Buying Blogs: The Blog Buying Checklist

Today I bought a Poker blog from SitePoint. Blog auctions are becoming more and more common, and they can be a great way to get a head start on turning a profit. But there’s a lot of snake oil out there.

So I thought for today’s post I could walk you through 1) why I bought this blog, 2) what I watch out for (both good and bad), and 3) how I value a blog -- all with real world examples. What more can you ask?

The first step in any buying process is research. Well, the ‘story’ on this blog is pretty standard. It’s 5 months old and gets about 1000 pageviews a month (not too much, but remember that the poker area is ultra-competitive). It averages $135 / month in revenue (actually not too bad for a blog that’s 5 months old).

But really all these numbers are more or less average. To see why I bought, you have to look beyond the numbers:

Reasons Why I Bought The Poker Blog

• Non-adsense revenue stream - I have a love/hate relationship with Adsense. Yes, it pays me well. But I am way too dependent on it. Anything with a non-Adsense revenue stream turns me on.
• Base of bookmarkers and subscribers - The blog already has fans and repeat readers. This will make it less vulnerable to the whims of search engines in getting traffic.
• Above-average content - Content is king. Always will be.
• Nice set of incoming links - I love links, for many reasons. Potential Google love is one of them.
• Original owner who I trust - I actually read the owner’s other blog regularly. He seems like an honest guy (many of the people selling blogs at Sitepoint or elsewhere are not).
• Oh yeah, and a kick-butt design - Now, in the hierarchy of importance I place links and content well above design. But a good design makes content look better, and it tends to help your blog attract more links. It has a reinforcing effect. Plus it’s just purty.

So, let’s go over why I like the blog: diverse revenue sources, diverse traffic sources, good content, good links, former owner I trust, and a kick-butt design. A good question would be: Why the heck wouldn’t I buy this site?

Once I’ve made the determination that I’d like to buy a site – that I see its value, and believe in its potential – then its time to determine if the price is right. Even though I love the site, I would not buy it if the price tag was $50,000!

How I Value a Site

Everyone loves rules, but the truth is, a weblog is worth exactly what someone is willing to pay for it. That’s the only rule.

But I always start with a frame of reference: 12 months’ profits (note: for a site less than 1 year old I substitute 12 months' revenues).

From this number, I add or subtract “bonus” points based on certain criteria; if a site hits every bonus point, I’d be inclined to pay something like 36 months’ profits, whereas if it misses on every bonus point I might scale back my offer to, say, 4 months’ profits.

Some things that increase a blog's value for me:

• Diverse revenue streams - I hate the fact that 90% of my revenue comes from Adsense. Any time a blog gives me an opportunity to diversify my revenue streams, I get interested very quickly.
• Diverse traffic streams - Google can hate you just as quickly as it came to love you. If a lot of traffic comes from bookmarks, direct links, or RSS subscribers, your risk of losing traffic is very low.
• I think I can monetize it better than current ownership - This comes down to whether or not I personally have a value-add. For instance, do I know an advertiser who would buy out the site’s ad inventory at twice its current rate and prepay for the next 3 years? If I do, it’s going to make owning the site much more attractive, since I can increase its monetization easily.
• High quality content - good content is always a good asset to own.

Based on the past list, you can probably surmise what would get a blog negative valuation points in my book:

• A single revenue stream (usually it’s Adsense)
• A single major traffic source (often it’s Google)
• I don’t have any particular value-add (why should I buy the site as opposed to someone else?)
• The content is poor quality

Also, a few other things that can greatly depress a blog's value:

• Being banned from Google - search for "site:www.blogname.com" , does anything come up?
• Being banned from Adsense - there's no way I know of that you know for sure if a site's been booted from Adsense, you have to trust the owner on this one (again, trust is important)

So back to the Poker blog I just bought. I started at 12 months’ valuation, but then ran it through my “bonus point” gauntlet. It had: diverse revenue streams (multiple affiliate programs), diverse traffic streams (decent amount of bookmarks and RSS subscribers) and high quality content. There are no major negatives as far as I can see.

So let’s say this made me double my valuation (it’s not exact science, I go on feel). The monthly revenue on the site is $135. So, $135 * 24 = $3240. $3240 is what I valued the site at. The asking price was less than my valuation. Normally, this would be a buy.

And it was a buy. The very last thing I ask myself is, “what is my gut feeling on this site?” I looked at the site, read some posts, drooled over the design, and generally loved what I saw. I emailed the owner my offer, he accepted, and I transferred him payment within an hour.

Hopefully in December ’06 I will write the sequel to this post: “How I took a Poker Blog from $135/month to $135/day in 1 Year”.

p.s. I’m looking for a talented, enthusiastic and reliable writer to help me with this project. If you are interested, please email me.