As an internet marketing fiend, I always get asked how websites are valued and what tools are out there. Today, I’m going to go over how most online tools work in determining a dollar value for a website and some of my favorite tools for valuing sites. Before we being, you should know that all website valuation tools are just estimates and can actually be waay off. If you are planning on buying a website, you can use these tools as a baseline proxy but the best way to find out a website’s value is to verify its current cash flows.
What Are Website Valuation Tools?
Almost all valuation website tools fit into the same category – they take an URL, analyze its keywords and traffic data and then try to find out the site’s value in dollar terms. The tool can take into consideration many factors such as total traffic, valuable keywords, or how valuable that particular niche is.
Important Metrics Used In Site Valuation
As previously noted, site valuation tools can grab your sites keywords and traffic data. From this, the tool can then go to Google AdWords Planner to determine dollar amounts for valued keywords. This is one of the main metrics and methods used to value a website.
After determining your sites valued keywords, the tool can then analyze how well it has ranked on Google and how much traffic your site gets. If your site gets a lot of traffic and those value keywords are noticed on Google, the tool can figure out approximately how much the site could make per month. Other metrics a website valuation tool could consider include daily unique views, bounce rate, and website authority via Moz or Alexa.
Problems with Using Website Valuation Tools
Website valuation tools can be an excellent way to find out a website’s information and stats that are relevant to monetizing and making money from a site. In some cases, they can be accurate but they should only be used as an approximation. These valuation sites aren’t perfect and can miss some extremely important factors.
A site valuation tool will not be able to assess the value of an email list, brand name, or money being received from ad banners on the site. In fact, a site valuation tool can only use public information, making the valuation difficult and sometimes inaccurate. The more intangible value a website has, the more likely a site valuation tool will be off by a larger margin.
Top Three Websites to Value A Website
Worth of Web – This site is my top pick because they are very transparent with how they conduct website valuations. On their homepage, they state that they use Alexa rankings and potential affiliate and ad revenues to value websites. In addition, this site provides great information on buying and selling websites.
Site Price – Site Price is my second favorite as it is extremely similar to Worth of Web. This site is just as transparent with their calculations and the site also has many other tools as well as its own marketplace for buying and selling sites.
Site Worth Traffic – Although it is last on the list, Site Worth Traffic is an invaluable tool in figuring out a sites monetization potential. What sets this site apart is the fact that they provide in-depth metrics such as daily, monthly, and yearly estimated ad revenues.
Conclusion & Recommendation
To sum up – website valuation tools are an excellent way to figure out an approximation of a site’s value, but it is merely a crude estimate. What really adds value from these online tools is that they can teach you and tell you about a website’s potential monetization methods, revenue streams, and website stats that you may find useful. It can be a quick and easy way to find out more about a website’s current potential. If you’re looking to buy or sell a website, I would only recommend using these tools as a gauge. If on the other hand, you’re buying a domain name, these tools would be a great starting place as they would only estimate a price based on traffic.
The good thing about these tools is that they rely on ad and affiliate revenues that they can find. So almost all of the estimates given are conservative in nature, which is a good thing if you’re buying a site but not if you’re selling one.
Recommendation: First, I recommend that you use all three tools I’ve mentioned and take an average to get a good approximation. If you’re buying or selling a website, you should use the common “cash multiple” approach. This basically means taking a site’s current net income per month and then multiplying it by some multiple. A common multiple used for websites is around 10-15 months. So, if a site is making $1K per year, then the site’s value is approximated at $10-15K.
This was just a brief overview and I will go into much greater depth about valuing companies without using tools to get a much more accurate figure in a future post. This will include determining a sites costs, the cash multiple approach, a comparable approach, and determining potential capital appreciation.