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How to Value a Website

Oliver Ewbank

by Oliver Ewbank on 26th March 2013

barcodeWhen a website goes up for sale it’s often difficult to put a true value on the business. Is the business sustainable? Does it have a healthy link profile? How much is the search engine traffic worth? These are all questions which will crop up in the buying process and in this guide we will help you calculate the true worth of a website.

Search Engine Traffic

If you are looking to buy a website you need it to have a steady stream of organic traffic. I would ask for Google Analytics access so you can review the amount of natural search traffic held in the account. Sort by keywords and calculate how much each term delivers per month and per year. Once you have this figure you can start calculating the true value of the traffic using:

Traffic Value Valuation Formula

AdWords Cost Per Click x Monthly Unique Visitors from That Keyword

For example if an online surf shop gets 26 visits per month for the term ‘wakeboard vests’ and the average CPC for this term (on AdWords) is £0.55:

£0.55 x 26 visits = £14.03 Vale of Organic Traffic for the term ‘wakeboard vests’    (£168.36. per year).

If you do this for the majority of your keywords you can get a good idea of how much the organic traffic is worth. If the client doesn’t use AdWords you can use the Traffic Estimator tool for a rough estimate of cost per click for the keyword based on past traffic.

Google Analytics Ecommerce Tracking

The above formula only calculates the value of organic traffic based on the average CPC on AdWords. To get a true estimation you will need to review the Ecommerce conversion data in Google Analytics. This data will provide information on:

  • Total revenue
  • Average order value
  • The number of transactions
  • Quantity of each product sold
  • Visits to transaction

Ecommerce conversion rate tracking will help you calculate the true value of traffic entering the site and you can sort by organic, paid and referral sources. Having access to Ecommerce Analytics will enable you to estimate future transactions and work out the average order value for non-paid traffic. If this information is accurate it can be extremely helpful when putting a forecast together.

Traffic Trends

If you cannot gain access to the Analytics account a good compromise can be to ask for traffic screenshots. Find out if traffic is consistent and trending up or down.  Run the site through a tool like Alexa and review the hitorical traffic trends of the domain.

Google Trends Regional

Industry

You may have found the perfect website to buy but it’s important to see if you are in a growing market. Is the traffic seasonal? Is it regional? Run some of the target keywords through Google Trends. You can then see the search trends on a yearly basis or over the:

  • Past 7 Days
  • Past 30 Days
  • Past 90 Days
  • Past 12 months

Domain

You can get a good idea about the value of a domain by looking at how old it is. The older the domain the more likely it will be trusted by Google.  Keyword rich domains trade hands for thousands of pounds but it’s important to understand an exact match domain does not guarantee a first place position on Google (particularly if it has links from a bad neighbourhood).

It’s also worth asking if any subdomains or blogs are included in the sale and performing an analysis on each of them.

domain for sale

Google AdWords Account

Many websites will generate sales through Google AdWords. If this is the case it is worth asking to take a look at the account. Why? By doing an audit of the PPC account you can forecast conversion rates and average Cost per Clicks. I would suggest reviewing the quality score in the account as a high score will be a massive advantage.

Quality score is an estimate of how relevant your ads, keywords and landing page are to a person seeing your ad. 1 is the lowest score and 10 is the highest.  If you achieve a high quality score you will be rewarded with a better average position at a cheaper cost per click. Look out for keywords with a quality score of 7 or above.

A well-structured AdWords account will help you buy cheaper traffic and conversions in the future. A poorly run account will need time and optimisation to make the return on investment pay off.

In addition you need to understand the AdWords spend as you will need to continue with these payments to achieve the same traffic levels in the short term.

Remarketing

If you can get access to Google AdWords it’s worth investigating to see if they have created any remarketing lists. Remarketing lists can have huge potential for future sales. If you are a competitor this can be extremely useful as you will have the opportunity to remarket your products to leads that are already qualified.

If the site you are buying is seasonal look to see if the member duration is at least 365 days or longer. This will give you the opportunity to target the same users in a year’s time.

Mobile

It’s almost pointless purchasing a website that is not mobile friendly. If you sort by device in Google Analytics you will be able to see what percentage of traffic comes from mobile devices. If there is a large amount of mobile traffic the chances are this is an area that can be exploited.

Does the website have responsive design? You can preview the site on multiple devices using The Responsinator.   To test how mobile friendly a site is use the free Google tool  www.howtogomo.com . This tool will review the speed, graphics and the navigation of the domain.

howtogomo

Email List

It’s worth asking if the sale would come complete with a detailed email list. Having a list of credible leads or past purchasers can be extremely valuable. Does the site have a newsletter? How many sign-ups do they get a week?

If they do have an email database don’t to be afraid to ask the following questions:

  • How often do you send emails?
  • What are your open rates?
  • What is your click through rate?
  • What is your unsubscribe rate?
  • What is your conversion rate?
  • How old is the data?
  • How many of the emails are active?
  • Do you segment lists?
  • What % of the emails are active?
  • Do they send HTML emails (what software do they use)?

These questions will help you understand the true value of the email list. Working out the open rates and number of active emails will help you put a value on each recipient.

Technical Review

When buying a website it’s essential to carry out a technical audit. Ask if you can have a login to the CMS. Then see if the content is easy to edit and if each page can have unique Meta data. If you can gain access to Google Webmaster Tools you can also see if there are any server errors or broken links.

It’s also important to investigate the hosting. Ask the seller the following questions:

  • Where is the site hosted?
  • Is it on a dedicated server?
  • How secure is the site?
  • Is there a control panel?
  • Is there 24/7 technical support?

Turnkey & Drop Shipping Websites

From an SEO point of view I would avoid turnkey or drop shipping websites. Although the sites are sold fully functional with a shopping cart the chances are that the content will be duplicated. Turnkey websites often have the same layout and copy as hundreds of others which will leave you way behind when trying to look unique to a search engine.

Social

If you are looking to buy a website it is essential that the sale includes ownership of the top social profiles. Social properties give off valuable signals showing search engines that you are a respected brand. If the website has a large Twitter or Facebook following this can then have massive potential for you to remarket products.

Twitter in particular can be an extremely valuable platform. The true value of a Twitter account will obviously depend on your business model but you can try using the tools below as an indicator:

Backlinks

One of the toughest things to value is the quality of backlinks coming into a domain.  Before you start valuing the total number of backlinks it is important to see if there are any harmful links that could hold back the site in the near future.

First things first, ask if you can be added to the Google Webmaster Tools account (to review the health of the site). Immediately check the messages section and see if the site has an unnatural link warning. If there is a warning message it’s essential you investigate further before making a purchase. If you do find traces of unnatural backlinks you will need to have a frank discussion with the seller.

If you have access to link analysis tools like Majestic SEO or Opensite Explorer it’s certainly worth taking a closer look at the backlinks. The seller may know something you don’t so audit the links on the following factors:

  • Anchor Text (is there a healthy variety of branded links?)
  • IP Address (are the links evenly distributed?)
  • Sitewide Links (if they have sitewide backlinks are they nofollowed?)
  • Reciprocal Links (are these links genuine or designed to manipulate PageRank?)
  • Relevance (would the source deliver appropriate referral traffic?)
  • Poor PageRank (are the majority of links poor quality?)

It’s important to find out how permanent the backlinks are. In some cases the buyer could be in charge of the backlinks and remove them as soon as the sale has gone through. This could damage your search engine rankings and leave you in a poor position.

Brand Reputation

It’s worth researching the sites’ online reputation. Do they dominate page one for all brand related terms? Do they have any bad publicity? Are there any complaints on large scale review sites?  Reviewing the feedback on customer service forums can be a big indicator on the reputation of the company. It’s also worth reviewing brand mentions on social networking sites like Twitter.

Questions 

Last but not least ask lots of questions. You can analyse endless data but nothing beats having an honest conversation with the seller. By asking the following questions you will find out a lot more about the value of the website.

  1. Why are you selling the website?
  2. How much profit does it generate?
  3. How many unique visitors does the site get per month?
  4. How long have you owned the domain?
  5. How many previous owners?
  6. What type of link building activity have you undertaken?
  7. Have you worked with any SEO agencies in the past?
  8. What type of content management system do you use?
  9. Where is the site currently hosted?
  10. Who are the websites’ biggest competitors?
  11. Do you run Pay per Click campaigns?
  12. Do you see growth potential in the site?
  13. What are the websites assets?
  14. What are the costs of running the site?
  15. Will the seller offer support after the purchase?

If you were looking to buy a website what questions would you ask? What would you investigate? Are there any scams to look out for? We would love to hear your thoughts. Please comment in the fields below.

Image Credits:

Domain for Sale from Bigstock
Bar Code & Cart from Bigstock

Oliver Ewbank

Oliver Ewbank

Working in new media for over 8 years, Oliver Ewbank has worked for a range of brands including eBay and SportBusiness.com on SEO, PPC and Social Media Management. He has won awards for his SEO work and been featured in a number of publications, including Virgin online.

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2 Comments

  • Scott 26th March 2013

    Great Post – not enough informative information around for buying or selling a website- very useful insight, thank you.

    Reply to this comment

  • Oliver Ewbank

    Oliver Ewbank 27th March 2013

    Thanks for your comment Scott.

    I think if you are paying big bucks for a website you need to do a thorough audit.

    The traffic and PageRank may look great but you need to dig deeper to find out the sites true potential.

    Reply to this comment

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