Last time, we talked about what information you should be prepared to give a potential buyer who is interested in purchasing your site. Today, we’ll discuss some of the factors that influence the sale price of a website.
The first and biggest factor, normally, is profit. The price set for a site will be a multiple of the profit and that multiple typically is based on whether the profit of the site is trending up or down and how fast it’s trending up or down.
I’ve seen valuations of as much as 5 times, although that’s very rare. Typically, price runs in the area of 2 and a half to 4 times the profitability of the site.
I’ve also seen valuations of 1x if the profit is taking a nosedive. However, at Adult Site Broker, as a rule we don’t take on those projects, because sites like that simply aren’t very marketable. We pride ourselves on selling top quality adult properties, not just anything we can get our hands on. When you buy a site from us you can be sure it’s been fully vetted and offers a good prospect of continuing profitability for the buyer – as well as a fair price for the seller.
If a site hasn’t been monetized, then it’s all about the amount and the quality of the traffic. This is often the case for free sites, some of which have a high potential for profit that isn’t being properly exploited by the owner.
If a sale is based on traffic, it will be a multiple of what the traffic would sell for on the open market. The quality and source of the traffic are major factors in determining this value, as well.
Direct traffic (or “key-in” traffic, which can be significant in sites with short, one-term domain names), search engine traffic and review site traffic typically are considered the most valuable, with traffic from tube sites and other free sites considered the least valuable, qualitatively.
It’s also important to know if a site’s traffic base is reliable and sustainable. This can be determined by looking at resources like Google Analytics and similar tracking software from other vendors. The history of the site’s traffic is very important. If it’s up and down all the time, then the buyer will have trouble determining what it is they’re buying. It’s not difficult for sites to create a traffic spike by purchasing low-quality traffic in bulk, so buyers need to look closely at historical data, when available.
In rare cases, a site’s valuation will be based primarily upon revenue, rather than profitability. In these cases, the same factors apply that apply to profit. These buyers are still looking for profitability; they just elevate sales to being the primary consideration when establishing the price they’re willing to pay. Some large companies in the adult space buy sites and domains this way.
The age of the website is also important. If a site has been around for a while and has continued to grow then it’s worth more, just like any other established business.
The domain name and the nature of the TLD a site resides on are important, as well. Even today, .com remains king. There are now many successful .xxx sites out there on the market too, however, now that the TLD has matured and includes brands which have shown real staying power.
The number of inbound links is important, as well. Quality inbound links benefit a site’s SEO and thus improves the traffic base.
Another important factor is the size of the staff employed by a site. Savvy buyers will look for operations that are already running efficiently, as well as operations where there’s obvious room for improvement in efficiency – or that they believe could generate significantly more revenue by adding some people in key roles.
The size of a site’s contact database – especially with respect to customers – is very important. We live in an era where data is essential. Particularly where dating sites are concerned, it’s not just about how many paying customers you have; it’s also about the amount of contact information at your disposal that can be used to generate leads, or be used in marketing and advertising campaigns, whether those campaigns are for the site itself, or third-party sites and products.
Another major factor is the ‘reverse engineering’ cost of the site. How much would it cost to build the site from scratch and drive the same amount of traffic to it and how much time and effort would be involved? If a buyer thinks it would be cheaper to build and develop a similar site, they might shy away from buying an otherwise desirable property for that reason.
The lifetime value of a customer on the site is also important. Where subscription adult sites are concerned, this metric is crucial. The longer the site’s average membership retention, the more profitable it will be on a per-customer basis.
All these factors together help determine what a site is worth. But, in the end, the most important factor of all is how much money a site makes. It almost always comes back to that. It’s nice to have a site with a good domain name and lots of potential – but if you want to command top dollar for your site, being able to show strong profitability speaks louder than anything else.
Next time, we’ll transition to tips on buying websites – a decision that should be made with every bit as much care and attention to detail as the decision to sell one.