Re: How to value a web site?

From: Carl Flansbaum <carl_at_planetcpub.com>
Date: Mon, 11 Jan 1999 18:55:57 -0600 (CST)

JONATHAN CORBET <CORBET_at_EKLEKTIX.COM> WROTE:
> My question is this: how does one put a value onto a web
> site? Are there any formulas or rules of thumb which people
> use to arrive at a starting point for such a valuation? Any
> resources out there which can help with this task?
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I am in a similar situation and have done quite a bit of
research. However, I have yet to find any information that
directly relates to evaluating a web site to determine a
selling price. Business 2.0 had an article (Nov 98) that
focused on evaluating a web site for investment, and I
understand that this can be somewhat similar to a selling
price. I tried to extrapolate some of the formulas they
used and while the data is from sites like Excite,
Sportsline, Yahoo, etc. at least it's a starting point.

There were three valuation formulas I used.

1. based on revenue per year (at the high end you could
multiply this by 50)

2. based upon unique visitors per month (I used $41 as a low
end)

3. based upon page views per month (anywhere from .33 to $5)

Most of these seemed to result in higher prices than I would
have thought -- but I'd gladly take :-)

Then my lawyer talked with a business appraiser that deals
with evaluating web sites. I just got the voice mail
message yesterday and haven't had a chance to call back and
discuss. He said:

* businesses under 1M hits per month really have no
commercial value

* value is estimated at 4-12 times yearly revenue.

* the more hits the higher on the scale you can go with the
above.


I have a couple of problems with this -- first of all (as
the article I referred to confirms), information based web
sites might not have much revenue. But if you're a "first
mover" (i.e. entrenched -- I started the site I have for
sale right around the time of Yahoo) and have a large share
of the market, this can be of much more value than your past
year's revenue.

Secondly, can anything really be based on hits anymore....

Bottom line, the information I've gotten so far has given me
a low and high end, but hasn't really helped with narrowing
it down much from what I initially would have come up with.
My next step will be to try and find some sources in Seattle
or San Fran. that may deal more specifically with this,
however I'm guessing that I'm in somewhat virgin territory
here and may just have to wing it on my own.

Hope this was helpful -- anyone out there looking to a new
type of business, I would think that this would be a very
interesting and profitable one.

Carl Flansbaum


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Received on Mon Jan 11 1999 - 20:27:16 CST