Re: appraising your web site

From: Mark J. Welch <MarkWelch_at_adbility.com>
Date: Mon, 26 Jul 1999 16:42:21 -0500 (CDT)

Chad Wold wrote, asking how to value a web site. I'll
respond with some discussion and then, at the end of this
post, I will share my own numbers and challenge anyone to
project a value for my web site.

Unfortunately, there is absolutely, positively no way to
create any kind of useful formula or software program to
attempt to fix the market value of web sites.

I have been approached by several firms who have expressed
tentative interest in buying my web site, but none will give
any indication of the price they might pay. Basically, they
want me to set an asking price first, and then they will try
to negotiate downward from there. (Thus far, I have not
quoted any starting price because I have been holding my
cards close to my vest -- but as you'll see below, most of
the cards are on the table now.)

Traditional valuation methods, such as multiples of earnings
or revenues, are completely ignored in valuing internet
businesses. Often, this is for good reason: the buyer may
have uses for the site, or plans for the business, that make
current revenues or earnings irrelevant. And of course,
the utterly irrational market capitalizations (stock
prices) assigned to internet stocks, and the shocking stock
surges that "offline" companies get when they announce
internet projects, make it quite impossible.

About 10 days ago, I subscribed to eBay's notice system so
that I am advised every time someone lists a "web site" for
auction on eBay. Most of the listings are simply frivolous,
and set impossibly high sale prices without disclosing any
data to support valuation. Thus far, all such auctions have
ended with no bidders (not even bidders who did not meet a
reserve price).

And now, the kicker: I'll share most of the key data for my
web site and ask members of this discussion list to try to
set a value for the business (via private email, please, and
I'll report the results in a follow-up post).

I'll also post information and updates at
http://www.adbility.com/valuation/

- - - -

Site being valued: www.Adbility.com
(Adbility's Web Publishers' Advertising Guide)

Revenue:
1998 gross receipts for advertising: $49,712
1999 First-Half receipts for advertising: $37,500

Primary Expense:
Colocation Fees: $415 per month ($4,980/year)
Other expenses: $500 to $1,000 per month
No current salary expense (sole proprietorship)

Assets:
Colocated Web Server (Windows NT, SL Mail,
IIS, dual PII-350, 256MB, SCSI, etc.) $4,000
Other tangible assets $5,000 to $10,000

Let's assume that there is no business debt (since this is a
sole proprietorship, business and personal debt are
essentially the same and any sale would require liquidation
of UCC liens and business debts).

Some observations: Obviously, there is a sharply rising
revenue curve, and the site will probably generate about
$90,000 to $100,000 in revenue for 1999. Gross earnings
(excluding any staff expense) are in the $50,000 to $75,000
range. Presumably, if I were replaced with (or hired as) an
editor, the staff cost would be $25,000 to $50,000 (not
counting any equity participation). There are also many
ways that the site could be altered to enhance revenue, and
it is also possible that a buyer might seek some other
benefit (such as providing the resource in order to enhance
the buyer's own brand and reputation).

I invite comments and dialogue on how this web business can
be valued.
-- Mark J. Welch [Adbility's Web Publishers' Advertising
Guide]
-- http://www.Adbility.com/WPAG/
-- (925) 462-8483 voice - Pleasanton, California

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Received on Mon Jul 26 1999 - 17:04:13 CDT