One of the things that you might think important as a website owner is knowing the value of your website, in dollars. This might sound like an easy task, since there are lots of calculators on the web that can be used to compute your website value.
Sadly, they are all inaccurate for depicting your website’s true worth. Lots of shortcuts in the calculation and too much generalization won’t give you a very reliable estimate of your website’s value. Thus, the only way you can determine your website’s true worth or value is through manual computation and analysis of your website.
You do not need to hire someone to value or appraise your site. As long as you are the website owner, you hold all the data you need for computation of your website’s value.
Your Website as an Asset – Factors Contributing Value
In financial literature, an "asset" is defined as something with "monetary" value that is generating an income. A website is an asset, just like real estate, stocks, bonds, copyrights and other classes of assets.
Bear in mind that a website is a different type of asset. Knowing intimately what factors can contribute to increasing the value of your website is very important. Below are some of the important factors that play a significant role in determining the final worth or value of your website.
First, there’s the amount of revenue that it is generating on a monthly basis. This should be an accurate figure. If you have monetized your website, then it’s probably generating revenue. The following are the common methods of monetizing your website:
- Advertisements (Google AdSense, affiliates, Infolinks, etc).
- Merchandise — The sale of original products/goods from your website, such as T-shirt, books, or anything that you have made and would like to sale.
- Pay to read/subscription-based — These sites offer subscription plans for their members for the use of services such as content, media and other resources.
There are still a lot of ways to monetize a website, but these three are the most common.
The second very important factor you need to consider in determining your website’s value is the site’s age and its inbound links. If your website is still new and has few backlinks, it is not as authoritative and as valuable as an older website with a significant amount of older backlinks.
The third factor affecting the value of your website is the marketable potential of your domain name. The domain name is an important element in SEO, marketing and brand competitiveness.
For example, if you manage to own a domain name such as "books.com" or "mp3.com," you’ll find it is very valuable, since you could leverage the domain name into an extremely profitable position.
The same thing will happen if you own a domain name that carries a strong brand, such as "microsoft.com."
The opposite will happen with a domain name that carries no brand at all or does not make any sense, such as abxsd.com, or uitew.com.
The fourth factor affecting the value of your website is the total amount of page views and unique visitors it receives. Website page views and traffic means "business." The higher these figures, the more valuable your website will be.
The fifth factor affecting your websites value is its size in terms of unique content. This shows how much work you have put into your website. The bigger the website, the more valuable it will be. This is especially true if you have lots of content that ranks well in major search engines.
There might be other factors, but those five elements are the ones that are most important.
Now that you know the important factors, its time to find a way to value each factor. "Valuing" is a process of estimating the monetary worth. Let’s use an example to make the valuing process easy to understand.
We’ll start by looking at the first factor, the value of the amount of revenue earned from the website. This is easy to compute. Just total all the current earnings you have from your website. For example, below are monthly average figures:
Google AdSense earnings – $700
Amazon.com affiliate earnings -$100
Infolink earnings – $100
Sales from merchandise (average) – $1100
Total website monthly income – $2000
As you can see, on average, the total monthly income is around $2000. Suppose the acceptable payback period is around three years. The formula will be:
Total income value after three years = $2000 x 3 x 12 = $72,000
Of course, this is the most conservative estimate, since it does not include the value of money over time. There are other valuing calculations in finance, but they’re out of the scope of this tutorial.
Now we’ll tackle the second factor, the value of age and inbound links. Each link to your website, particularly if it is editorially given, adds some value. In some businesses involved in SEO and professional link building services, the charge per link can be expensive.
Suppose you have 200 natural inbound links coming from unique domains. Say you price these conservatively at $50 per link. The total value of your links will be:
Total value of links alone= $50 x 200= $10,000
How does the age of the domain get factored in valuing the links? If you have old links because your website is old, then the value of the link will be multiplied by the age of your domain. Suppose you have a 60% to 40% ratio of old to new links, and your website is six years old. Therefore:
Total value of links considering the age of domain= $10,000 x 6 x 0.6 = $36,000
Now we’ll examine the third factor, which is the value of your domain name. The more competitive your domain name in your niche, the higher will be the value. One piece of useful information you can use when valuing your domain name alone is this: http://www.igoldrush.com/domain-guide/domain-buying-and-selling/determining-the-value-of-your-domain-names
Note that the item linked only values the domain name, and not the total worth of your website. The following steps can be used when valuing a domain name manually:
Step 1: Determine the value of the traffic potential. Go to this tool: https://adwords.google.com/select/TrafficEstimatorSandbox
Step 2: Type the domain name in the box. Enter any max CPC and Daily budget values. Under "Match types," select the exact match.
Step 3: Click the "Estimate" button.
Step 4: Compute the value using the formula below:
Traffic value = Global monthly searches x Estimated avg CPC x 0.02 x 10 + $30
0.02 is the estimated click through rate if you are bidding for that keyword in Google. 10 is an approximated one year period for the traffic value.
For example, say your domain is pythondevelopers.com. The keyword is "python developers," and the traffic value for this domain is calculated like this:
Traffic value = 170 x $1.9 x 0.02 x 10 + $30= $94.6
Step 5: Check your TLD and multiply using the value below:
.com – x 7
.net - x 2
.org – x 1.5
others – x 1
Since pythondevelopers.com has a .com TLD, the multiplier would be 7. The updated value of the domain name is $94.6 x 7 or $662. A .com domain is estimated to be seven times more valuable than other TLDs.
Step 6. Check to see if the domain name is protected by a trademark brand. This is applicable for businesses that use their official business name as the domain name, and is protected by trademark. For example, ebay.com, amazon.com, and google.com are all business names, and trademarked brands as well. If you own a trademarked domain with substantial value, use the multiplier below:
Trademarked with substantial value – x 5
Trademarked but not yet so popular – 1.5
No trademark approved – x 1
If you have not registered your domain name as a trademark, the total value would remain $662.
Let’s continue by valuing the fourth factor, page views and the unique visitors to the website. Page views is a much more accurate measurement of human visits. It easily translates to monetary worth. For example, most CPM are based on page views criteria, not unique visits. In this case, let’s use a conservative estimate. Taking the overall average CPM of all verticals from this data: http://www.rexduffdixon.com/2010/05/06/the-average-cpm-rates-across-different-verticals/ we learn that we get ~$10 as the CPM.
Suppose your website’s current number of page views per month is 75,000. Computing the total CPM value per month leads to this:
Value per month= $10 x 75000/1000 = $750
In three years, the total value will be: $750 x 12 x 3 = $27,000
Now we’ll consider the fifth factor, the value of the size of your website’s content. To value each piece of website content, ask yourself this question: if you hired a professional writer to get the job done, how much would it cost? Suppose you have a fairly big site with 500 articles, each containing 700 words. The cost of writing a great 700-word article is around $50, at a very conservative estimate.
Total value of your website content – 500 articles x $50 = $25,000.
You can get the total worth of your website by summing up the values you got for all of the different important factors. Therefore, follow this equation:
Total worth of the website = The value of the amount of revenue earned from the website + The value of age and inbound links + The value of the domain name + The value of the page views and the unique visitors to the website + The value of the amount of the website’s content.
For our example, total worth = $72,000 + $36,000 + $662 + $27,000 + $25,000, or $160,662.
In our example, if you wanted to sell your website, you could sell it for $160,662. The buyer would have an expected payback period of around three years.