How do I determine the sell value of a web site?
May 18, 2006 12:26 PM Subscribe
How do I determine the sell value of a site that has 5000+ readers per day (including RSS readers), 3300+ articles written, 120,000+ comments, 40+ active authors, and a high Google PageRank of 7?
Three years ago I created a political discussion blog. It was unique at the time in that it truly tried to be non-partisan and offer different side-by-side viewpoints from each major party of politics.
The issue now is that I am no longer actively involved in politics and no longer am interested in maintaining the site. The Managing Editor, a volunteer, has offered to purchase the site from me in the interest of keeping it running as it has pretty wide and loyal readership.
The question is: How do I determine the value of a site that has 5000+ readers per day (including RSS readers), 3300+ articles written, 120,000+ comments, 40+ active authors, and a high Google PageRank of 7?
The problem is advertising on political web sites is very very cheap so 5000 ad impression per day only results in about $3 to $4 per day in revenue, barely enough to pay for hosting let alone pay the salary of a Managing Editor to keep the authors in line.
So basing the value of WatchBlog on the potential ad revenue is pretty weak. What I'd like to know is how to estimate an approximate value based on all of the other factors that make the site popular in Google as well as the 3+ year history of political writing and discussion.
Three years ago I created a political discussion blog. It was unique at the time in that it truly tried to be non-partisan and offer different side-by-side viewpoints from each major party of politics.
The issue now is that I am no longer actively involved in politics and no longer am interested in maintaining the site. The Managing Editor, a volunteer, has offered to purchase the site from me in the interest of keeping it running as it has pretty wide and loyal readership.
The question is: How do I determine the value of a site that has 5000+ readers per day (including RSS readers), 3300+ articles written, 120,000+ comments, 40+ active authors, and a high Google PageRank of 7?
The problem is advertising on political web sites is very very cheap so 5000 ad impression per day only results in about $3 to $4 per day in revenue, barely enough to pay for hosting let alone pay the salary of a Managing Editor to keep the authors in line.
So basing the value of WatchBlog on the potential ad revenue is pretty weak. What I'd like to know is how to estimate an approximate value based on all of the other factors that make the site popular in Google as well as the 3+ year history of political writing and discussion.
The sell value of the website is whatever someone is willing to pay for it. It could be "worth" a million dollars, but you'd never sell it (see: Friendster, who missed all their chances to sell their site for big bucks and now can't give it away). Do you mind sharing how much he's offering?
posted by ThePinkSuperhero at 12:36 PM on May 18, 2006 [1 favorite]
posted by ThePinkSuperhero at 12:36 PM on May 18, 2006 [1 favorite]
Response by poster: I have thought about retaining ownership and letting him pocket 100% of the ad revenue.
It's hard to just give up a site I've spent so many hours working on, since I conceived the idea and then spent many long days executing it.
But I do recognize that his multi-year commitment as a volunteer Managing Editor also has some value. I'm just not sure how to deal with the ownership issue.
Since one of the ideas is to sell the site outright to him, I need to determine some kind of value, hence my questions above.
posted by camworld at 12:42 PM on May 18, 2006
It's hard to just give up a site I've spent so many hours working on, since I conceived the idea and then spent many long days executing it.
But I do recognize that his multi-year commitment as a volunteer Managing Editor also has some value. I'm just not sure how to deal with the ownership issue.
Since one of the ideas is to sell the site outright to him, I need to determine some kind of value, hence my questions above.
posted by camworld at 12:42 PM on May 18, 2006
buying a normal business is usually a year's worth of profits. for drug dealers it's more like 6 months. who knows about stuff that doesn't turn a profit, though!
posted by soma lkzx at 12:44 PM on May 18, 2006
posted by soma lkzx at 12:44 PM on May 18, 2006
Another way of looking at it is this: what would happen if you ask too much and he doesn't buy it? Would he get annoyed with you and quit, leaving the site to eventually wither away and die due to lack of interest? At that point, what would any of either of your efforts be worth?
If you must get something for the site and he seems amenable, ask him for some kind of relatively inexpensive gadget you've wanted to buy but just haven't. An iPod, an Xbox 360, something else relatively cheap. That way, it seems more like a gift exchange.
posted by MegoSteve at 12:51 PM on May 18, 2006
If you must get something for the site and he seems amenable, ask him for some kind of relatively inexpensive gadget you've wanted to buy but just haven't. An iPod, an Xbox 360, something else relatively cheap. That way, it seems more like a gift exchange.
posted by MegoSteve at 12:51 PM on May 18, 2006
buying a normal business is usually a year's worth of profits. for drug dealers it's more like 6 months
haha, do you get all your business advice from internet articles posted to MeFi?
posted by rxrfrx at 1:07 PM on May 18, 2006
haha, do you get all your business advice from internet articles posted to MeFi?
posted by rxrfrx at 1:07 PM on May 18, 2006
What I would do:
Selll it to him for $1, and a complicated clause that keeps you "in the loop" with important decisions, and ensures that you get a % of actual profits, including a share if he sells the site completely (it'd probably decrease by year... 60/40/30/20).
This won't put any undue burden on the new owner, but it'll make sure that if the site does start bringing in an income in the next 3 years (right around election time!) and gets bought out by someone else.
posted by hatsix at 1:51 PM on May 18, 2006
Selll it to him for $1, and a complicated clause that keeps you "in the loop" with important decisions, and ensures that you get a % of actual profits, including a share if he sells the site completely (it'd probably decrease by year... 60/40/30/20).
This won't put any undue burden on the new owner, but it'll make sure that if the site does start bringing in an income in the next 3 years (right around election time!) and gets bought out by someone else.
posted by hatsix at 1:51 PM on May 18, 2006
Why not just give him 50% ownership outright in return for his maintaining the site. Upside for him is that he owns half with no out of pocket and shares in any later potential profit. And you get to retain an attachment to this site you created.
posted by gfrobe at 1:55 PM on May 18, 2006
posted by gfrobe at 1:55 PM on May 18, 2006
buying a normal business is usually a year's worth of profits.
Well, buying a normal -service- business is 1-3 year's profits. Businesses with intellectual property are different and physical assets acquired in the purchase can shift that number around.
The standard rationale, though, is that if it's a business doing a non-unique service, why do they need to buy your business when they could just start doing it themselves? The answer is existing customer base and identity. For a web business this might mean you demand a little more since you can't open up your competing website in the empty space in the neighboring strip mall - branding and existing shopping patterns are a little more valuable online.
Perhaps you can work a hybrid deal - an up-front purchase amount and a share of monthly income for the next 36 months with a minimum monthly of X and a maximum payout of Y. This way you get some green up front in case he's hit by a bus, you get some monthly share with a minimum to motivate him to stay serious about keeping up and increasing traffic and a maximum payout so that if his efforts make it a rolicking success you don't get rich off his labors?
posted by phearlez at 2:30 PM on May 18, 2006
Well, buying a normal -service- business is 1-3 year's profits. Businesses with intellectual property are different and physical assets acquired in the purchase can shift that number around.
The standard rationale, though, is that if it's a business doing a non-unique service, why do they need to buy your business when they could just start doing it themselves? The answer is existing customer base and identity. For a web business this might mean you demand a little more since you can't open up your competing website in the empty space in the neighboring strip mall - branding and existing shopping patterns are a little more valuable online.
Perhaps you can work a hybrid deal - an up-front purchase amount and a share of monthly income for the next 36 months with a minimum monthly of X and a maximum payout of Y. This way you get some green up front in case he's hit by a bus, you get some monthly share with a minimum to motivate him to stay serious about keeping up and increasing traffic and a maximum payout so that if his efforts make it a rolicking success you don't get rich off his labors?
posted by phearlez at 2:30 PM on May 18, 2006
Try Leapfish.com for a domain value estimate?
posted by vanoakenfold at 2:41 PM on May 18, 2006
posted by vanoakenfold at 2:41 PM on May 18, 2006
Perhaps you could work out a future revenue sharing agreement. Or a straight exchange for a certain number of impressions at your discretion (traffic deals usually fly because there's no upfront cost); just make sure you retain control over ad placement, ad size, etc.
Anyway, a good rule of thumb for negotiation is to ask for double your bottom line.
posted by GIRLesq at 2:58 PM on May 18, 2006
Anyway, a good rule of thumb for negotiation is to ask for double your bottom line.
posted by GIRLesq at 2:58 PM on May 18, 2006
If all you are making is 3-4 dollars off of a site like that don't count out potential profits from other income streams such as text links.
posted by maxpower at 3:10 PM on May 18, 2006
posted by maxpower at 3:10 PM on May 18, 2006
I agree with gfrobe. I would just give him some percentage as a "gift" for his hard work over the years and keep the rest as a "call" on the business doing well. I would not stay actively involved in that it will not endear you to him and maybe he has a way to make money you haven't thought of. He can't make much less than it already is. Anything you get on the upside is gravy. Giving him ownership incentivizes (is that a word?) him to make money and his interests are perfectly aligned economically to yours.
posted by JohnnyGunn at 6:23 PM on May 18, 2006
posted by JohnnyGunn at 6:23 PM on May 18, 2006
haha, do you get all your business advice from internet articles posted to MeFi?
and now i just use getrichslowly
posted by soma lkzx at 6:56 PM on May 18, 2006
and now i just use getrichslowly
posted by soma lkzx at 6:56 PM on May 18, 2006
Hello. How come I rich and you not? How come you not sell real estate like I do? How come I sleep with your wife while you at work? And then I pee in your toilet and don't flush. And sometimes I open the back part and I pee in there, so that when you flush, pee come out. You know why? Cause I'm smart. I'm smart, you stupid. Call Now!
posted by rxrfrx at 6:59 PM on May 18, 2006
posted by rxrfrx at 6:59 PM on May 18, 2006
Cam, it's a difficult problem you have. The fact is that the sale price of the site to someone who has never been involved might be significantly higher than it would be to someone who has been involved for a long time and is invested in the site. The question then is what's more important - selling the site for the money (doubt it) or doing what's best while still not just giving it away.
With that in mind, I think the people suggesting that you work out a deal for a nominal fee up front but a sliding scale of continuing interest to protect you against turning around and selling it at a huge profit is the best idea.
The other thought I had is that you should not be suggesting the price but should say, "make an offer" and then see what happens from there.
There may be other options too, such as forming a nonprofit with a board of directors and continuing it that way. The board doesn't have to in any way be a managing board and that way you can reduce your involvement while still keeping your hand in the game.
Email me if you might be interested in an option like that. I was recently (and am involved in an ongoing manner) part of a slightly similar conversion of a major internet property and so far it has worked out well.
posted by mikel at 7:48 PM on May 18, 2006
With that in mind, I think the people suggesting that you work out a deal for a nominal fee up front but a sliding scale of continuing interest to protect you against turning around and selling it at a huge profit is the best idea.
The other thought I had is that you should not be suggesting the price but should say, "make an offer" and then see what happens from there.
There may be other options too, such as forming a nonprofit with a board of directors and continuing it that way. The board doesn't have to in any way be a managing board and that way you can reduce your involvement while still keeping your hand in the game.
Email me if you might be interested in an option like that. I was recently (and am involved in an ongoing manner) part of a slightly similar conversion of a major internet property and so far it has worked out well.
posted by mikel at 7:48 PM on May 18, 2006
Cam, that site has always been one of my favorite 'proofs of concept' for the possibilities of blogging. I always point people to it in my seminars.
posted by ao4047 at 9:23 PM on May 18, 2006
posted by ao4047 at 9:23 PM on May 18, 2006
Sounds to me like you are just having emotional trouble letting go. That really isn't fair to the guy who will be taking over..
I don't think giving him 50% ownership is a good idea at all. He will have plans, and he is going to be the one doing all the work, so don't put yourself in a position where you can interfere.
I can understand protecting yourself against a flip.. I like the sliding scale idea. Give yourself first right of refusal on resale for 5 years, and claim 80-60-40-20% of profit on the sale. Hell, claim 50-20-10% of the annual profit on the website too and then charge him $1 for it (operating profit can be hard to calculate though..).
GIRLesq: Anyway, a good rule of thumb for negotiation is to ask for double your bottom line.
This is an exceptional item, it is very hard to price, so normal rules may not apply..
Normally, I would say +20%. I probably wouldn't even talk to someone asking +100% unless I knew that the seller was just being eccentric, rather than trying the gauge and wait strategy (common with collectibles that you don't really want to sell). This would go for any market, house, collectable, salary negotiation, etc.
The same goes the other way. If I work hard to price fairly and somebody comes along and offers 50%, that will be quite insulting. Any goodwill is lost at that point.
mikel: make an offer" and then see what happens from there.
I've said it before:
posted by Chuckles at 12:53 AM on May 19, 2006
I don't think giving him 50% ownership is a good idea at all. He will have plans, and he is going to be the one doing all the work, so don't put yourself in a position where you can interfere.
I can understand protecting yourself against a flip.. I like the sliding scale idea. Give yourself first right of refusal on resale for 5 years, and claim 80-60-40-20% of profit on the sale. Hell, claim 50-20-10% of the annual profit on the website too and then charge him $1 for it (operating profit can be hard to calculate though..).
GIRLesq: Anyway, a good rule of thumb for negotiation is to ask for double your bottom line.
This is an exceptional item, it is very hard to price, so normal rules may not apply..
Normally, I would say +20%. I probably wouldn't even talk to someone asking +100% unless I knew that the seller was just being eccentric, rather than trying the gauge and wait strategy (common with collectibles that you don't really want to sell). This would go for any market, house, collectable, salary negotiation, etc.
The same goes the other way. If I work hard to price fairly and somebody comes along and offers 50%, that will be quite insulting. Any goodwill is lost at that point.
mikel: make an offer" and then see what happens from there.
I've said it before:
It is always better to let the other guy name the first price. But how many rounds of "I don't know, how much can you spend?" followed by "I don't know, how much do you want?" can you or your customer stand..You can only press for a number so long before you have to cave. So, you must have a price in mind anyway!
posted by Chuckles at 12:53 AM on May 19, 2006
The value of anything is the present value of expected future revenues. CAPM might give you a decent start on pricing. Of course, this means "basing the value of WatchBlog on the potential ad revenue". You can't eat promise.
posted by yerfatma at 6:15 AM on May 19, 2006
posted by yerfatma at 6:15 AM on May 19, 2006
« Older How to find business partners to put up funds to... | Two weeks or two months notice? Newer »
This thread is closed to new comments.
posted by MegoSteve at 12:35 PM on May 18, 2006