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!
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 ;-).
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?
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.
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!
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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