10 Factors That Can Skyrocket (or Tank) The Value of a Website

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Today’s post is by Chris Yates of the website flipping blog FlipWebsites.com. Chris is one of the organisers of the Internet Investment Summit, happening May 18 – 20 in Las Vegas. Note that early bird tickets end 20 April!

Have you ever considered what it would be like to buy or sell a site valued over $100,000? Several times a year sites sell on Flippa in the six figure range. What exactly makes these sites command a valuation over $100,000? That’s the question I set out to answer before writing this post. First, I’ll explain the methodology I used to answer this question, then, I’ll summarize my findings into 10 factors that affect the value of a website.

The Methodology

In order to answer the question, I first had to find a source of data. Using Flippa’s advanced search feature, I set my search criteria like this:

  • Listing Format: Auction
  • Auction Status: Won Listings
  • Property Type: Websites
  • Auction Price: Minimum $150,000

This narrowed the list down to about 30-40 listings. I further narrowed it down by weeding out any auctions that only had 1 bid, were private, and those that sold more than a year ago. I ended up with 10 auctions to use as source data.

For each of these auctions, I did a little “mini due diligence” on them, making notes on what I felt increased and decreased the value of the site based on my own experience buying six figure sites. In the interest of full disclosure, this part of the process was rather subjective since I don’t pretend to know the value every buyer sees in every auction. I also assumed the seller’s statements on factors such as traffic and revenue were accurate since I had no way to verify them directly from the sellers for my research.

Summary Of The Data

Number URL Bids Price Uniques Per Month Net Profit Per Month

1

 sgholiday.com

69

$160,000.00

325999

$11,883.00

2

 bloguez.com

5

$190,000.00

3450000

$0.00

3

 doneforyoutraffic.com

9

$200,000.00

159436

$0.00

4

 zerodowncommissions.com

9

$175,000.00

30000

$42,500.00

5

 makecashtakingsurveys.biz

24

$395,000.00

319508

$33,312.00

6

 blippitt.com

4

$200,000.00

920000

$6,565.00

7

 unlocking.com

26

$195,000.00

106406

$18,635.00

8

 bloggingtothebank.com

30

$900,000.00

342479

$90,000.00

9

 list-of-companies.org

26

$200,000.00

1900000

$19,600.00

10

 burnyourtodolist.com

2

$180,000.00

17927

$5,697.00

 

  • Average Number of Bids: 20.4 Bids
  • Average Price: $279,500.00
  • Average Unique Visits Per Month: 75,7175.5 Visits
  • Average Net Profit Per Month: $22,819.20
  • Average Revenue Per Unique Visit: $0.29
  • Average Price Per Unique Visit: $2.37
  • Average Monthly Revenue Multiple: 15.27 Months

The 10 Factors Affecting Valuation

At this point, I gathered my notes and looked at the various factors affecting the value across different auctions. I came up with a list of the most common factors which were prevalent across the data set and identified the factors that seemed to be the outliers which contributed to the value. Keep in mind, this is not meant to be a comprehensive list of all the factors that affect any website’s value, only those that I felt affected those in my data set.

Subscriber Lists

10 of 10 of the sites included some form of a list such as a customer list, subscriber list, membership database, forum database, social media account, etc.

The lesson: Six figure sites build and manage lists.

Solid Traffic History

It’s no surprise that all of these sites were generating traffic. 8 out of 10 of the sites were generating over 100,000 visits per month.

The lesson: Six figure visits to a site each month can translate into six figure valuations.

Solid Earning History

All but one of these sites had a history of revenue generation. Auction 3 didn’t claim it in the Flippa system, but did state the site had earned revenue in the auction copy. 9 out of 10 of the sites had earned more than $5,000 in a month.

The lesson: Four to five figures of revenue each month can translate into six figure valuations.

Low Maintenance

8 out of 10 of the auctions used wording like “low maintenance” or “automated” to indicate that the site could be maintained with little time. Surprisingly auction 10 seemed to require the most amount of work but also received one of the highest revenue multiples.

The lesson: Six figure sites are scalable.

Multiple Sources of Traffic

Based on the seller’s statements, 8 out of 10 of the sites didn’t rely primarily (more than 50%) on Google for its traffic. Even the two which did seemed to have a diverse range of keywords with no one keyword driving over 50% of traffic.

The lesson: Six figure sites don’t put all their traffic eggs in one basket.

Established Relationships

6 of 10 of the sites included unique relationships such as suppliers, joint venture partners, etc. which were key to the success of the sites and were included in the sale.

The lesson: Networks of strong relationships build six figure sites.

Proprietary Digital Products

6 out of 10 of the sites had proprietary products that could be delivered digitally. Buyers often see value in proprietary products since they can add the product into an existing business’s offerings. Digital produts also tie into the low maintenance aspect to each of these sites.

The lesson: Proprietary products that can be delivered in a scalable way increase the chances of a six figure valuation.

Lots of Free Traffic

Auction 2 had no claimed revenue but had the highest traffic at over 3.5 million unique visits a month. Even with no revenue, the site sold in six figures. This means a buyer likely saw the ability to monetize the traffic and could justify the price.

The lesson: Traffic alone (which can be profitably monetized) has value in the eyes of six figure buyers.

Effective Monetization Systems

Auction 4 had the best claimed monetization with the highest revenue per unique visit number. To be making over $40,000 a month on only 30,000 unique visits is quite a feat.

The Lesson: Create a monetization system for your six figure site which buyers can leverage.

Recurring Revenue Streams

Auction 10 sold for the highest revenue multiple. I believe one of the factors that contributed to this was the fact the site had over 200 recurring subscribers. Recurring revenue streams significantly reduce the risk for buyers. Auctions 4 and 8 also claimed recurring revenue streams.

The lesson: Six figure sites are able to maintain momentum and revenue after the sale.

 

Want to Learn More?

If you’d like to learn more about over 250 other factors I’ve uncovered which affect the value of a website, join me and several other website investors at the Internet Investment Summit happening May 18 – 20 in Las Vegas.

 

About Chris Yates

Chris Yates is an entrepreneur who actively buys, sells, and invests in websites. In addition to buying and selling internet businesses, he also educates and coaches others to make money buying, selling and investing in websites. Chris is also co-owner and co-author of several sites and books on the subject of building, buying and selling websites and co-creator of the Internet Investment Summit.

Connect with Chris in person at the Internet Investment Summit happening May 18 – 20 in Las Vegas. Note that early bird tickets end 20 April!

Are these factors you look for in a website purchase? What else do you think factors in a high-value website? Let us know in the comments!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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  • Rez

    I am hearing talk that people may not even be using websites in a matter of few years because of newer technology where people won’t even use traditional computers. Is it worth spending so much of your time developing sites if sites may not even be a way people get their information 6-7 years down the line. I like to invest time and money that will (in theory at least) provide return for near on 2 decades at least. So, in essence, are we wasting our time develping sites? Sure, we can earn income in the short term (3-5 years), but what of beyond?

    When people go into a good profession, they go in intending to apend a large part of their life in that profession (unforseen events apart). Shouldn’t people who work in web development expect the same?

    Is it worth people paying premium for websites not knowing the environment the industry will be like a few years down the line.

    • Raphael

      @Rez
      Sure Iphones and other smartphones are looking to be dominant in the next few years, but people still use laptops and desktop computers for heavier work. With the population growing at 1.3 percent that means there will be double the amount of people in 54 years. That’s a heck of a lot more internet users. Also, just thinking about it, it’s very difficult to do any heavy duty work without a larger screen. Sure many people are turning to tablets, but the key feature of the tablet is the ability to use the internet. Even without traditional computers people will still be using the internet in the next 100 years.

      • Rez

        I agree with you in that that is the case now. More tablet computers means more people on the internet. I also agree with you whenever I want to work, I invariably use my desktop or laptop; I just do not find a tablet comfortable to work with. Its purely for web, video and bit of gaming for me. However, what I am talking about is a disruptive change in the internet landscape where new technology bypasses the need for websites alltogether.

    • http://www.chrisyates.org Chris Yates

      @Rez, You make some good points here, however I believe the key is for entrepreneurs to look at changes such as those you mention as opportunities rather than threats. I’d recommend looking at the history of companies like General Electric and how they reinvent themselves. If you’re buying or building a solid fundamental business, the medium (i.e. websites, mobile apps, etc.) matters less.

      • Rez

        I know exactly what you mean. Most successful companies anticipate change and see those changes as opportunities rather than threats. However, I think people who run sites are in a unique position because when you actually make all of your income from showing ads and selling affiliate products you rely on people coming to view your sites in signficant numbers. You don’t physically own products that you sell and therefore if people stop using the internet as we know it now, its very difficult then to find another avenue to reach the market.

  • https://flippa.com/users/358202 danielweb

    Hi Chris, Great post, can you supply your contact information, would like to ask your professional opinion about one of my sites that fits the “high value” profile

  • https://flippa.com/users/378142 jayveedee

    This was one of the better posts I have read on Flippa’s blog. Great research and data analysis.

    Rez – Strike while the iron is hot! You are right, nothing lasts forever. Every business idea only has so many good money making days ahead of it, but don’t let that fear prevent you from jumping in. There are many guys on Flippa including myself that are making thousands of dollars every month from websites we have purchased on Flippa (and not very many of us are paying over $100k for those sites). You can buy a website 6-12 month/net profit, and have it paid off in before the end of 2012! Good luck finding a brick and mortar business that is profitable, maybe be paid off within the year, and selling at a low enough price that just about anyone can get in on the action!

    John

    http://www.howtobuyawebsitebusiness.com

    • http://www.chrisyates.org Chris Yates

      @John, thanks for those kind words regarding the post.

    • Rez

      Actually, I myself make thousands of dollars a month running sites. However, I must say the rate at which technology changes is spooking me a bit. Much of my income is from adsense, but also good chunk from affiliate sales and clickbank (the two latter are increasing all the time and earning an increasing share). All of those things are dependent on people coming on to the websites vclicking ona ds or buying something, and if people are not potentially going to be suing websites to look for information, my existing model would not give income.

      This fear is actually making me think twice about whether to just sell up and pay towards a home with the proceeds and earn rental income from that. At least homes are forever.

      However, in order to do that I would be looking for a professional outlet through which to sell at least my biggest site. My biggest site is one I consider to be a very good one with some excellent content; it is in the health niche and generates a lot of valuable comments. The site earns me approx. $4K (from adsense and affiliate products). I read in someones blog that in order to get the most for a professional website, its probably best to look for a professional seller rather than selling on Flippa. I would not at all be happy selling this site for 10-12 times monthly earnings.

      • https://flippa.com/users/367835 chrismyates

        I understand your concern here. This business isn’t for everyone. I personally have embraced the quick pace of change online and the lifestyle owning website businesses provides. Real estate, stocks, etc. all have their positives and negatives so finding one that fits with your ideal lifestyle and level of risk is important.

        I may be interested in buying your site, feel free to get in touch.

  • DJ

    Good post. There are certainly some stats I hadn’t thought about.

    I would, however, suggest that to gain cleaner numbers for your averages is to throw out the highest and lowest priced sites. This is pretty much a standard in order to eliminate outliers.

    • https://flippa.com/users/367835 chrismyates

      I considered that, however the outliers actually gave insight into some of the factors. Figuring out why they were outliers can tell you as much as looking at the common factors. If you were to take out the outliers, what factors might have changed in your analysis?

  • http://nopassiveincome.com Chris @ NPI

    Hi Chris,

    thanks for your tips. They are important not only, when you want to sell your website, but especially when you want to build solid base for your business.

    BR, Chris