As one of the Managing Partners of WhyDoWork I am always on the lookout for possible partnerships, acquisition targets, and competitors. Just like any offline business, it’s important to look at these four elements in your online business. I thought this might be a good blog topic because frankly I haven’t really seen anyone else cover investing in other sites to grow your own.
Maybe it’s the potential complexity, cost, or research that scares most away, but trust me if you can effectively leverage someone else’s work through an acquisition you will be much more successful. I could write for days on this topic, but I’ve selected a few key thoughts to outline below. If you’d like to discuss further, drop me a sticky note on my wall in our forums.
Most Site Owners Over Estimate “Their Baby’s” Value
Have you ever seen this badge on another site:
I plugged in the blog url and it suggested the WhyDoWork blog might be worth $52,502.22. The creator of this widget had a great idea, but I don’t think that valuating a website can be as simple as looking at the value of each link coming into your blog. I consider website valuation to be more of an art than a science, with gut feel and past experience often playing the biggest role.
One element I consistent notice is webmasters and site owners valuating their site at much more than it is actually worth. It can be difficult to think logically when you’ve poured your heart and soul into creating something unique, but as a site owner you need to understand that the market may not see your site (or as I like to say “your baby”) in the same light as you.
Where to Find Sites to Purchase and What to Look For
A great place to see whats on the market is the SitePoint Marketplace. Here you can find hundreds of quality sites for sale, place bids, take a look at past revenue, and discuss the site with the website owner. One site I recently had my eye on was 5xmom.com listed here. This is a blog covering making money online with a little over 200 RSS subscribers and a lot of great quality unique posts. Taking a deeper dive, the listing shows that monthly revenue on the site is $600, it has 0 PageRank, a little over a year old, and generating 24,000 pageviews a month. Before reading on, take a second and think about what you would value this site at
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I came up with no more than $4,500. The only problem for me was that bidding started at $10,000 :).
How to Value a Site
This is the tricky part. Short answer is that it all depends on how important the site is to your success. Looking at the sample auction I’ve posted above, I was considering the ROI we’d see from an additional 238 RSS subscribers, increased traffic as a result of the content I’d migrate to our site, and additional traffic from redirecting the domain for a while. Our success does not hinge on this acquisition so it was not a critical purchase. To protect the privacy of the owner of 5xmom I’m not going to post my detailed analysis, but keep in mind that before you decide to bid you should do your due diligence. My general rule of thumb is that if the site seems like a perfect fit, its worth paying between 12 and 18 months the value of revenue. In the case of 5xmom.com, this would be between $7,200 and $10,800. Because of the low traffic to the domain, a zero on the PageRank scale, the uncertainty of the search engine rankings, and the young domain name (1 year isn’t that old) I lowered my max to $4,500.
I’ll save what to do with the site once you buy it for another post! And yes my title was serious - just make sure you value your site accurately! 
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Adrian Keys responded on 07 Dec 2007 at 11:47 am #
It’s an interesting topic to explore. I suspect most people are afraid of falling prey to the hype machine or conflicts that may arise out of partnerships. In the final analysis though I think many of us could much better in strategic partnerships…
WhyDoWork responded on 07 Dec 2007 at 12:03 pm #
@ Adrian:
Thanks for the comments. I think I’ll do some more posts in the future on this topic because partnerships and acquisitions don’t need to be a scary thing.
One good post I came across on this topic was at the Rookie Blogger covering the botched takeover of the blog CashQuests.com.
Looks like there are a lot of people out there who could benefit from some advice in this area!
bloggernoob responded on 07 Dec 2007 at 6:14 pm #
great piece on the valuation of sites. i think with the recent selling out of blogs like bloggingfingers and cashquests, people are looking at an exit strategy. there isn’t an industry standard formed yet with website appraisal. that technorati api price is a joke.
Alicia responded on 10 Dec 2007 at 8:30 am #
Just two weeks ago I had to make a buy or make decision.
I bought a website and the amortisation is going to be between 13-18 months, without pushing anything.
So in my opionion the hard part ist to evaluate, how much better can the revenues get with how much work effort…
Please post more on this topic
WhyDoWork responded on 11 Dec 2007 at 11:44 pm #
Hey Alicia,
Thanks for the feedback. I’ll be sure to post a continuation of this discussion
Valuation Myths responded on 09 Jan 2008 at 2:38 pm #
I thought using the revenue multiple was a worn out myth when trying to determine the value of a potential business purchase. What your business is worth today depends on three factors: 1) how much cash it generates today; 2) expected growth in cash in the foreseeable future; and 3) the return buyers require on their investment in your business.
A better method would be using discounted cash flow analysis and a combination of other methods instead of calculating the revenue multiple by itself. It sounds kind of limiting for the seller, and completely unfair for the buyer if you rely on the revenue multiple for business valuation.
WhyDoWork, your faithful readers would love to see newer detailed posts that discuss more useful methods for valuation. We’re trying to make a living out here! Thanks.
WhyDoWork responded on 09 Jan 2008 at 6:14 pm #
Sounds like there’s some folks out there that want the long version of this post
@ Valuation Myths:
using the revenue multiple is a quick first pass. If I we’re listening to a group presenting that was looking for funding, thats just the first thing that comes to mind for me. In actuality, it could end up bearing 0% weight in any kind of final decision.
I’ll do my best to cram some more complex valuation principles in my next post on the topic!