revenue by eight. This would, unfortunately, only make your web site worth about $160k. That sounds a little low to me, but if you can convince a prospective buyer that the revenues will increase significantly over the next eight years, that number should go up significantly, also. Can you show a January 2000 number that is much larger than January 1999?
Look at what some of the "newer" startups are doing to build a name. They throw all this money at PR, TV and Radio spots, billboards. And for what? They need to do this because their product is not unique, and they are a late entry into the business. I believe is is commonplace for V.C. to "own" these concerns, and their founders are nothing more than modern-day Lexus driving serfs. I was driving past a large ISP in my city at around 2:00am one night. This ISP was purchased by a telecom giant in recent history. I nearly collided with a brand new Mercedes 500 Series pulling out of the lot. Who do you think that was in that car?
See, what I am talking about is freedom. I would
A wise man once said to me, if you were given the choice of two plots of land, next door to each, both empty, except one had the footings for a house already, which one would you chose?
cat
At the risk of sounding like a smartmouth, the answer is to invest in the other 25%. Though, really (and this was probably your point), investing in other things is probably a better way to get "20% easy." My investments are pulling in 20% right now, easy. Slightly better, long-term, since that's pure dividends and not counting the theoretical increase in the value of the principal investments.
Of course, none of them are in mutual funds OR Internet startups, either...
Slashdot's token middle-aged housewife
Internet revenue is going to rise and rise and rise. I certianly wish I was talenteded enough to design or contribute to a business on the web in some way, but UNIX administration and being a college student at the time doens't help me be anything more then a mere /. reader/poster. (And not a good one at that)
But anyways, not to jump ship... I think around a 400% of the websites cost + income can be very reasonable. I'm sure they should understand inflation and bring more money in banners...
------- What exactly is real?
Slashdot is priceless! The revenue and income it makes should not even be a factor. The site is a haven of computer nerds, and no monetary value can match the spirit that causes millions of geeks to check out the news that is really important in the world. In my mind the sheer signifigance of slashdot is cause for it to hold out for at least a million... at the very least!
Some of the values I've seen tossed around so far are ridiculous. Look at the web site as a small business. $20K/yr in earnings is pretty small. Its a healthy contribution to an overall bottom line, but it'd better be one of many projects. Look at it this way: If you're lucky you'll get five years out of your current business plan--the way the web changes I figure very lucky. So, any perspective buyer is going to want get a few years of profit on this thing. I'd figure around $60k on a site that earns $20k/yr. If I as a buyer were able to bring more traffic onto the site I'd get the value of advertising up, but thats very iffy. So, I'd be scale my offering price to something that would pay itself off in a couple of year and start earning a profit after that. The other question I'd have to ask on the business level is what does your business--the web site--produce. Right now the value of banner advertising seems to be a very cheap commodity because every one is jumping on the bandwagon. Not to mention, who knows how that market is going to change in the next single year, let alone the next several years?
Theoretically, the value of your site (or of anything) is the amount that the highest bidder will pay. If you're only dealing with one buyer, the best that can be determined is the value of the site to that buyer.
Being shocked at the original asking price is part of the negotiation process.
Oh I love the new economy!! I'll only charge you $125, but I want stock options too.
The jaws that bite, the claws that catch!
It is not stealing (a crime) since:
1- unauthorised copies of copyright material remain the property of the owner of the copyright,
2- information, in this case music, cannot be stolen and
3- the rights (the exclusive right to reproduce his work, among others) of the owner of a copyrighted work cannot be stolen
-Earthling
-Earthling
"I'm sorry, I had to; the irony was just too thick."
This is simple:
.25% of the users are posting to a given story..
We read everyone's posts and click their references. We saturate ourselves in the subject and post ONLY when we have something new to add to the discussion.
I think there are over a hundred thousand registered users. At an average of around 250 posts, less than
Most of us ARE asking, reading and not posting. If your threshold is set high enough you are probably only reading the posts of the experts in a very specific field that pertains to the story.
Visit any story ever posted on slashdot with your threshold maxed out and you will find some guys that are so damn smart and informative you would think the story was written about their own research. In some cases it is!
There are stories about quake that Carmack has posted to.
If voting were effective, it would be illegal by now.
Well, let's see, according to the Amazon model, the more money you're losing, the more valuable your company is. Therefore, the more trouble they have breaking even, the higher their price, right?
No one running a website today is doing it for current profits, they're doing it for growth and future profits. Looking at today's bottom line for a site valuation just doesn't make sense.
normal(adj)- people who don't sit on slashdot all day wondering why everyone else isn't building robots [DECS]
Ok, time to whip out the handy analog calulator.
You have spent $60K over the past five years which comes out to $12K per year operating expenses. You have been grossing $20K in ad revenue. That leaves $8K per year in profit (before taxes). For the sake of argument we will just pretend that taxes don't exist. So when they buy your site they have to all of a suden start paying people to run it (I'm assuming that is all being done for free by you and your buddies right now). Not a good investment at all, IMHO.
Now lets assume you will be pulling in $100K in gross ad revenue every year. That's $88K after costs. This is better, but you still aren't making enough to pay the people needed to run the site.
Do you seriously think a website that is going to have serious problems breaking even is worth $250K?
-
hey its your site, its up to you on how much its worth. You were the creators and the caretakers. who are we to judge how much your site is worth.
in the grim world of hello kitty there is only war
Tech/Net stocks haven't been riding so high lately.
Selling is a fuzzy art at best. Some things are easier to sell based upon actual cost of parts, labor, and a percentage for profit. A website of course would be much more difficult to appraise.
I would look to revenue generated, actual investment of time and money, and potential future income when calculating a price. Of course, the final price is usually dictated by how badly the potential owner wants the site.
Don't forget to factor user base into the equation.
In most industries, the market cap of a company is roughly equal to its yearly gross revenues -
in your case 20k, or 10 times its actual profits.
But the internet industry is often different and sometimes you'll see these numbers up an order of magnitude.
Why?
Because in certain areas it represents a much greater potential - ie. the first one to tap into a multi-billion/year market.
But this is not the case for most "websites" and the internet companies that fall, fall hard! If you can't show that you'll make a billion
dollars with your web site, well, than its worth _less_ than a business with real possesions - ie. real products.
I'll give a little boost because it is internet though, and many people are stupid about that.
How about 50k?
The question being how do I determine the value of a site when planning on selling it.
The answer is, why.
The highest bidder will have the best answer.
Why would someone not dupe your content? Why not build from scratch and purchase and valuate the capitol outlay of HW and network gunk? Are you selling your people with the company? What exactly are handing over?
Determine why someone would want to pick up an existing site and not just build it on their own. If building on their own has an advantage, your site has NO value. If the intrinsic is what you are REALLY selling, what cost of physical hardware and consulting talent would dupe it? Add extra for the time value of money and go from there.
If you can not clearly define why someone would even match the hardware infrastruct cost, liquidate and run.
... Hey, I only read a couple of posts so I am sure SOMEONE has said this all before. But if not, here is my 2 pence.
~Juris~
Juris
how much is that worth?
Nothing. I'm sick of seeing you post the domain name and asking about it. Stop it.
i've always wondered how much i should sell it for
Whatever you can get for it. People who think it's cool to substitute 'z' for 's' in words don't typically have much money.
So Yahoo.com is worth $100B, and Slashdot.org worth considerably less.
I would argue that the value of a web site is not so much what you have produced in the past (since this usually implies tangible assets), but what you have the potential to produce. Given the ease at which anyone can copy the bits of data on the Internet (e.g. MP3s, other web sites, etc.), it is only your ability to continually come up with something new, usually intanbigle, that will truly differentiate you.
Consider the staples of the Internet, porn and portals. Both must constantly push out new material to keep their audience/customers interested. It is their intangible ability to keep a little bit ahead of the competition that makes them what they are.
Therefore, the value of your web site has more to do with the people that keep you fresh. Evaluate the intangible strength of you and your staff. If ten of your competitors copied your web site, what would you do to stay on top? That is certain to happen. Given the nature of the net economy, your site is not going to be valued on what assets you have accumulated (past), but what you have the likely potential to do (future).
Think of the intangible talent of Vince Carter. Anyone can try to copy what he does, but he keeps ahead. Is he worth more if he forgets how to slam dunk? He still has the same assets (car, house, etc.) but now he is limited to how he can compete.
How much can they make from your site?
How will they recoup their investment?
How much will it cost them to run the site after it's purchased?
Will they be able to increase revenues?
How much money do they have, and what's their long-term strategy?
Is there another potential buyer?
Is there another site that this buyer could purchase instead of yours?
What are they interested in... your URL, your readers, your talent?
Do you dominate some particular niche? How difficult would it be for somebody to build a bigger site than yours that serves the same market?
Think hard, talk to people who have made money in this market. And good luck.
Except for APPL. Shit, am I ever gald I bought at $20.00.
Reality does not happen until you analyze the dots. -Don DeLillo (Underworld)
Dude, why didn't you post the web address?
You could have pointed out to your potential
buyers that it was posted on slashdot.
Everyone secretly wants thier site to be slashdotted.
Well there are a few things that you need to consider to determine the worth of any business, web-based or not. 1) Cost of Entry - What would it cost the prospective purchaser to enter the market? Not taking into account any worth of an established brand or client base, what is the minimum that it would take to make another website that provide the same service? Not having seen the site, I would guess that unless the purchaser had experience in the interactive industry, they would hire a consulting company (iXL, USWeb, Xceed, etc) to build the site. Depending on the site, this could exceed the $250K asking price quite easily. The build-vs-buy argument comes into play during every merger and the determining factors are usually time, brand, and customer base - in addition to cost of entry. Do these guys have the balls to actually complete with you? 2) Customer base- What is it and what is the lifetime value of a customer. This is hard to determine for a interactive business, but recent metrics show that it is well into the thousands of dollars 3) Value of the Brand - Do you have an established brand and what is it worth. In today's digital economy, the value of the URL could be $250k 4) Value of Capital Resources - What is the value of any hardware of physical facilities 5) Potential Return on Investment - Most purchasers what to see a positive return on investment in 3-5 years. This factor may be used against you, but when compared to the cost of entry it's not much of a factor. If the purchaser wants to be in the business, the cost of entry is still there and it's their fault for pursuing a venture that may not be as profitable as they want it to be. 6) Investment so Far - Not a factor. It doesn't matter how much you have spent so far, your potential buyer doesn't care. They are only concerned with what the business is worth, not how much you have sunk into it. The two are not the same thing. Post your URL and let us 'experts' look at it an decide. but I wouldn't sell for less than 500K.
Well there are a few things that you need to consider to determine the worth of any business, web-based or not.
1) Cost of Entry - What would it cost the prospective purchaser to enter the market? Not taking into account any worth of an established brand or client base, what is the minimum that it would take to make another website that provide the same service? Not having seen the site, I would guess that unless the purchaser had experience in the interactive industry, they would hire a consulting company (iXL, USWeb, Xceed, etc) to build the site. Depending on the site, this could exceed the $250K asking price quite easily. The build-vs-buy argument comes into play during every merger and the determining factors are usually time, brand, and customer base - in addition to cost of entry. Do these guys have the balls to actually complete with you?
2) Customer base- What is it and what is the lifetime value of a customer. This is hard to determine for a interactive business, but recent metrics show that it is well into the thousands of dollars
3) Value of the Brand - Do you have an established brand and what is it worth. In today's digital economy, the value of the URL could be $250k
4) Value of Capital Resources - What is the value of any hardware of physical facilities
5) Potential Return on Investment - Most purchasers what to see a positive return on investment in 3-5 years. This factor may be used against you, but when compared to the cost of entry it's not much of a factor. If the purchaser wants to be in the business, the cost of entry is still there and it's their fault for pursuing a venture that may not be as profitable as they want it to be.
6) Investment so Far - Not a factor. It doesn't matter how much you have spent so far, your potential buyer doesn't care. They are only concerned with what the business is worth, not how much you have sunk into it. The two are not the same thing.
Post your URL and let us 'experts' look at it an decide. but I wouldn't sell for less than 500K.
Most websites are normaly 5 - 20 - 50k if they're the small little decent websites. Slashdot went for 3mill and the founders are not getting paid for 3 years or something like that. Truely most website buyouts are over paid.
Bill Sehmel
Cheif Technical Officer
Goat Sex Inc,
www.goatse.cx
Extrapolating from the company's 10Q is not going to assist you in determining value. First, the 10Q does not reveal purchase price of Slashdot or Freshmeat. Second, page views don't mean much (as compared to uniques) and taking a percentage of theirs is the blind leading the blind. Third, obviously many other factors were inputted into their offering. Fourth, do you mean clickthroughs when referring to "pitches?" Or am I misinterpreting your remarks. You do have value. It is found in the manhours used to create and maintain the site. Your quote of banner sales do not reflect net income. What about overhead? Net is what interests a purchaser. How many years and how much income must he input in order to recoup the investment and then, and only then, get a decent return on the investment? Being outrageous here, perhaps your site has a book value of $75-100,000. Beyond that is all negotiation.
I think it must be very difficult to put a price on a webpage. When you think about the number of /.ers there are out there..there is more than just the webpage, there is a whole audience out there too..I think a high price is the only price for this webpage...just think of all the work that went into it. Actually, I am just writing this comment so I can put an ad for my site up. =) Iceball.net Internet Services http://www.iceball.net The MattShow, 11:00pm-1:00am EST every friday night http://audio.iceball.net fjordboy
The anti-salmon
Im sorry to jump in on this late in the game but this guys way of valuation is so wrong.... ""US$25 per 1000 impressions is a good mark"" That means a website with 1000 impressions/month is worth 3million. My 5 year old luckily listed YAHOO homepage gets more impressions then that. I love this site..I have been a reader for about 3 months. This is the first thread I have read, and what a bunch %@*& &$%*. To the rightfull owner of this site>>>> You have done great, (yes we all know you need a new server), your content is good. MAKE SURE YOU GET A GOOD DEAL........BOTTOMLINE....You will know it when the right offer is made. Good Luck.
The biggest problem with determining value of an Internet or high tech company is that they don't have physical assets to measure their value - the current accounting practises are, quite literally, centuries old (i.e. if you had the most cows you were the richest). In today's information based economy it's near-impossible putting a value on an idea or knowledge a company has amassed. How can someone properly assess how much value there is with a company's patents, products and especially their employees? What makes things even more confusing and annoying for traditional economists/accountants is the sheer speed at which companies grow and the fact that they tend to ignore many of the basic principles 'old economy' companies use. A good term for today's startup's is "built to flip", meaning that the company is focused solely on research and development and hopes to eventually be bought out by some larger company that will actually implement, market and sell their product.
Always ask twice what you want and you should only figure you offered too cheap if their eyes don't bulge out. With the kind of traffic you are getting it wouldn't be too tough to explain to them the increase in revenue as the total number of internet users increases (prety much exponentially at this point). Also point out to them than early market leaders have an added advantage over newcomers because the competition for attracting viewers is much higher for startups. If they don't buy then at least you may use this as free advertising that you website is for sale and the list of potential bidding buyers will increase.
According to this article, one way of valuing your site is based on the number of unique users per month.
They reckon (for a US based site) that $470.50/unique user/month is a fair figure.
...j
I have the domain xcski.com. I've had it for years, and I got it because I used to be an avid cross country ski racer. I've never used it to promote cross country skiing or anything like that, because bad knees have kept me off my skis for years now.
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.
The next Cmdr Taco duplicate will be ready soon, but subscribers can beat the rush and see it early!
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...
"The invisible and the non-existent look very much alike." -- Delos B. McKown
It is clear that Wall Street is in a huge speculative bubble when it comes to so-called 'new economy' stocks. And pretty much the same thing for companies and assets that are privately held. Despite various prognosticators, this bubble is hardly the first one in US or European history... and eventually, it will be clear that basic economic principles of capitalism will not be reversed or thrown out.
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)...
Buy Text Processing in Python
Illegally copying a copyrighted MP3 file (which I don't condone, BTW) might cost the artist or studio a few bucks. Making it available for download might cost them a few hundred bucks, but even that's debatable. Copying someone's web site and operating the same service, however, is unfair competition because you are trading using someone elses material, which they have invested time and money developing. You therefore have lower overheads because you didn't invest in the material, so you can undercut them.
ten bucks a hit.
just like acid.
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I think there is a world market for maybe five personal web logs.
...Or, in the case of Amazon...multiply by -1770
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Why can't I moderate something "Wrong" or at least "Grossly Misinformed"?
When a radio station changes hands, what's really being bought and sold is something that's in limited supply--a license to broadcast, and the supply is further constrained by its being a license to broadcast in a particular desireable market. If the staion using that particular frquency allocation happens to already be doing well ratings and ad sales wise, that makes it even more attractive, but without the license it's just a pile of used equipment and maybe some land and a building.
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.
I see even classic Slashdot is now pretty much unusable on dial up anymore.
Spend $250,000, get $20,000/year. You could shove that $250,000 in a crummy CD and get 6%, $15,000. Or put it in a mutual fund, get 20% easy, $50,000.
Why work like crazy to make so little?
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Infuriate left and right
It's all dependant on completely arbitrary factors. Like, who are the types of visitors? Are they loyal? Do they have money to spend? Is your site based on any of the now popular keywords? Is the domain of any value of itself?
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.
Check out Altavista's rate card (provided by DoubleClick) here. 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.
MOO;IANAL.
There used to be a picture linked here.
If you are computing salable INVENTORY, which is what we have been discussing, you figure it at full list -- before you include discounts, freebies, trade, etc. But I agree -- if you're producing $540,000 worth of ad inventory, you're probably going to make somewhere around $350,000 (or less, depending on how you sell it) off of it.
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.
MOO;IANAL.
There used to be a picture linked here.
Or just threaten to. Look, the way Internet companies are valued these days, you're worth ten times whatever revenue you can bring in in the next 100 years. So don't worry about their shock. If they really want you, a quarter mil is a bargain.
--
Wage Slave Journal
What??? I don't see how you can even pretend that there is a major difference here. If I run a download site that offers music copied from some other label I am clearly "trading using someone elses material, which they have invested time and money developing". I can also clearly undercut them because I have not had to find the artists, pay the artists, or pay production costs.
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.
First off, you're not charging enough for advertising if you're only grossing $20,000 per year. I run several sites including some that get similar traffic and they gross much more than yours. Your ad rates are probably too low.
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.
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.
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The unsig!
It's not stealing. It's wrong, and it's rightfully illegal, but it's not stealing.
--
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Mod up a post Rob doesn't like and you'll never mod again
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).
========
<sig>Guvf vf abg n frperg zrffntr
To the prior comment about web sites being "worth what someone will pay" -- a true point -- I would add this: sites are also worth what someone else has paid.
;-)
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.
The Unbearable Arrogance of Slashbots. You people make me sick.
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"?
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+&x
Have you even read this story yet?!
/. already.
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.
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
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+&x
Illegally copying a copyrighted MP3 file (which I don't condone, BTW) might cost the artist or studio a few bucks.
Or, and I know this is a tough one for some folks, it might make them a few bucks. Free promotion and all that.
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+&x
That was a great explanation! Thanks for taking the time.
I didn't mean to imply that the P in P/E was profit. Sorry for the confusion. The way I understand it, Profit = Earnings. I really hate reading corporate financial reports and government budget figures. Numbers seem to get spun every which way and it is often difficult to determine "How much money was spent this year?" and "How much money did we have left over at the end of the year?".
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?
I'm glad we've got someone who know what he/she is talking about here. To my earlier comment, I tried to mention the profit part of the P/E ratio. Now, I know that this is something that really applies to buying portions of businesses, i.e. "stock". I also know that many investors do not consider P/E to be a very important factor when choosing an investment. Even my own Morgan Stanley advisor has urged me to not consider P/E so much when choosing investments. I promptly told him to go climb a tree. Call me old fashioned.
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?
(Aside: You can't really say "crack into," can you? I hate to misuse "hack," but...)
MSK
If you could just let us know what the name of the site is, I'm sure the added traffic from slashdotters will drasticlly pump-up your March banner impression totals. This should give you a better bargaining position.
Work for Change & GET PAID!
Like a piece of art, a website is worth whatever someone is willing to pay for it. If they blanched at $250k, see if there is anyone ELSE interested in it for that price. If not, then maybe the price IS high....
:)
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?
Slashdot social engineering at it's finest
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?
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
Wikia
First of all, it's not the best time to be selling, because the "page hits --> ad sales --> profit" model has come under heavy attack. My questions to you would be do you have an ecommerce play (b2c ok, b2b better, but even b2b is old hat now -- still you almost have to have an ecommerce angle), will your site "scale" and do you have a massive untapped number of potential users. if you answer yes to these questions, then the sky's the limit. if you answer no, then you would have to go with a discounted cash flow type of valuation. assuming your 20K gross can go to 100K+ and that this translates into 20K net/year, at 7 times net, you're talking about 140K. that's why you need the plus factors.
Investment theory says that the inherent worth of any business proposition is the present value of cash flows discounted at an interest rate appropriate to the risk of the business.
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
Anomalous: deviating from what is usual, normal, or expected
Canard: a false or unfounded repor
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.
normal(adj)- people who don't sit on slashdot all day wondering why everyone else isn't building robots [DECS]
The value of a site does not really have anything to do with banner advertisement revenues, labor, or even formulas. This could be a tool to determine your minimum selling price, but not necessarily the market selling price. The two are different. If you have read the news over the last year, then you have heard of the largest price extracted for a domain name sale. The domain was business.com and was sold for approximately $7 Million. The entrepreneur of this domain (and others) was a gentleman named Mr. Ofstrofsky. One month ago I heard him speak at the University of Houston about his business. He had a few thoughts that you should consider. I will also interject a few of my ideas that you must consider. First, you should think about what they want. Does this company want the website, the company you have built, or the domain name? I would suspect that they want to buy the domain name. If they wanted to buy the company, they would have stated that. Their intentions go a long way to the what they are willing to pay. Second, just say no. If you have a good domain name, then you will not get the price you could if you sell early. Mr. Ofstrofsky said "No" many times before accepting his $7 Million dollar offer. If he had said "yes" to the first, second, or twentieth offer, he would have never gotten anywhere close to the final selling amount. The same concept applies to the company or website (excluding or including the domain). If it is really worth something, then there will be other buyers willing to pay more. This is actually an important point. I will use the stock market at a metaphor to describe this concept. If you own stock, that stock is only worth as much as the next person is willing to pay for it. If you owned a single stock and nobody wanted to buy it, then it would not be worth anything. If everyone wanted to buy, then it would be worth everything. You should keep this in mind anytime you are buying or selling. If this is the first offer, wait. There will be others. Third, does this site or domain have any liability or risk associated. Could you lose it through an adminastrative action or be tied up in a trademark infringement case? For a quick and non-complete trademark search, look at the U.S. Patent and Trademark Office's website. They have a useful tool at http://trademarks.uspto.gov/access/search-mark.htm l. I should note that you should consult an attorney for a complete intellectual property analysis of this topic. (I am not an attorney and please do not take my opinions as knowledgeable legal advice) Furthermore, you should read the many good articles at the New York Law Journal which can be found at http://www.nylj.com. They have some _good_ information there. If you could lose it to these "potential buyers", then you may consider selling it to them. In simple terms, watch your back because business is not nice. If you consider, plan, and act on these three points, you will have done quite a bit of the required homework. Doing your homework ahead of time is incredibly important! Fourth point is that anytime that you sell a domain, company, or intellectual property, you should consider attaching a "string". In your case, I would add two stipulations to the agreement. The first stipulation (or string) should be that if they ever decide to sell the domain or site in the future, that you will automatically get some percentage of that sale. An example could be that you sell it for only $50k. Two years later, they sell it for $1 million. If you "string"-ed a 10% sale price onto your original sale, you would get $100k. I have heard of up to 50% of sale price for these types of strings. The second stipulation would be if they ever lost the domain name or gave it away, you would automatically receive some fixed sum. Granted, both of these stipulations will have to be negotiated. The last point is to use an attorney to draft the sale agreement. If this item is worth a lot of money, then it is worth protecting. The best way to protect yourself and your future is to hire a legal gunfighter. The ideas above should help you do your homework. However, do not stop there, keep looking for other issues which are not "on the radar". (If you or anyone else gets rich with help of this post, please feel free to take me out to dinner. *grin*) Good luck.
What is a web site worth?
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.
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?
If you've got substantial banner revenue, make sure you let them know the site will pay for itself in a few years. As well, they need to understand that you *have* invested time and money in the site. If they don't compensate you for it, you're throwing it away.
æeee!
The most common formula I see managers using for the valuation of the site is (kinda) as follows:
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
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, 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!
Bill Clinton: Pimp we can believe in. - The Shirt!!!
All of the things mentioned here are important in determining your asking price for the page, and since it sounds like you did your research to reach a price of $250k, then this is what you should ask for.
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!
$250k for a site that makes $20k a year in ad revenue? That's actually a pretty reasonable price, 12x earnings. It's even more reasonable if you consider growth potential.
/||\
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)
Hand me that airplane glue and I'll tell you another story.
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
So I've worked on this web site, SkiIn, 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).
How much greater is a matter of debate... depends on the site, what it is, how unique the model is, how much the content is driven by you generating it, etc.
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.
MOO;IANAL.
There used to be a picture linked here.
You could talk to an accountant or a lawyer, but if you want to swag a number, take yearly revenues (profits, after operating expenses have been paid) and multiply by 20. That'll give you a conservative estimate. If you want to get gutsy, multiply by 100.
Or, in the case of Yahoo...multiply by 1770!
Like a piece of art, a website is worth whatever someone is willing to pay for it. If they blanched at $250k, see if there is anyone ELSE interested in it for that price. If not, then maybe the price IS high....
-=Bob
Put it up for auction on ebay.
;-)
Then you will see what people
thinks it is worth
Knud
Let's see. Very little revenue. Small site. Room for growth. On the stock market, that's about one billion dollars.
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.
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.
There really isn't a standardized way to assign value to a web site, unlike things like cars which have "blue book" values.
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?
--
Do daemons dream of electric sleep()?