January 7, 2010, 5:00 am

How To Buy A Blog Step 2: Assess the value of a Blog

by: The Financial Blogger    Category: Make Money Online
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I received many emails regarding how I appraised the value of Gather Little By Little! It seems like there is a great interest in making money online and as a result buying blogs can be quite appealing. However, I must say that making money definitely looks easier than it is! While all information related to the transaction of GLBL must remain confidential, I will explain what to look for and how to obtain a fair value for both parties.

Before we start looking at how much you should pay for a blog, we have to know what we are looking for to determine the right one.

Traffic, traffic, traffic, what traffic?

Some blogs show amazing traffic stats. Steady traffic can be worth a lot of money. Advertisers need exposure and you need several thousand visits in hopes of making a decent income through affiliate programs. But beware of traffic sources.

I personally give little or no attention to social bookmarking site traffic like Stumble Upon, Digg or Tip’d (for financial websites). The truth is that most visitors coming from these sites won’t stay on your blog very long and chances are they will never come back.  When it comes down to converting those visits into revenue, they are worth a big fat $0 (are we here to make money online or what?).

RSS readers and The blog community

The biggest power of a blog is its community. A blog with a strong, active community will most likely grow faster in the future as people talk about your blog with friends and family. There are 2 ways to know how big the blog community is:

– Number of RSS readers and followers on Twitter.

– Number of comments on each post.

RSS readers and followers are great if you want to reach many people for a specific purpose. While it is not recommended to use this publishing method to do heavy self promotion, an affiliate post once in a while won’t hurt your readership. In fact, if you write about a great product or service that really can really help your readers, it will probably have a great impact.

The average number of comments will show if your readers are willing to participate actively in your blog. This is entertaining for other readers and can become a great source of inspiration when you wonder what to write next.

It’s all about money!

Most sellers will tell you about the unexploited potential of their blog due to lack of time or resources. I actually don’t believe in “unexploited potential” from the seller. If you know that your blog could easily make more money than it is right now, why the hell have you not done it prior to selling your blog????. By doubling the blog income, you could probably double the price. Better than that, what would you have been doing with all this money for the past few months! Who would actually denounce the ability to make more money? So, concentrate on what is being made right now.

A rule of thumb says you should value a blog by calculating 12 to 24 times its monthly income. Therefore, if your blog is making $100 a month, it should be worth $1,200 to $2,400. However, you must consider the following points when regarding income:

– Income consistency

Take the average of the last 6 months and pay particular attention to note if the income is increasing or decreasing! If one affiliate post contributed as most of his income during a particular month, substract this income spike in order to understand the full and real picture.

Income sources

Is it the classic Google Adsense? Through affiliate programs (then you would have to create new user accounts and switch links!), by selling links? Banners? The more sources the better. If you have only one sponsor, you better make sure he has the intention of pursuing his agreement with you after the sale!

Valid proof

Ask for several cross reference sources of proof like PayPal print screens and user account print screens. While this won’t guarantee you anything, the seller will have to do much more work and may make a mistake.

All right, enough information for today. Tomorrow, I’ll outline how our buying model works. Stay tuned 😉

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Comments

I like your guidelines, particularly about looking closely at the specific income streams and trying to determine if they will last.

Not sure about the 12-24 months range – that’s a pretty big range!!

Verifying numbers (paypal, adsense etc) is also a good idea.

by: The Financial Blogger | January 7th, 2010 (12:52 pm)

I would say that 12-18 months would be for a smaller website or a smaller that doesn’t have income consitency, or not great traffic source (social bookmarking).

18-24 is more for bigger and well established websites. You may even have to pay for a premium depending on the site quality.

Wow 24 times monthly earnings? That’s equivalent to a yield of 50%!

Of course the drawback is that you have to keep posting quality content. Which is why I never write about mesothelioma 😉

Another drawback probably is that you have to get a quality writer if you want to create a scalable business model. Which basically means that selling a blog for 2 times revenues ( not earnings) is a decent price to pay.

In comparison JNJ currently trades at about 2.7 times sales.

Thanks for the thoughts TFB.

Out of curiousity, who in their right mind would sell their blog for LESS than a 24X monthly revenue multiple?

If I’m making $1,000/month, all I gotta do is last 24 months to get to $24,000. It can be worth $12,000/yr for YEARS, if not much much more as transaction and content grows. Hence, I may consider selling my site for maybe 60 months of income, but not less for now 🙂

Do you mind visiting my site and assessing it? The one thing I enjoy about my site is the prolific amount of user comments. It’s a pretty loyal community, and the average amount of comments range from 20-40/post. Thnx!

FS – you are forgetting about the cost of your labor. If the site is making $1000 per monthindefinitely without doing any posts or work on it, then yes – it would be worth far more than $24k

Four Pillars – Good point, so then if I sell for 2X yearly revenue, then I don’t have to do anything… but what’s the fun in that?

5X yearly revenue minimum or bust! 🙂

by: The Financial Blogger | January 7th, 2010 (8:30 pm)

cost of labor is something pretty hard to assess. At one point, you can’t write for 5 blogs, therefore, you will have to be able to pay for a good writer to keep up with the blog. This could reduce your profit considerably!

but still, 2X yearly revenue is pretty cheap!

by: The Financial Blogger | January 7th, 2010 (8:31 pm)

FS,
you have a pretty decent blog, if you want me to do an assessment, send me an email at thefniancialblogger at gmail dot com 😀

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