Determining the value of a website may seem like a complicated process. With some solid internet research, you can accurately determine a site's fair market value so a buyer or seller can make a successful and informed decision.
Factors When Appraising a Website
There are several ways to determine the value of a site, including both key metrics and financial performance.
If the website is designed to earn revenue, such as an e-commerce or membership site, a review of the financial records of past years is necessary. By pulling the income statements and balance sheets, you can see what revenue the site has brought in and can reasonably estimate what it will earn in the future. Likewise, you want to get an accurate idea of the costs involved in running the site. Some typical costs may include hosting, domain registration, hiring web developers and content creators, software licenses, marketing and advertising, and credit card processing fees.
Is the website targeting a market with a lot of future growth potential? Or is it a small niche unlikely to expand any further? Are customers generally onetime buyers or are they long-term purchasers who will continue to support site (such as with subscription memberships)? What is the profile of a typical user of the site?
If the site has a social media presence, you should also review this data to create a customer profile. Facebook Insights provides a wealth of demographic and visitor usage statistics for your page for free. There are also paid services like Hootsuite and Sprout Social that can provide data on users of a website's social media presence.
An additional factor to consider is your openness to advertising on the site. If the site targets a market that internet-based advertisers want to reach, can the site make additional revenue by selling advertising space? If the site is already selling advertising space, what is the revenue history and potential for growth?
Methods of Valuation
Once you've reviewed the financials, one method of valuation is to take the monthly revenue and multiply it by 24 to 36 months for a final figure. If you have a website that grosses about $500 per month, you will come up with a figure between $12,000 and $18,000.
Another method is to look at the traffic a site receives based on its most used keywords. If you're a buyer thinking of selling ads on the site, this can give a picture of what sort of revenue you can expect. Take the main keywords and use Google AdWords and Bing Ads to find out their average cost per click (CPC). Multiply this by the estimate click-thru rate (CTR) and the number of unique monthly visitors (UMVs) to produce the average amount of monthly ad revenue.
Determining the Lifetime Value (LTV) of the site's customers can provide both parties in the transaction with a way to see the current and future value of customers. It also can help you estimate what it would cost to acquire a new customer. Harvard Business School has a free detailed Excel spreadsheet you can download for this method of valuation.
Some key metrics to research for any website sale or purchase include the following.
- Traffic: You'll want to know the number of visits to the site, both in terms of unique monthly visitors and total page views. You can find this information using the free version of Google Analytics. You can also use Google Analytics to find information on page views, bounce rates and the average time spent on the site.
- Alexa Ranking: Traffic flow to the site can be researched via Alexa, a paid service for SEO and marketing information on websites. Alexa does offer free tools, such as finding a website's traffic, although if the website has a small following, the free Alexa tool won't be able to provide data. There's also a helpful Chrome extension you can install for free that will provide you with basic data on a site. You do not need to a site's owner to use it, so it's also a helpful tool for buyers. With Alexa rankings, a smaller number is better.
- PageRank: Determined by an algorithm Google created, PageRank rates how a site appears in search results on a 10-point scale (higher is better). There are several sites buyers and sellers can use to find the PageRank, such as Google Rank Checker and SEMRush.
- Site Comparison: Reviewing comparable sites' pricing and sales is also an important metric for buyers and sellers, assuming there are similar sites that have been sold available to research. There are many places to buy and sell websites and you can see what similar sites are priced for sale at and what others have sold for. Some well-known sites are Flippa, FE International, Digital Point Marketplace, and BuySellWebsite. All of these sites also provide a resource section for buyers and sellers. You can even use eBay to research comparables and to buy and sell websites. All of these sites are also places to go once you are ready to buy or sell a site which you can do on your own or through broker and escrow services made available by the sites.
- Domain Authority (DA): This provides an estimated rank of a website on search engine results pages (SERPs). A website is given a score between one and 100; the higher your score, the higher a website's value. A site's DA can be found by the buyer or seller using a free Chrome extension as well as other SEO research sites like those mentioned above.
If a website also has a social media presence, such as a company page on Facebook, the traffic, user demographics and engagement rates are important metrics as these are all part of the website package. Email newsletters are another significant source of data. If a website regularly markets its products to a large cultivated list of targeted buyers and subscribers, this increases the value to a seller.
You will want to ask about open rates as a newsletter with a very low open rate and click-through-rate is less valuable than one with a high one. Open and click rate benchmarks vary by industry and company size. The seller can provide this data to the buyer if they use a third party service like MailChimp or Constant Contact.
Tools for Buyers and Sellers
There are many tools online that you can use to research key metrics for a website. It's important to remember when using any of these that they will give you an estimated value and these figures may range among various sources. Don't use just one tool to determine the value. Instead do your due diligence research among many sources to arrive at an accurate price.
- YourWebsiteValue.com, you can enter the URL of any site and receive an estimate cost of a site within seconds. The site calculates the value based on the age of the site, Alexa ranking, backlinks, domain authority, page loading speed, bounce rate, search engine indexing and social media links.
- Siteprice.org works in a similar manner but has an additional feature that provides useful data. The site will generate an SEO Checker and SEO Analyzer report with critical issues to fix on the site, as well as ones that are done correctly. As a buyer, this allows you to fix any problems with the site to ensure your site receives top dollar. As a seller, you can see where the site ranks and work you may need to price out to fix SEO problems.
- Worth of Web calculates website values from your URL as well but only provides analysis if the site has an Alexa ranking of 30 million or above. The website also has a section for selling and buying websites both through a broker service and a marketplace where buyers and sellers can handle sales with one another directly.
- Moz Pro can provide you with detailed reports of the site's ranking with keywords, page optimization and link opportunities for a new buyer. A seller can review sites as well prior to a sale and use their crawler and auditing tool to identify issues with a site. There is a 30-day free trial; the tool costs $149 per month thereafter.
Considerations for Buyers and Sellers
Buyers and sellers both have their own set of questions to be answered before buying or selling a website.
Along with all the valuation information discussed previously, a buyer should ask additional questions of the seller.
- Technical Needs Assessment: What is the technical status of the site? Is it entirely up-to-date in the latest technology, or will it require extensive coding and updates? Some examples of concerns are whether the site is mobile-friendly, optimized for fast loading times, fully secure for financial transactions and has a modern and appropriate design. If there's any "work" to be done on the site, that can affect your future profits after the purchase.
- Server Resources: Another financial aspect to consider is the site's history of growth on its hosting platform. As a site grows and increases traffic, this will affect the performance of the site if you do not bolster your hosting package and server resources. Don't finalize a sale without asking to review the site's hosting history and whether you will need to pay more in the near future to handle the site's traffic and whether this cost will be offset by projected increases in revenue.
Seller Issues and Concerns
Sellers may be concerned about non-analytical issues involving a site sale:
- Emotional Connection: Some sellers create basic business websites that are created specifically for sale. Other sites may have been created based on a seller's unique passion and was not initially intended for sale. These sellers may have a strong emotional attachment to the website and want the future owners to have the same passion and respect for the site's subject matter and products. If you're a seller in this position, you will have to interview and research a buyer to make sure you are comfortable selling to them.
- Ongoing Support: Some buyers may require you to continue to be available to help out with the site transition, technical support and marketing. If this is necessary, you should add the cost of your time into the valuation of the site and also make sure there's a clear contract in place spelling out the scope of your duties and procedures for additional billing if the buyer needs work outside of what is originally discussed.
How Much Is a Website Worth?
Whether you're buying or selling a site, there are many relevant factors to come up with a well-researched and thoughtful website valuation. It's critical for a seller to spend time determining value and providing a wealth of back-up data to a seller to convince them of your site's worth. Likewise, a seller should make use of all the available free and paid tools online to make sure their financial commitment is one worth making for the long term.