How to Value / Evaluate a Website (part 2)

Well, we continue our previous blog about the website valuation methods and considerations… right now 🙂

As mentioned in our previous post, the vast majority of the 11 million or so links can be summarized in two extreme positions:

– one is saying that website valuation is an easy task which can be done gathering information from the internet and quantifying it based on several algorhythms which are deemed to be different (but in fact in most cases are the same), whilst

– the other one is saying that a website valuation is dependant on the existence of a potential buyer and the willingness of the owners to sell, thus a function of the negotiation process.

As we saw in the previous blog, there are plenty of automated calculation methods of a website’s value. A simple engine search will give you thousands of such sites… which do it more or less in the sam way. The automated methods of evaluation might work differently… if they would give a different result. But they don’t! Try it with any website on different evaluation websites and you will notice that the results are pretty close to each other and pretty far from planet Earth.

How do they calculate your value, anyway? The truth is very plain – they take the estimated number of users from a statistics engine and multiply it with a value (which should be the average yearly revenues per user) in USD. Thus from the multiplication of the number of users with the value per user and a percentage of valuable users (those who will click on your ad sense for example) these sites generate the value of your website.

Some others are more sophisticated – they fine tune the evaluation of your web site with your position in the search engines  (your page rank or your positioning rank on Google). The statistics can get more complicated based on the web site keywords or on various other methods, yet they look quite simplistic.

Why? Because those methods tend (statistically speaking) to overvalue the top listed web sites and unde-value to zero neglection the rest of the internet world. The logic behind it is very simple – the more links you have and the higher your position in your search engine, the more other sites are staying out of any business (thus they don’t make any money).

Is this realistic? Probably not and we shall see why and how we can correct these valuation methods… in  a later blog.

As you can see, I tried to do this review impartially (not as a commercial). Should you like to read the book, please try this Amazon link – you will pay the same price whilst a small referral fee will help sustain this investment blog. Thank you for your choice!:

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