Re: How to value a web site?

From: Mark J. Welch [Adbility] <MarkWelch_at_Adbility.com>
Date: Wed, 13 Jan 1999 13:45:30 -0600 (CST)

RAY TAYLOR WROTE (IN PART):
>The revenue is easy enough to establish, and is the most
>tangible of the three measures. It is far more important
>than cost or profit, because both of these things depend on
>how the site is operated, which is likely to change when the
>new owner takes over. costs and profits need to be taken
>into consideration, but both can be improved by new
>management.
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Hold on, there! I disagree with this premise (that costs
can be reduced by new management) in the case of most web
properties. However, I don't disagree with the conclusion
that profit can usually be improved by "the right buyer."

Most of the queries I receive from web publishers seeking to
sell a property involve a property that has been a "labor of
love" -- something that the creator has invested huge
amounts of time and effort and skill to develop and
maintain, but the creator has never measured or valued the
time spent to create or maintain the site.

In the case of Linux Weekly News (lwn.net) which was the
origin of this discussion thread, it is a weekly news update
service created and maintained by a Linux consulting firm.
If LWN has not been paying its consulting staff for the
editorial content, then the buyer will likely see an
increase in editorial costs to maintain the weekly news
feature. (If the site will be maintained by simply posting
vendor- written press releases, the value of the property
will decline.)

If the "cost" column does not currently include the cost of
creating and maintaining the editorial content, then a buyer
will almost certainly find it difficult to reduce costs, and
in fact will usually be confronted by the choice of either
investing additional money to develop and maintain content,
or allowing the site to stagnate and gradually lose its
value.

This doesn't mean that a marginal web property can't be
turned into a more profitable property by a buyer. Wile
costs may increase to just maintain the prior editorial
quality, the buyer can probably increase the revenues even
more, if they have a clear vision and plan for integrating
the new site with their existing web properties.

In the case of LWN, the site apparently draws about 700,000
monthly pageviews from 120,000 visitors, so there is some
real revenue potential. If the site is only earning $1 CPM
(net after commissions) through Burst, then there is a huge
upside potential in that area. In addition, if the "right
buyer" is found, they should be able to drive more traffic
to the site (and could probably also benefit by drawing
traffic from the site to other properties), creating a huge
overall increase in profit -- despite the increased
editorial costs.

-- Mark J. Welch, Web Site Banner Advertising [Adbility]
-- http://www.markwelch.com/bannerad/
-- Ad rates: http://www.markwelch.com/bannerad/baf_spon.htm
-- (925) 462-8483 voice - Pleasanton, California


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Received on Wed Jan 13 1999 - 15:00:47 CST