February 8, 2012, 5:00 am

Site Valuation What People Are Saying and What They Keep Secret

by: The Financial Blogger    Category: Make Money Online
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quietA while ago, I wrote a 4 article series on how to buy blogs:

How to buy blog – intro

How to assess the value of a blog part 1

How to assess the value of a blog part 2

Finalizing the transaction and integrating the community

 

But these articles were written back in 2010 and we are now in 2012. It’s kind of funny as not even 18 months have passed between this series and today’s post but we are already evolving in a whole different world. You don’t believe me? Here’s a few difference between 2010 and 2012:

 

-          I’m not the only player in the blog acquisition field (there are several other bloggers doing it now)

-          Well known blogs have been sold for over $1M (GRS, Bargaineering, Simple Dollar, etc)

-          There are advertising brokerage services offered (contact me if you want to learn more about that)

-          We even have a conference just for financial bloggers! (Fincon12 coming in… I already have my ticket!)

 

 

As you can see, in a span of less than 2 years, the financial blogosphere has completely changed. In fact, I’m not even sure we say “blogosphere” anymore ;-). I’m already a dinosaur in my own field! Lol!

 

What’s up with blog valuation?

 

Amongst all these changes, the thing that I am most interested about is seeing how blog valuation models have evolved. It’s very interesting as you have the story that is accessible that you can read about and the story that happens behind the scenes. Players behind the scenes want to keep their things hush hush and this is why we have 2 stories to tell. I can’t blame them, I sign a confidentiality clause for each site I buy and sell too! So, I can’t tell you how much I paid or sold my sites for, but I can tell you that the blog valuation model has evolved over the past 2 years. This is great news for me as it is an obvious sign that there is a market emerging and assessing a blog will become easier over time as we will get more information.

 

It’s also bad news for me since I’ll have to pay more for my next purchases! But that’s okay… since I the day I will want to sell, I’ll be able to get a lot of money for my network ;-).

 

We are not talking about 12-18 months anymore

 

Some people claim while standing on the top of the mountain that a blog is worthless, it is attached to the author and that paying more than 18 months (or 24 months in certain cases) is being foolish. I even read in a forum that a guy would only pay 5K for a site generating 12K in income that came from private advertising… I guess this is a buyer’s speech and he doesn’t want to pay a penny.

 

But let’s put the situation the other way around: what if you are the seller? I you have a blog raking $1,000 a month, why in the hell would you sell it for 6 months, 12 months or even 18 months worth of income? Think about it: you have been making a steady $1,000 for the past 12 months or more but you are tired of blogging on a daily basis. At this point you have 2 options:

a)      Sell your blog

b)      Slow down your posting schedule and let the blog die slowly (which can take more than a year).

If you look at the latest option; I can tell you that if you drop your post to once a week or even twice a month you will be able to make almost as much for a very long time. The only difference is that you won’t see anymore growth and your blog will eventually be fed by Google and not by commenters. So if you can’t get more than 2 years of income, why would sell?

 

Because private ads are risky

 

Most bloggers will tell you that private ad income should not be as good as Adsense or affiliate income. I would have agreed 12 months ago but now, it’s a totally different ball game. Why? Because of the Panda updates. We have seen the power of Google last year when they decided to modify their rankings. What happen if you lose your high ranking keywords in Google? Both your Adsense and affiliate stats will go down the toilet. In reality, you will make 10 times more with search engine visitors than with your loyal readers when it comes down to Adsense and depending on the type of affiliates, your chances of making more money from SE visitors is pretty good too! I’ve seen bloggers lose more than 50% of their income in a single month after the Panda update. Do you really think this is not risky? This is why I’m giving almost the same value to private advertisers than other sources of income.

 

What is risky about your blog

When I look at a blog I want to buy, I’ll tell you what I find risky:

a)      Concentration in sources of income (per type)

b)      Concentration of traffic sources (Search engine, references or direct hits)

c)       Concentration of a few high ranking keywords (I’ve seen sites getting 90% of their traffic with only 5 keywords!)

Therefore, what is really risky about your blog is when you are too concentrated! It is kind of ironic that the best way to rank in search engines is to find a specific niche (such as Dividends and The Dividend Guy Blog for example) and master it. But then, you may become “too concentrated” in a few keywords or sources of income/traffic. This is why you need to find your niche and cover each aspect of it to make sure that you still get different sources of income, traffic and multiple high ranking keywords.

 

Once you reach this level, then you can ask for more than 24 months!

 

Oh shoot! I’ve said it! YOU CAN GET MORE THAN 24 MONTHS OF REVENUE FOR YOUR BLOG!

 

Yup… this is what the industry wants to keep hush hush ;-). To be completely honest, I’m now only looking at sites with over 10,000 visitors/month. For smaller sites, the 18-24 month rule probably still applies for a while as there is too much volatility associated with lesser traffic. However, when you look to buy bigger sites, you can see them more like a long term investments. These sites usually have over 2 years of history and demonstrate great diversification in terms of topics, traffic, income sources and high ranking keywords.

 

For these sites, we are still using the same valuation model as in my previous series (start with How to buy blog – intro) but we will use a multiplier of 2 years + premiums to assess the value of a site. Depending on the site and the situation (blogs that sell at an auction gets more), our own business model allow us to pay up to 4 years the income. WAIT!!!! Don’t start thinking your site worth that much yet! I currently have a steady network generating over 100K per year and I don’t even value my blog at 4 years the income. I’m just saying that if your blog meets the following points, you should be able to get about 3 years worth of your income:

-          High RSS readers (over 2,000)

-          High traffic (over 20,000)

-          Traffic diversification (not more than 60% in a single source)

-          Revenue diversification (not more than 60% from a single source)

-          Mailing list

-          2 Years + of history (or more than 500 articles)

-          Steady income proof (for over a year)

-          Growing traffic over the past 2 years

 

The more you get closer (or surpass) these criteria, the more your blog will be seen as a business and not as a simple page with financial babbles on it. And the more I’ll be interested to buy it ;-). But I can guarantee you I will start the negotiation with 2 years + premiums and not 4 years worth of income ;-) lol!

 

 

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Comments

So basically, if you ever want to sell a site for a reasonable amount then you have to build it out into a well-rounded business. That makes sense.

I really like how you break out the different aspects, especially things like seeing where the majority of search is coming from/going to. One good keyword can be gold but it’s precarious to have one post driving most of the revenue.

I guess I am behind. I didnt even know that some of those sites sold for so much! A million of a site i would take it. I think that have income diversification is great to a point. Maybe having a few sites with adsense, some with private ads etc. and some with a mix. Some sites no matter how much I could get for them I would probably still keep them around to get more since the same way they can lose income they could also increase.

Some people say post twice a week and other post almost everyday. What is your take on posting as I notice you post almost everyday.

This does make complete sense. I would never buy a normal business that was not diversified or that did not have stable income. However, my blog is only about 7 months old and my 24 months valuations based on my average income are very exciting. Not that I have any intentions of selling, but it is very encouraging to have an idea of what my cite could go for on the open market one day.

your first link broken dude :)

by: The Financial Blogger | February 8th, 2012 (10:03 am)

@Glen,

I’ve realized that buying a small site for 4K for example is useless. I always compare which kind of blog I would get if I was going to spend 4K to create a new blog vs buying one. At $25/articles, you can spend $3K and get 120 article. You can spend the last 1K on design and promotion and you have a very cool blog up and running for a while with probably the same or more success than the small blog that you would have bought at the same price.

@Thomas,
I guess it depends on which kind of blog you want to have. I post 4 days a week on TFB while I do 2 posts per week on The Dividend Guy Blog and both are very successful. If you want to call it a blog, you need to post at least twice a week in my opinion.

@MoneyforCollegePro,
At a young stage, you would probably be able to get 12 to 18 months. The more you grow your blog, the more you will be able to get :-)

by: The Financial Blogger | February 8th, 2012 (10:06 am)

@aaron
ooops! fixed that!

all this sounds good and makes sense in theory, however in practicality the value of a web property is as much as someone is willing to pay for it. there are financial buyers, which seems like you are, and there are strategic buyers who sometimes will pay an astronomical amount bec of synergies to be obtained.

i sold my ecomm website for well over six figures, 4 times operating earnings in the five figure range (not revenues). at the time i thought this was great

I think that evaluating a blog’s value and a niche website’s value is very different. Selling a blog is like selling a business, where selling a niche website is like selling a simple stream of income.

But transferring a blog to someone else isn’t always so simple. For example Pat Flynn’s “Smart Passive Income” blog makes thousands of dollars per month, but if he sold it to someone else it wouldn’t have the same value. Pat could just start up somewhere else and take all his followers.

by: The Financial Blogger | February 8th, 2012 (5:20 pm)

@Sunil,

that’s a pretty good number but you had a real business :-) Do you regret selling it? what did you do with the money?

@Mike

you are right, some blogs/site would have less values due to the solid bond between the author and the blog. However, Pat’ site would generate a lot of money even after he’s gone since he has good SE rankings and makes most of his income through affiliate.

At the end of the day, if you are making money from your blog (whether the intention or the outcome; it doesn’t matter), you have a business. How well that business is run (way beyond the writing skills) determines the difference in valuations.

These numbers seem a bit high for me. I am curious though… if you are serious about buying sites, why would you publish the fact that sellers can get 4x the annual income? Wouldn’t you want to keep that a secret?

@20′s Finances,

Reverse your position. Assume that you own a blog generating 1K per month for the past 2 years.It brings steady income with “okay” effort. Why would you sell your cash cow for 12K? or 24K? Would you sell a triplex earning 30K per year for…30K or 60K? This is the same rationale applied to a website.

The reason why the multiple has gone up is because of the stability some sites have shown. They are now considered as real businesses and not just a place where some guy vents once in a while :-).

As for the reason why I publish this information, well A) I hate BS and B) since I already own a lot of PF sites, it’s also in my own interest that there is a market to sell them.

Don’t worry, one way or another, this multiple will continue to increase overtime :-)

Great point – I was happy to find one for less than 4x annual income… but I think you are right. As long as you are willing to put in some effort, anyone can easily make decent money off of a well-established site. This is good news for both of us. More money if we ever decide to sell. (never going to happen)

by: The Financial Blogger | February 9th, 2012 (2:29 pm)

never say never ;-)

You and I have VERY VERY different business models, but I think we can both agree on the fact that the problem I have found with valuations:
- Just because someone poured their heart and soul into a blog for 2 years does NOT mean it is worth ANYTHING.

Getting over that hump is sometimes very difficult during negotiations.

by: The Financial Blogger | February 9th, 2012 (11:07 pm)

Hey Evan,

We definitely have a different view of this business ;-). I agree with you that emotion tied to the blog worth nothing for me; it’s pure business ;-D

Are you still buying small sites? if so, I’d be curious to know if you had ever consider using the same amount of money to build your own sites, designed your own way. Sometimes, it’s faster and you can make the same amount of money, don’t you think?

[...] you have time you should also check out what Mike wrote about site valuations. If you’re considering selling your site you should read this piece. It’s an [...]

Wow… I often wonder if web properties will one day be looked at much like real estate is. People that are selling today might be very sorry 10 years from now. On the other hand, I don’t really see how blog valuations could possible go down.

by: The Financial Blogger | February 11th, 2012 (8:26 am)

Blogs will become like any other assets: if you sell now; you’ll make money. If you wait; chances are that you will make even more money :-)

On the other side, if we start to have a real market (more sellers and more buyers), some sites will lose in value due to competition.

TFB,

I say I would be taking more of a risk that way since I am selling the metrics – I don’t know what the metrics will be if I build it myself. If I buy those metrics boom I have them and can capitalize right away.

I have a site that meets the above criteria – newsletter, traffic sources, traffic quantity, revenue sources (no links) etc – that I would very, very happily sell for 3x annual income. That’s a pretty rich valuation from what I’ve seen.

Over time, no fewer than 20 people have emailed me to buy it. Only two or three were willing to pay more than 1 annual income for it. None more than 2x. If someone offered 3x, I’d give it up in a heartbeat, even if it is a low-work, consistent producer.

by: The Financial Blogger | February 12th, 2012 (2:14 pm)

@JT,

hum… that’s interesting, I’m sending you an email right away ;-)

mind you, most people that send emails are not generous buyers. I’ve been offered ridiculous amount for my site too (sometimes 2 months worth of income, duh!). Have you tried to market your site and put it on Flippa for example?

Wow awesome eye opening post!

I was only offered once by someone and then she stopped emailing me back. She was really trying to lowball me too. I’m glad I didn’t because the income is pretty steady now.

I don’t know how to get more RSS without annying the crap out of people with a pop up ;)

by: The Financial Blogger | February 20th, 2012 (3:10 pm)

@Y&T,

offers you receive by email will always be low ball offers. You need to market your site and run an auction (private or public) if you want to have a good price.