Internet is a digital world with digital properties on it. Digital lands (domains), digital buildings/condos (websites), digital landlords (domain name owners, website owners etc.) …
And of course there are many ways/tools to follow/apply while calculating the values of these properties. In my opinion, calculating the value of a domain name is relatively simpler compared to website valuation. Evaluating a website’s value includes (or should include) domain name valuation in it.
How to Evaluate a Website’s Value – Online Tools
There are many online tools for evaluating website values as there are for evaluating domain names, but are they accurate? Should you trust them?
If you know nothing about the digital world, then that is exactly what you will do. Use online tools to evaluate a website’s value. Why? Why is it wrong to use an online tool to evaluate a website’s value? Because online tools know nothing about the business that is running on a website.
Most (if not all) of the online tools that claim to calculate the value of a website use stats like PageRank, Alexa Rank, estimated number of page views etc. Then they use those stats to estimate an Adsense revenue to finally evaluate a website’s value. How do they estimate the AdSense revenue? That is a big question mark there!
Since online tools know nothing about the business that is running on a website, using stats like the ones I mentioned above will never be correct, for example, for an eCommerce website.
How to Evaluate a Website’s Value – Do your Homework
This is the way you should go. Do your homework to assess the value of a website.
Check if the site has an existing income stream. Request proofs of the income if possible. There may be multiple sources of income, request proofs for all of them. Calculate the average net income per month. You could expect a website value which falls in the region of 1 to 3 years of revenue.
Other Things to Consider
I said in the region of 1 to 3 years of revenue. How do we determine where it will fall in between?
-How reliable is the revenue source?
-What is the effort required to maintain this revenue?
-Has the site realised maximum revenue potential or is it still growing in revenue? What does the historical data say?
-How is the specific market/niche doing? Is it popular? Is it gaining popularity?
-How old is the domain name the site is built on? Although google doesn’t care much about this, people/market still seems to care about this.
-Does the domain name of the site have any keywords related to the niche/market it appeals to? Although emphasis on keywords in a domain name is reduced, it still matters from the SEO point of view.
-And couple of more key points for evaluating the domain name of the site but I will not be talking about the details of domain name evaluation now.
In this post, I tried to provide you with some helpful info on how to evaluate a website’s value. You might also be interested in Historical Valuation Analysis of 3letter Com Domain Names.
Hope this helps.