The starting point for most website valuations is a multiple of current revenue, generally set based on recent transactions of similar properties (aka. comps). The most common way to value a website is to price it as a multiple of monthly recent earnings. Most blogs would be priced at 30 – 40 times monthly advertising earnings, unless there are other issues present. But how do you value a website with no revenue?
It’s been about 4 years since we last wrote about website valuations, continuing the work of a project we started 8 years ago. One of our readers recently commented that valuations have risen. He’s absolutely correct – and here’s why….
The Market for Websites – 2019 vs. 2012
Digital investing has come a long way as an asset class over the past decade. When I first started looking at this business, it was effectively an “operators only” market, especially for small websites. You had to be close to the asset.
Several years ago, we completed a website revenue study focusing on small websites. The goal of this study was to understand how much a typical site should make. We accomplished this by looking at 100 websites listed for public auction at a major site. We recently ran an update on this study to understand how the sites were doing today.
This update measured two things:
- What % of the sites were still online and indexed by Google?
- Has the site gotten better or worse since the sale (using competitor analysis tools)?
Of our original 100 sites, 93 were in a position to be effectively tracked using 3rd party competitive research tools such as SEMrush. The remaining sites got a hall pass; these had been executed as confidential sales (no site name), where we vetted the site anonymously and were unable to find them for a follow-up. Since a basic due diligence review was run on every site included in the study, we are comfortable that each of the sites was operating as a legitimate business at the time of the sale – although many were “window dressing” from a SEO and traffic generation perspective to boost their statistics.
Driven by a passionate desire to “scratch our own itch”, we released the first draft of a little project we’ve been working on this weekend. As our regular readers are aware, we built our first public website earlier this year. We started running ads earlier this summer (just to pay the server bills) and wanted some perspective on “what good looks like”. This is where things get furry: there aren’t any reliable and comprehensive public sources on revenue benchmarks for a small website. So we decided to build our own data set and create some benchmarks around how much a small website could earn. Here you go…
As you can see below, profit-per-visitor numbers vary widely. More after the jump…