Understanding the basics of website valuations

Understanding the basics of website valuations

As the Director of Websites at Flippa, I thought it would be appropriate to share some insight into a few basic factors that can influence web valuations. After all, whether you are looking to buy or sell a website, you should have at least a basic understanding of website valuations. However, it is important to remember that a website’s value is based on both subjective opinions and objective observations. The big implication here is that the same website can be valued at different amounts depending on who is valuing it and what criteria they are using. Below are some widely accepted examples of basic factors that can influence website valuations.

1. Age

Generally speaking, the older a website is, the higher the value. Of course, it is not just the age that is important, it’s the authority and reputation that come with the age. Older websites are more likely to have more established link profiles and brand loyalty, as well more traffic and financial data than a newer site.

2. Authority

Until it stopped being updated by Google, PageRank was the industry leader for establishing the authority of a website. The “authority” of a website determines the importance and trust a website has. In layman’s terms, you can think of it this way: the higher the authority, the more popular the site. And finally, with respect to this article, the higher the authority, the higher the website is likely to be valued.

Since Google PageRank is no longer a viable system, below are the best alternatives to calculating a site’s authority.

  1. Moz’s Domain Authority – Domain Authority (DA) by Moz is calculated on a logarithmic scale from 1-100. Think of a brand new website with no content as having a DA of 1, while sites like Facebook or Google will have a DA of 95+.
  2. Majestic Trust Flow – Since backlinks are one of the largest factors in determining a website’s authority, it is important to make sure these backlinks weren’t paid for. If they were, this site risks being blacklisted by Google and disappearing from Google’s SERP.
  3. Ahrefs URL Rank – Although Ahrefs is a paid service, the site pays back immensely, by detailing backlinks, content scores, and even calculating site’s traffic and its sources.

3. Traffic

Traffic is one of the most significant influencers when performing website valuations. However, contrary to popular belief, it is not just a numbers game. High traffic certainly helps, but quality traffic is just as important. For instance, when performing a website valuation you might ask questions such as: Does the website pay for traffic? Is all of the traffic coming from a single 3rd party source (ex. Facebook)? What is the revenue per unique visit (RPU)? What is the bounce rate? The answers to these questions will influence the valuation. Of course, this goes without saying, the higher the quality of traffic the higher the value of the website.

As a side note, this is yet another reason why anyone seeking to sell a website should ensure that they have a comprehensive traffic analysis system such as Google Analytics installed. Without a reputable form of analytics, potential buyers will be unable to perform in depth due diligence on the quality of the traffic and the valuation will decrease as a result.

4. Financials

If you were forced to choose only one metric that you could use to perform a website valuation, then your best choice would be to examine the website’s profit. By and large, this is the metric with which buyers should be most concerned. Websites on Flippa typically sell for between 12x to 18x average monthly profit, with high-end sites creeping upwards of 24x. That said, I have seen sites sell on Flippa for as high as 72x, and I have obviously seen many sites sell for far below 12x. This is where the other factors (traffic, PR, age, etc.) come into play. Of course, beyond profit, valuations should also consider other financial indicators such as revenue and expenses.

5. Stability and Sustainability

Stability is an important valuation metric, because otherwise, a valuation could be heavily skewed by a few “good days.” To be clear, a website with turbulent traffic or revenue is a risky acquisition target, even more so when the seller is unable to explain the turbulence. Sustainability is another crucial factor that needs to be considered. A website that will become (or has already become) obsolete, is not worth as much as a site that has longterm growth opportunities. For example, a site that is dedicated to iPhone5 news is not sustainable. Sure it might make good returns for the time being, but in a few years when the iPhone5 is obsolete and completely phased out, the value of the site will significantly diminish.

6. Domain Value

I debated about whether or not to add this to the list because domain valuation is, in and of itself, a complex, cumbersome, and arduous undertaking. Many professional domainers (of which I am not one) will advocate using various methodologies and processes. However, the fact remains that a domain name does carry value, and so it should be considered when performing a website valuation.


It may come as a shock, but the simple reality is that no valuation method is perfect. The only way to get a true accurate valuation is to list your site for sale with a reserve that is the minimum amount at which you would be willing to part ways with the business. From there the market will produce an accurate valuation. In the end, your website is only worth what someone is willing to pay for it.

Pricing Your Website For Sale the Right Way

Pricing Your Website For Sale the Right Way

How much do I sell my website for?

Whether you’re selling your hobby site or a bigger business with an established revenue stream, the price tag that you put on it is possibly the most important decision that you need to make. Price it too high and it won’t sell, price it too low and you’ll walk away with less than you could have.

Whilst a large number of very different valuation methodologies exist, arguably the most widely accepted methodology in the industry of buying and selling established websites is applying a multiple to the site’s Net Revenue (or  to be more accurate – to Seller’s Discretionary Earnings) to determine its market value.

This approach works well in principle, but what it doesn’t account for is that websites tend to sell for anywhere from less than 1 year of net revenue to over 4 years, meaning that determining the right multiple to apply to your property can be a challenge on its own right.

Determining the “correct” multiple can be rather tricky, but the easiest and possibly most accurate way is by comparing it against other sites that have recently sold.

Whilst this can be a little bit complicated, mainly because sale details (especially at the higher end) are rarely public, you can usually get a good ballpark-idea by taking a look around at public marketplaces such as Flippa itself, as well as looking at the asking prices of brokered sites. Just make sure not to confuse asking prices to selling prices – more often than not, the difference between the two tends to be as much as 10 – 30%, depending on the broker and their pricing strategy.

Compare Apples to Apples

When comparing your web business to other businesses that have recently sold, it’s important to make sure that the two businesses that you’re comparing are indeed similar to each other. The key areas to look for when determining such similarity, beyond traffic and revenue, are:

History – do the two businesses have a similar level of history?  A site that was established a mere 6 months ago will always sell for less than one that has been operating for several years or more.

Stability – Do the sites show similar stability levels? Stable (or growing) revenue and traffic always add to the valuation.

Sustainability – Are the business models of the two sites equally sustainable? Sites that depend overly on third parties or carry any other risks to their sustainability tend to be valued at much less than those that enjoy varied traffic sources and are likely to stay profitable for years to come.

Niche and Market – Investors always prefer “clean” niches and markets that are evergreen in nature. In cases where a website operates in a generally unattractive niche (some examples are adult-related sites and gambling sites), or an industry that tends to change rapidly (such as SEO, internet marketing or other industries that have an unknown future), the valuation is always going to be lower.

Barrier to Entry – Is it easy or difficult for potential competitors to enter the industry and take over some or all of the market share of the site?

Owner Operations – Do the compared businesses require the same level of hours and skills from its owner? Needless to say, a business that requires its owner to perform sales 40 hours per week will be valued at a much lower multiple than one that is nearly passive and only requires minor management and monitoring to be done.

Bear in mind that the above list is merely a generalization. There are many more metrics that need to be taken into account, but the above should get you started nicely.

Common Myth: Start High to Gauge Interest 

One of the worst suggestions that I keep hearing from sellers of web properties goes along the lines of: “Let’s start the listing at a high price and see if there’s any traction. If not then we can always lower the price later”.

Whilst an approach like this appears logical at first, it would only be true if we had an extremely large number of potential buyers to target.

Unfortunately, we’re operating in a relatively small industry where every eyeball counts, and therefore it’s crucially important to bear in mind that your listing needs to be attractive from the moment it’s launched, and that’s simply because the majority of buyers will only give you one chance.

This has to do more with human psychology than logics, though. While logics would say that it would be unwise for a buyer not to take another look at a listing when its price is reduced, the reality tends to be different. Buyers often completely ignore such price reductions for two primary reasons:

1) “I’ve already looked at this listing”

Most buyers look at a large number of listings daily. When they encounter your listing (with a reduced price), the first thing that crosses their mind is that they’ve already looked at your listing, and decided to pass for some reason. They won’t remember that the reason was the price, but rather that there was a reason – and therefore you will often fail to get a “second chance”.

2) “Something must me wrong

Bearing in mind that many buyers are also fairly new in the industry, they tend to trust the marketplace dynamics when making purchase decisions.

If the market appears to have a lot of interest towards your listing then it must mean that your listing is good/attractive. Similarly, if the market seems quiet then it must mean that something is wrong.

Because of this, lowering the asking price during the listing process often makes buyers believe that the market wasn’t interested enough in your listing at first, as well as giving them the impression that the price reduction may have been carried out as a “desperation move”, making them move on and not take a closer look at your site.

Prior Investments in Valuations

One concept that many sellers, especially those who are in the process of selling off their main business, often need to be reminded of is that any historical investments are irrelevant, as long as they don’t contribute to the site’s current revenue.

Over the years I’ve had a number of sellers tell me how there is no chance they would sell their business for less than $X, simply because of the amount of money (or time) that they have invested in it.

This is perfectly understandable. After all, who would want to sell their business at a loss. But unfortunately, this isn’t how buyers see it.

The harsh reality is that a typical buyer isn’t at all interested in how much time or money has been invested in the business previously – the only things that they care about are how much the business is profiting today and what are its future prospects, rendering the investment amount completely irrelevant when it comes to valuating the asset.

The simplest way to look at it is to always remember that what’s done is done. Similarly to having won a lottery 50 times in a row won’t increase your chances of winning again tomorrow, the amount that you’ve invested into building your business won’t increase its value unless the investment is clearly reflected in the site’s profit or has after-market value of its own.

Value Beyond Profit Multiple

Another aspect that is often misunderstood is when to apply value beyond the profit multiple. Many sellers understand the concept of profit multiples well, but tend to believe that their property is worth more than the multiple, due to some additional “assets” that it comes with.

This isn’t entirely wrong on its own.  In cases where there are real, tangible assets, that have value of their own, it’s appropriate to add such value to the overall valuation of the business. But it’s dangerously easy to go wrong in distinguishing whether such additional value really exists or not. To give you an example, some assets that do have independent value are:

  • Inventory
  • Premium domain name (if it can be sold on its own)
  • Tools & Supplies that have an after-market value

It’s however rarely the case that any of the above apply to an online business. More often, we see an “asset” list consisting primarily of things like:

  • A large mailing list
  • A Twitter profile with a high number of followers
  • A bespoke technical platform, made specifically for the site

While it may seem that the items in the above list, albeit intangible, are true assets and should add value, the reality is different. None of these items should be added to the valuation figure, simply because the value that they have is already reflected on the overall Profit & Loss statement.

Let’s take the large Twitter account or Facebook page as an example. As a seller, you would (rightly) claim that social media account is a valuable asset, simply because it helps the web property generate significant revenue. But there are two additional aspects that need to be taken into consideration:

1) Does the social media profile in question already generate revenue?

If the answer to this question is yes, then the value of the Twitter profile would already be reflected in the overall valuation, by applying a revenue multiple to the proceeds that originate from the Twitter profile. This means that adding separate value to the Twitter account would result in double-counting.

If the answer is no, then the first question each buyer will ask is why would the Twitter profile be worth anything if the seller has failed to monetise it so far?

2) Would the social media account have value on its own?

Odds are that, without the website to go with it, the Twitter account or Facebook page would have either no or very little value itself. This is the key distinction between something like this, and a true asset, such as a PC or a room full of inventory, due to the fact that the latter can be easily liquidated separately from the main asset if needed.


The valuation of web businesses is a difficult topic, and one that different people will always approach differently. The above should, however, give you a good starting point when considering listing your business for sale.

Let us know of your own thoughts with regards to valuations in the comments section below, and feel free to ask me any questions that you may have.

Guest Post: Which Factors Influence Website Value?

Guest Post: Which Factors Influence Website Value?

Today’s blog post is by Mark Collier of DropMining.com. I love his insights into Flippa’s sales data, and hope you appreciate it as well!

Over the last several months I’ve been busy annoying the Flippa tech team gathering data on over 6,500 Flippa sales as part of a comprehensive study to determine what influences the value of a website and it’s sale price on Flippa.

My core goal was to develop a reliable website valuation model but additionally I wanted to delve into the data and answer some of the questions you might have about website flipping and selling on Flippa in general.

Note: this study was independent of Flippa, in fact they weren’t even aware I was conducting it and thus all findings are my own.

I looked at 52 potential influencers of a website’s sale price; mostly the data Flippa provides with their listings as well as some of my own.

I used a statistical analysis technique known as multiple linear regression to determine which of the 52 metrics of a website’s value are statistically significant influencers and which aren’t important.

The key thing to remember about regression is that it isolates each influencer and determines what the increase in a website’s sale price would be if you increased that influencer by one unit e.g. adding $1 to monthly net profit without changing any other metrics for example by cutting costs will likely increase the sale price of your listing by $3.50

I’ve summarized the major findings from the study below, you can find the full version on my blog.

Stay focused

It’s pretty easy to buy into a lot of the hype regarding what you can do to a website to make it more valuable.

But a lot of it is just that – hype.

Only 18 of the 52 metrics often used to measure a website’s value are actually statistically significant influencers.

That means that if you spend time and money improving on the other 34 metrics you will likely see no increase in your listing’s sale price.

Take a look at the below graph which shows the importance of the most influential metrics.

Importance is measured through a combination of both the amount a one unit increase will cause the sale price to rise by and the how what scale the metric can be increased to.

For example many Flippa upgrades cause a pretty large increase in sale price, but with many of them you can only buy them once thus their impact on sale price per unit increase might be quite large but the data only shows that metric as having a range of did or didn’t buy.

But while a one dollar increase in monthly profit might not have a massive increase in the sale price, it’s one of the most important metrics because profit can be virtually infinite.

Revenue, profit and traffic are clearly the most important factors influencing the sale price.

Holding everything else constant each dollar increase in monthly revenue and profit will yield a $2 and $3.50 increase in the site’s value respectively.

In practice often two metrics work together, for example a $1 increase in revenue may also lead to a $0.75 increase in net monthly profit thus having a double effect.

Or the number of inbound links to a website may increase the site’s traffic, which increases revenue which in turn increases profit, having a quadruple effect.

If you’re flipping a website, your sole focus should be to increase traffic, revenue and profits in a sustainable manner but with immediate effects.

Any actions that fulfill these criteria will have the maximum positive impact on your listing’s sale price.

Easy wins

I get really excited when data can find clear cut answers to people’s questions.

Let’s have a quick-fire round:

Verified traffic

Taking advantage of Flippa’s feature allowing you to directly link your Google Analytics account to your Flippa listing is likely to increase the sale price of your website by $630.

Interestingly uploading Google Analytics PDFs of your traffic has little or no effect on a listing’s sale price.


While I didn’t have sufficient data to study all of Flippa’s upgrades I did study their screenshot, bold, highlighted and premium upgrades.

Each of the first three upgrades which cost $20, $5 and $10 respectively will likely increase the sale price of your listing by over $500.

While the data is less clear whether using the three in combination will be as effective due to the large margin of error I can highly recommend using each of these Flippa upgrades for what will be an easy win.

Very few people use the $250 premium website listing and as such the data is insufficient to render a concrete judgement, but nonetheless from the available data I would estimate that this upgrade will likely add between $6,500 and $10,000 to the sale price of a listing.

These were probably to two most interesting areas in the study but I also analysed the importance of domains, what listing types do best and more.

Mark Collier is the founder of DropMining.com, a soon to be launched start-up in the expiring domain space, offering premium data on 200,000 daily expiring domains. You can catch more of his data based posts on his blog

10 Factors That Can Skyrocket (or Tank) The Value of a Website

10 Factors That Can Skyrocket (or Tank) The Value of a Website

Have you ever considered what it would be like to buy or sell a site valued over $100,000? Several times a year sites sell on Flippa in the six figure range. What exactly makes these sites command a valuation over $100,000? That’s the question I set out to answer before writing this post. First, I’ll explain the methodology I used to answer this question, then, I’ll summarize my findings into 10 factors that affect the value of a website.

Value of a Website: The Methodology

In order to determine what makes sites sell for six figures, I first had to find a source of data. Using Flippa’s advanced search feature, I set my search criteria like this:

  • Listing Format: Auction
  • Auction Status: Won Listings
  • Property Type: Websites
  • Auction Price: Minimum $150,000

This narrowed the list down to about 30-40 listings. I further narrowed it down by weeding out any auctions that only had 1 bid, were private, and those that sold more than a year ago. I ended up with 10 auctions to use as source data.

For each of these auctions, I did a little “mini due diligence” on them, making notes on what I felt increased and decreased the value of the site based on my own experience buying six figure sites. In the interest of full disclosure, this part of the process was rather subjective since I don’t pretend to know the value every buyer sees in every auction. I also assumed the seller’s statements on factors such as traffic and revenue were accurate since I had no way to verify them directly from the sellers for my research.

Value of a Website: Summary Of The Data

Number URL Bids Price Uniques Per Month Net Profit Per Month






























































  • Average Number of Bids: 20.4 Bids
  • Average Price: $279,500.00
  • Average Unique Visits Per Month: 75,7175.5 Visits
  • Average Net Profit Per Month: $22,819.20
  • Average Revenue Per Unique Visit: $0.29
  • Average Price Per Unique Visit: $2.37
  • Average Monthly Revenue Multiple: 15.27 Months

The 10 Factors Affecting Website Valuation

At this point, I gathered my notes and looked at the various factors affecting the value across different auctions. I came up with a list of the most common factors which were prevalent across the data set and identified the factors that seemed to be the outliers which contributed to the value. Keep in mind, this is not meant to be a comprehensive list of all the factors that affect any website’s value, only those that I felt affected those in my data set.

1. Subscriber Lists

10 of 10 of the sites included some form of a list such as a customer list, subscriber list, membership database, forum database, social media account, etc.

The lesson: Six figure sites build and manage lists.

2. Solid Traffic History

It’s no surprise that all of these sites were generating traffic. 8 out of 10 of the sites were generating over 100,000 visits per month.

The lesson: Six figure visits to a site each month can translate into six figure valuations.

3. Solid Earning History

All but one of these sites had a history of revenue generation. Auction 3 didn’t claim it in the Flippa system, but did state the site had earned revenue in the auction copy. 9 out of 10 of the sites had earned more than $5,000 in a month.

The lesson: Four to five figures of revenue each month can translate into six figure valuations.

4. Low Maintenance

8 out of 10 of the auctions used wording like “low maintenance” or “automated” to indicate that the site could be maintained with little time. Surprisingly auction 10 seemed to require the most amount of work but also received one of the highest revenue multiples.

The lesson: Six figure sites are scalable.

5. Multiple Sources of Traffic

Based on the seller’s statements, 8 out of 10 of the sites didn’t rely primarily (more than 50%) on Google for its traffic. Even the two which did seemed to have a diverse range of keywords with no one keyword driving over 50% of traffic.

The lesson: Six figure sites don’t put all their traffic eggs in one basket.

6. Established Relationships

6 of 10 of the sites included unique relationships such as suppliers, joint venture partners, etc. which were key to the success of the sites and were included in the sale.

The lesson: Networks of strong relationships build six figure sites.

7. Proprietary Digital Products

6 out of 10 of the sites had proprietary products that could be delivered digitally. Buyers often see value in proprietary products since they can add the product into an existing business’s offerings. Digital produts also tie into the low maintenance aspect to each of these sites.

The lesson: Proprietary products that can be delivered in a scalable way increase the chances of a six figure valuation.

8. Lots of Free Traffic

Auction 2 had no claimed revenue but had the highest traffic at over 3.5 million unique visits a month. Even with no revenue, the site sold in six figures. This means a buyer likely saw the ability to monetize the traffic and could justify the price.

The lesson: Traffic alone (which can be profitably monetized) has value in the eyes of six figure buyers.

9. Effective Monetization Systems

Auction 4 had the best claimed monetization with the highest revenue per unique visit number. To be making over $40,000 a month on only 30,000 unique visits is quite a feat.

The Lesson: Create a monetization system for your six figure site which buyers can leverage.

10. Recurring Revenue Streams

Auction 10 sold for the highest revenue multiple. I believe one of the factors that contributed to this was the fact the site had over 200 recurring subscribers. Recurring revenue streams significantly reduce the risk for buyers. Auctions 4 and 8 also claimed recurring revenue streams.

The lesson: Six figure sites are able to maintain momentum and revenue after the sale.

Are these factors you look for in the value of a website prior to purchase? What else do you think factors into a high-value website? Let us know in the comments!

How to Value a Website that Doesn’t Report Revenue

Valuing a website before deciding to make a purchase is one of the most important steps in your due diligence. Valuing a website that lists little or no revenue in the Flippa sales page is challenging, to say the least.

In a previous post I described how I went about valuing a young website before making a purchase. This post will hopefully help you value more established websites that haven’t recorded any significant revenue.

This post was prompted by one of our users who recently Tweeted us and enquired:

“How much clout does Google’s PR carry when selling a site? Eg:What if a site is well indexed, with a PR 5 but not many overall sales?”

PageRank, or PR, is usually a good indicator that the site is well indexed by Google and has been around longer than a couple of months. Good PageRank suggests that the site has a respectable volume of original content and a substantial number of back links (people linking to the site from other websites).

PageRank vs Traffic

What PageRank doesn’t tell you is the amount of traffic the site is receiving. When push comes to shove, it’s traffic that counts; you can’t monetize PageRank, but you can monetize traffic. I’ll add an important caveat to that last statement; you can monetize the right kind of traffic. And by traffic I mean the number of different people who visit a website.

With any website auction or sale listing on Flippa, the seller has the ability to submit and display website traffic statistics from Google Analytics or other traffic stats packages. We highly recommend you see some proof of traffic and study where the traffic has come from.  This applies for any potential purchase, but especially if you’ll be making a significant investment.

Not All Traffic Was Created Equal

The first question you need to ask yourself is, what is the right kind of traffic to value? Traffic generated by organic search engine results tends to be the most reliable and consistent. This is a bit of a blanket statement and there are exceptions to every rule, but read on for an explanation.

Looking at a site’s stats, there’s usually 3 to 4 main types of traffic mediums you’ll be able to identify via Google Analytics:

Organic: Organic traffic comes from people searching by a keyword phrase in a search engine, finding a listing in the search results, then clicking on that listing. It’s an indication that search engines think a website’s content is relevant to a user’s search. Generally speaking, the more organic traffic, the more keywords a website is ranking for.

Referral: Traffic that’s arrived via another website may not always be reliable long term. Say, for example, the website owner has been active in a particular website forum, leaving links back to the website for sale.  What if the forum disappears or the user gets banned?  No more traffic!

(None): This really just means that Google Analytics can’t figure out where the traffic came from. In reality it may indicate that visitors are typing the domain directly into a browser address bar. This can be a good thing; it may suggest that the site has an established brand name, Twitter for example, and people just know to type twitter.com into the address bar. But it may suggest that traffic has been generated by less scrupulous methods, such as spam email.

CPC: cost per click or paid traffic means exactly that – the owner has paid to generate the traffic. You’d have to ask yourself the question: why is the owner paying for traffic?  Especially if, as in this case, the site isn’t making any money.

Putting a Price on Traffic

Ok, so you’re satisfied that the traffic is kosher and the majority of visits are being generated by organic search engine results. How do you value that traffic? One way to value traffic is to figure out how much it would cost you to buy it.

For example, a site for sale might rank #1 in Google for “takeaway pizza”, if you were to use AdWords (Google’s Pay Per Click advertising engine) to pay for a #1 position in the sponsored listing, you’d be paying around $2.75 per click. 10,000 clicks is going to cost you $27,500 – that’s a lot of pizza.

This is complicated, but fortunately there’s a tool that will help you estimate the value of a website’s traffic. SEMrush.com is a keyword research tool that lets you discover the keywords a domain name is ranking for then estimates the value of that traffic based on what it would cost you to buy that traffic. Read that back slowly and make sure it makes sense.

SEMrush provides you with an estimate of the monthly traffic value (see SE Traffic price below) of a website:

Screen shot 2009-12-03 at 11.30.05 AM.png

The other great thing about SEMrush is that it gives you an indication of a site’s top ranking keywords which you can then compare to the statistics a seller provides on Flippa:

Screen shot 2009-12-03 at 11.35.01 AM.png

So How Much Should I Pay for the Website?

Well… it depends. I won’t go into the complicated mathematics of different monetization methods and revenue generation models right now. You need to decide how much the traffic is worth to you. You need to figure out what percentage of visitors are going to convert to product sales, clicks on ads, sales leads, or membership subscriptions once they come to the site. Then you’ll know what to pay.

At the end of the day using the SEMrush tool is just one of the many methods of valuing a website, but it’s a handy one to include when doing your due diligence.