How do you put a price on a blog?
The free valuation tools commonly available suck – you cannot place a value on your blog by counting links and PageRank and at the same time not considering actual revenues, site traffic and a dozen other factors that are relevant to blog valuation.
To be honest – there’s no perfect formula for blog valuation. What I can do is share the factors that I consider important (these may change depending on specific cases or on the buyer’s goals) and discuss one way of calculating the value of a blog. Feel free to jump in and share your own views here.
Valuation Factors to Consider
Used to evaluate if a blog is making less or more than the average in that niche for a blog with that amount of traffic. If a blog is under-monetized then it gives the buyer leverage in the buying process. On the other hand, if the blog owner knows that his blog is under-monetized he can then focus on attracting advertisers and adding different revenue streams to his blog prior to putting it up for sale. Fatten the cow, so to speak.
If a blog is in a highly profitable niche this will have some impact on blog valuation, but this is only in relation to whether the site under-monetized or not.
What does it cost to run the blog? Hosting, blogger time, promotion, administration – take everything into account.
How much is that site earning?
How much did it earn in the last 6 months (month-by-month breakdown)? Take the average and that is a more realistic revenue estimate for the blog.
What are the major revenue sources? If it’s just one, it’s a risky proposition and the buyer invariably has an advantage in negotiations. On the other hand, if you have 3-4 or more sources of revenue and they all earn reasonably well, you have a very business and the price invariably goes up.
Does the blog have high search engine rankings?
How many feed subscribers?
Is there a mailing list / newsletter?
Is the comments section active or passive, and is there any value in the discussion (or are people just saying ‘this sucks’ and ‘that rocks’)?
Does the blog get mentioned regularly on other websites? Does this bring in traffic?
What is the site design worth?
What would the domain name alone be worth (think of branding, established reputation, etc)?
What is the content worth, if anything (search engine rankings and traffic matter here)?
Some niches are more easily polarised than others (for example: pop culture and sports) and it’s easier to offend segments of the audience through them.
Is the blog recognised in its niche as a leading blog? Do fellow niche bloggers read the blog (a big, big positive)? Does the blog enjoy a negative reputation for past actions?
Anything positive is just bonus, but if the blog has a negative reputation it may become difficult to make it grow beyond a certain point.
On the flip side, how big a brand is this blog in its niche? Does it have media recognition? Is it recognised in non-niche circles as the leading blog in its niche (as Danny’s SearchEngineLand is)?
Is the blog attached to the personal brand of the lead blogger or is it all about the content?
TechCrunch and MarketingPilgrim are two examples of blogs that were built on the personal reputation of their lead bloggers but have successfully moved away from personal branding and towards building the blog as a standalone brand.
If the blog relies strongly on the main blogger to relate to the community, it becomes difficult for new owners to run it with the same amount of success and as a result the price can go down.
How Do You Value a Blog
What are we going to do with these factors? I use a simplified valuation formula that works like this:
Blog Value = Premium + ((Monthly Revenue – Monthly Costs) x Multiplier)
The Premium is established based on the value of the content, site age, design, established rankings, community, etc. Revenue – Costs is a straightforward calculation.
The key difference where people have issues is the multiplier.
As Andy Hagans has discussed here, there’s a wide discrepancy between offline businesses and online blogs – whereas blogs often go for 1x or 2x their yearly profit, real-world businesses often go for 10x on yearly profit (plus premium).
The challenge here is to build defensible traffic, to have multiple monetization methods, to build a great brand, to have an active community and to make your blog indispensible to your niche.
The better you are at all of the above, the higher you can push that multiplier.
If your blog gets traffic exclusively from Yahoo, only earns from AdSense and is unknown outside your niche, it’s not going to get more than a 1x multiplier.
On the other hand, if your blog is the ProBlogger of its niche, you could name your asking price and easily charge a 5x or 10x multiplier.
A Few Problems
The problem with establishing a Premium and a Multiplier is that these decisions are subjective and as such the valuations of two experiences domainers will almost always differ. Because of this it’s always a good idea to have 2-3 people independently value a blog – whether you’re selling yours or looking to buy one.
Putting a price on your blog (and developing a blog exit strategy) is always a good idea no matter at what stage you are with your blog.
Have you valued your blog? If so, please share your methodology and what factors you considered most important.