One of the trends that I suspect we’ll see more of in 2005 and beyond is Blogs for Sale. This past year saw Jeremy Wright sell his blog which proved that its possible – but the question it leaves me wondering is – ‘How Much?’
How much would you sell your blog for? How would you determine the asking price?
I’ve done a bit of searching around on Google and so far haven’t found too much quality advice. So far the main opinion I’m seeing is that you either sell it based upon one or all of the following three characteristics:
1. Domain Name Value – If you’ve got yourself a highly sought after domain name you might be able to sell that alone – the buyer could scrap your site and build their own. In a sense this is like selling your home that is falling down knowing that the buyer will knock it down and build something else – they’re paying for the land. Domain name value can range incredibly – loans.com apparently sold for $3,000,000 for example….
2. Traffic – Most of us don’t have a domain of that high a value – but that doesn’t mean our blog is worthless. Traffic levels are obviously another method of determining the value of a site. Highly trafficked blogs obviously have a higher potential for earning than those with no readership. However determining the value of traffic is the tricky part. I’ve seen people value traffic at anything from $3 to $10 per hit per day. By this equation a blog with 1000 impressions per day would sell for anything between $3,000 to $10,000. The downfall of this approach is obviously that some traffic is more valuable than others. A blog that is personal in nature for instance might have 1000 daily impressions but they are harder to convert to income than a blog with 1000 impressions that writes on the topic of plasma screen TVs.
3. Earnings – a more logical approach to me would be to base your asking price upon current and projected earnings. To do this your blog will of course need to be earning something to start with. Again there are different opinions around the web as to how to use current earnings to assess a blog’s value. Some say you should expect 6 – 8 months earnings as a price (ie a blog with a daily income of $100 would sell for between $18,000 and $25,000), while others calculate a site’s value as being 2 years of current earnings (ie a blog earning $100 per day would be worth $73,000). Again this doesn’t really help much as there is such a huge difference between these methods of assessing value.
I suspect we’ll just have to wait and see what sort of figures are generated by sales over the next year or so. In the mean time however I’m very interested in how YOU would calculate your blog’s sale asking price? Leave your thoughts below in comments.
Depending on what the accountants could work up, I would take any offer over 400K seriously. You have to factor in the expenses of a sale into the cost, so that would be a low figure. Lawyers, taxes, CPAs and negotiators all cost a pretty penny. And then there’s the issue of payment–multiple payments, lump sum, percentage?
It’s a complicated issue, but one that I would love to see written out in some detail here.
Good points Jon, I’d not really factored some of those features into what I was thinking for some of my blogs.
Out of interest – what are you basing your 400k figure on? hits, current earnings multiplied by a time frame? Don’t feel you have to disclose too much but am interested into your working out of the figure.
I’d probably be willing to begin thinking of selling my blogs for a minimum of 18 months earnings – but would be a bit reluctant to do so as they are still in a period of growth and I suspect next year would see me easily earn that kind of figure…..
What do others think?
A combination of earnings multiples, and growth. For example, if I’m growing at 10% a month, in a year I’ll be making 310% more. So if I would sell for 1 year’s projected earnings (to keep numbers easy I’ll start at $100 monthly gross), the value would be $2,452.27. When you’re growing the gains are exponential in your favor.
Now I don’t think you’re going to be able to sell for a few (2-4) times projected earnings. But if you look at projections for the near term, 6 months lets say, and make some numbers based on that, it will hit in the middle of the road. Hedge the risk you could say.
The problem with not factoring in growth is that in a years time I could be making in 2-3 months what the “value” of the site is otherwise. That would be eternally frustrating.
Also, I know 400K sounds like a lot (before I started thinking about it, 400K sounded like a whole lot), but after taxes it really takes a hit. That will put you in the top income bracket, which is 40% off the top (In the US, income tax + FICA on the first 90K or so). Writing a 160K check off to the IRS would be a major blow.
The costs should not be overlooked, I’ve discussed this with someone who sold two mid size (7 figure sale price) sites (once his own once as a negotiator). Anytime changes are made to the contract, and the contracts do get lengthy, your lawyer needs to look it over. For a smaller site like we’re talking I would expect the overhead for the deal to be in the 15,000-20,000 range (excluding a negotiator which is a great idea and will probably make you more) unless you happen to have a contract attorney as a good friend.
I think the biggest question is what the sale includes. In Jeremy’s case, he sold the ownership of the site and the right to advertise, but he’s going to maintain a working relationship with the new owner and write for the weblog.
In the case of most personal weblogs, if the owner abandons it completely, posting stops (or is continued by an entirely different person) so the site has no value aside from the “tear it down and rebuild” value of the domain name.
This means that valuing a weblog by its traffic or its earnings may not work, because when the original owner stops posting traffic and earnings may go down.
Good points Jon and Michael,
I was thinking about the ongoing relationship thing with the site last night. I guess you could package your own ongoing posting services with the sale to increase the value.
I agree with your thinking on how you came to your price Jon and would come to a similar figure to sell my collection of main sites – a combination of current and projected growth.
What about others?
I wanted to also add that posting on a site such as mine could come from other people (in fact names aren’t on posts, some posts are from others). In the contract would be how long I would stay on to train staff and have an editorial focus, for a set fee or percentage.
yep – I think most of what I do could easily be passed on to another blogger to take over – I suspect I could do it in a day or two and then be ‘on call’ for ongoing training.
Hmmm – so now we just need to find some buyers with a spare half a million in their pockets… :-)
I’ve gotten two real offers for the domain name recruiting.com in the last two weeks. One was over 100k. Did not have to think to hard about that one
In the past year I have sold and purchase a decent number of websites and blog related sites. We sold our first 2 sites for 3 times annual revenue. The sites were vacation rental listing site that had listing revenues and adsense. I recently purchase blogcatalog.com for approximtaly 2 times annual revenue. In the “real” world a business that returns 50% in the first year on the sales price is a steal. The only way this is possible online is because overhead can be reduced to almost nada.
hey thanks for visiting my blog int he past. Currently I am relocating and changing jobs and would like to hand my blog over to some one else. It is only about 3 months old and has gotten great reviews. Please contact me if you or anyone else is interested. There will be no cost attached except a small fee for my labors. Please post about it in your blog. Maybe you can start a discussion going abut whether someone can get rid of a blog by selling it and so on, be creative. Thanks…http://neriaswhirl.blogspot.com/
I found your comments interesting, BUT to some extent you all remind me of the scene in Friends where Foebie is blinking her eyes and thinking that she is changing the channel “magically” whilst in reality Monica is switching the power on and off in another room!
It may seem like you are deciding the price you can sell – based on complex formulas of one sort or another – but in reality the prices are being determined by the play of market demand and supply. When demand out paces supply, the sellers can ask good prices (based on whatever justification they can put together, but that’s just window dressing) Try using these “formulas” when the market is weaker. Then the buyer will be determining the “formula” and it won’t look like these!!
The value of any asset be it a business, apartment building, or blog is calculated the same way: discounted cash flow. It’s the sum of all future earnings discounted to the present via an appropriate discount rate, which you can think of as your required rate of return. If you want a 15% yearly return on your blog investment, you’d discount future earnings by that amount. The math is simple. The difficult part is estimating future earnings accurately. But the whole “2 years earnings” or “$2 per impression” methodologies seem pretty silly and unlikely to prove accurate. At least with DCF your assumptions are made explicit.