Website Value Components – Whats a Website Worth?

Understanding website value components will help you understand what a website is worth. Performing due diligence of website value components prior to purchasing a website will help ensure the transparency required for a sound business deal made in full view of foreseeable risks and increasing the odds of a beneficial business outcome.

Evaluating website value components on websites for sale

How does one calculate the value of a website? That’s a somewhat loaded question. This question comes up often with clients in a variety of contexts such as a business owners looking for an exit strategy selling off a website or an entrepreneur looking to purchase a website to start or take over a business or use the website as part of a linking strategy.

In any and all cases, it is nearly impossible to calculate the precise value of a website but understanding some key website value components can help buyers and sellers estimate website valuations while understanding the risks to that valuation. Website buyers, like buyers of any major asset, need to perform the due diligence to understand the various components that drive website value to make informed business decisions.

Website Value Components to Consider

Top Ten Website Value Components

Age of the domain Google, the dominant search engine in the US, places value on the age of the domain. The older the domain, the more value Google sees.
Google Page Rank Named after Larry Page, one of the Google founders, which is a calculated value tracked by Google for each of the billions of web pages in its index. Page Rank is a numeric value between zero and ten. Pages that have zero page rank are little to no authority in Googles assement and search results and web pages that have higher page rank are viewed as more authoratative and generally are returned higher in the Google search results.
Inbound links how many links does the website have pointing to it from other websites. This includes not only links to the homepage of a website, but also links to other pages within the website. Look carefully at the longevity of these links. If possible use a tool to evaluate the prominence of certain links and ensure to the best of your ability that the most prominent links will survive well beyond the transaction.
Number of special inbound links (i.e. links from websites on .edu, .gov top-level domains) search engines view the value of different types of links, well …, differently. Two top-level domains in particular are typically more difficult for websites to obtain due to reguations, in turn making obtaining inbound links from websites on these domains more difficult as well. Possibly for this reason, evidence has demonstrated that Google provide additional authority to websites that have links from other websites on .edu and .gov domains.
Number of different domains that link to the website a metric that is calculated by evaluating the diversity of domains with pages that link to a website. For example, a website with 100 inbound links from one domain would tend to receive less authority from Google than a web site with a single link each from 100 different domains.
Number of pages indexed in Google, Yahoo! & Bing which simply means how many pages of a website exists in the search engine index (or database) so that when users are searching for relevant information in that search engine, links to the website content will show up somewhere in the search results.
Number of unique visitors per month or how many different visitors did a website have for a one-month period of time. One month is the normal industry time period to evaluate number of unique visitors to a website. Third-party verification from trusted sites is very important to substantiate claims of unique visitors. Google analytics and Compete.com provide data and serve as a trusted third-party source of traffic data.
Traffic diversity making sure that no single source of website traffic is a majority source of traffic to that website. This can reduce the impact that any one traffic source can have on the overall web site traffic. For instance, if all the website traffic virtually all comes from Google and Google decides to alter the way that it ranks websites, disproportionate impacts to overall site traffic will happen.
Visitor growth trend to ensure that a website visitor growth is trending positive, especially when relying on increasing traffic to meet a business plan. A negative visitor growth trend is often indicative of underlying issues in the market or possibly with the website itself, both of which will affect website value.
The financials including revenue and profit numbers as verified by a third-party whenever possible. Depending on the type of website and the business objectives driving the purchase, a common buyer mistake in all the excitement is to underestimate website operations costs including hosting, content creation, search engine optimization, advertising, moderation of user-generated content, system administration, online transaction processing and many others.

Why Components Matter for Google which Matters for Website Value

That said, it’s important to recognize that value, much like beauty, is often in the eye of the beholder. The value or potential value of a website will be driven in part by the business objectives it’s intended to support. For example, an e-commerce website is designed to be a platform for retail sales over the Internet. Valuation can be simply viewed as the profit potential of the website over some desired payback period. For a website investor looking to generate revenue by selling advertising on the website, value will be based on existing and potential ad revenue driven by things like pages views and click-through rates. Still other investors will purchase websites with high Page Rank in order to manipulate the search results by passing authority from a purchased web site through linking it to other investor web sites. Still other publishing businesses can find value from the unique content that a website contains often being able to purchase that content for a small fraction of what it would cost to create similar content. In this case, verifying the uniqueness of the content through tools like Copyscape.com are crucial to valuation.All of the top ten website value components have a relationship to Google and its treatment of a website authority and relevancy from the Google perspective, thus impacting position in the search results and therefore traffic. The reason Google matters so much is that for US English-speaking search market, the Google share is between 65 and 70% at the time of this writing. Search engine traffic drives a majority of Internet traffic. Internet traffic equates to website visitors, and as with any business, more visitors means more chances to convert those visitors to customers. That is why understanding the top ten key website value components are so important.

Pulling it all Together

Wow, that seems like a lot of information to digest. Bear in mind that there are free tools that can help you gather all of this information simply by going to the website of interest. One can use the SEO book for Firefox toolbar to gather information on all ten website value components listed above. Regardless of the goal of buying or selling a website, understanding key website value components of all parties involved in the transaction will ensure the transparency for a sound business deal made in full view of foreseeable risks and help ensure a successful and mutually beneficial transaction for all.

If interested in assistance with valuation of a website or websites, contact eBiz ROI for a complimentary high-level website valuation consultation.