How much is my website worth?
15/05/2009
How much is my website worth?
This is a very common question, but not always easy to find a sensible answer to.
How do you value a website?
Basically a website is worth what someone will pay for it. You can use a variety of online tools to get many different values for your website but the simple fact is that it is only worth what someone else is prepared to pay for it.
Online tools for calculating your website worth.
These are totally unhelpful, and give a very false impression. All these tools are based on measurable factors such as:
- Google Pagerank
- Backlinks in major search engines
- Pages cached in major search engines
- Alexa Ranking
These measures simply give an approximate indication of how well your website is optimised and how much traffic you get. But you may be small fry on a minor market such as loans or mobile phones. Yet the same traffic and search engine visibility may correspond to market leader in a niche product market.
Therefore without sophisticated market analysis, the many ‘calculate your website worth’ tools are simply misleading and not worth using.
So how should you calculate the value of a website?
The actual value of website is made up of several factors.
The domain name. For many websites the domain name is the most valuable commodity. If your domain name is 3 or 4 characters long is made up of a useful dictionary keyword then this may well be the case. You may have purchase this for less than £5 but the domain name alone could be worth from £250 to upwards of £15,000 with most good domain names selling from between £500 and £2,500.
Associated with domain name is branding. A good domain name is likely to be associated with a brand name and this will need protecting. If, after acquiring a website with a good domain name you “take down” the website for maintenance, this wil have little impact on the intrinsic value of the domain name, but could adversely impact any ‘good will’ or ‘branding’ associated with the domain name
Existing natural traffic, backlinks and ‘Google PageRank’. These are related. The inbound traffic from natural searches will be dependent on website search engine optimisation and this may have been slow to build up. This has intrinsic value, and in competitive industries this could value at between £2,000 and well above £500,000. If you acquire a website with good traffic and well positioned on the search engines then it is important to be careful with any changes or redesigns as these (if done badly) could wipe away a huge value of your website very quickly.
Incoming traffic from paid advertising and affiliate schemes. This is useful but will stop if you stop the advertising. Traffic from paid advertising shows the potential market size, but you will be paying for this
How much profit it generates now and potential to generate in the future. This is really the most important factor. I nice short domain name, a fantastic looking website design and a website that is always on number one position of Google for all keywords in a market so small and so low value that the income cannot even cover the cost of the domain and hosting is not worth much. Not even if this website has won design awards. If the website cannot generate an income or is in a ‘market’ with no earning potential then it is not worth much.
The last point, the most important point, is totally ignored by online tools to evaluate website worth, which explains why online tools to evaluate website value are of no real value..
So how do I evaluate a business website’s worth?
One method is to find out the profitability of the business, and some estimation of how much business is generated from online sales or enquires. This will give a crude but better estimate than any online tool. For an online business the estimate may be quite good, but gets worse as the percent of offline sales increases, as allocating costs between the two becomes difficult.
So in summary, a website’s main value consists of:
- Domain name
- Goodwill or branding associated with domain name
- Natural search traffic, backlinks and historic search engine positioning
- Revenue stream from the website
But remember, that in the end a website is only worth what someone will pay for it. If no-one wants it, then it is worthless.
The above article is copyright Dr Rachel Cornish, and can only be copied or reproduced provided a link to the original source is included along with an identification of the author.
