Start Up Blog

How to sell a website

Posted in entrepreneurship by Steve Sammartino on May 7, 2012

While there are many examples of startup entrepreneurs selling dominant websites for a gazillion dollars. A less known fact is that small, or even micro websites can be sold. In fact, there is a thriving private market for sites which fill particular niches or have the potential to be much more than the founder could manage.

In the spirit of demystifying this process of selling any website, big or small, I’ve developed a list 4 simple things that are key to selling digital assets such as sites and apps. It’s important to note that we don’t need all 4 to make a sale, very often just 1 of these will suffice.

1. Traffic:

Probably above all things is the number of people frequenting a site or using an app is the quickest path. Any site that has this should really be able to sell the eyeballs. The main reason for this is that correctly or incorrectly, the web is still largely seen as a media vehicle and so ‘eyeballs’ are still valued very highly. In fact, heavy traffic may even reduce the sites ability to make money, as was the case with Youtube which only recently started turning a profit more than 5 years after it was sold for $1.6 billion. It must be said that the traffic doesn’t have to be mass. It could be highly sought after niche content traffic of the right people. This could include a membership database.

2. Technology Platform:

If you have built something of value, a site that functions well, and does a job using technology, then this asset itself could be sold. The price should be at least what it would cost to make from scratch or the cost less ‘renovating’ the technology. Sites which have unique or new technology platforms can often be sold at prices far above the creation cost because they can provide a great short cut for other businesses who either don’t know how to build it, or don’t have the time.

3. Brand Name / Market Presence:

A brand name or .com that is known for something can be quite valuable, even if the idea and concept did more work than the site itself. There are still plenty of words and url’s that can be sold on ‘pure potential’. If we have some good media coverage from when we launched, or throughout the journey this can really enhance the potential for the selling process. A market presence might also include a deep content trail. This could even be the accumulated words of a long running blog, listings on a classified site or any other form of crowd sourced content. Although we think that content should all be fresh to have value, the truth is some long term solid long tail content is often the hardest thing to build in a web business, and smart buyers know this.

4. Revenue:

We know the world has really changed when ‘revenue’ or ‘profit’ are the last on the list. But the truth is that revenue should really be the end result of getting the first 3 items on this list right. Which is why so many sales happen before this occurs. The suitor knows this, and is essentially trying to acquire the asset at a discount, prior to the realisation of its full value. That said, if you do have revenue then the minimum amount we should ever sell the business for is equal to annual revenue. But we all know that any digital asset could be sold for many times more.

While it’s better to have all 4 of these, there are arguments that we can extract more value if we are pre revenue. The 2 classic examples are Youtube and Instagram, which both sold in the billions before they had any money coming in. If you’re interested in seeing the selling price of some other famous digital assets and websites, I think this chart is interesting as it breaks it down into many segments.

I’m also sure these 4 items are non-exhaustive when it comes selling out, so please share any others in the comments.

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9 Responses

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  1. Matthew Ho (@inspiredworlds) said, on May 7, 2012 at 2:57 pm

    I think what we are also seeing acquisitions for these reasons:
    1. strategic value (adding customer database, engaged audience, supplementary service or taking out a future threat)
    2. talent acquisitions (which is not for the website itself but for the talent i.e. people).

  2. Agatha said, on May 8, 2012 at 11:12 pm

    Hi Steve,
    A bit off topic post. I really enjoy reading your posts and I honoured you with The Versatile Blogger Award. Please follow the link for more details: http://lifestyleinc.wordpress.com/2012/05/08/a-day-in-the-kitchen/

    It is up to you to participate of course but any way I wanted to let you know that I am one of your loyal readers:)

  3. Ophelie said, on May 9, 2012 at 11:14 am

    Being the digital marketer for Flippa.com (the biggest marketplace for buying and selling websites), I know a thing or two about selling cool sites. There’s a lot of good stuff here, but let me add a few precisions, based on my experience as a keen observer of the website marketplace.

    Let’s do this point-by-point:

    1. Traffic. This is one of the two key points that most buyers are looking for when evaluating a website purchase — at least a half-dozen months of steady, varied traffic. The latest Google update, Penguin, made it very clear that websites can’t rely on one search engine for the majority of their traffic. Why is traffic so important? Many sites are monetized with ads: the more eyeballs, (generally) the more the site will make.

    2. Technology platform. As an appreciator of nicely-developed sites, it kills me to say this: it doesn’t usually matter, unless it’s very unique and very cool. Most technology can be reproduced more-or-less easily and cheaply (especially when you outsource the development). Unless there’s a high barrier to entry for competitors, cool technology is sometimes just a great idea ready for the stealing.

    3. Brand name and Market presence. A steady history of good press and a dedicated, loyal user base is a huge plus — I suggest showing off an active Facebook page and Twitter account as proof of your users’ interest. You’re right to point out that long term, solid content is important: a long history of blog posts with comments or an active forum shows that users are in it for the long run. A great dot-com domain is also excellent — often, buyers will pick up the site for the URL only. This brings us to the most important point…

    4. Revenue. I have received hundreds of messages from sellers whose site has “great potential”, an “engaged user base”, and “lots of money spent in development/content”… and who have completely unrealistic expectation for their website. At the end of the day, most website buyers are buying a business, not a dream. They’re looking for dollars so they can make up their investment eventually. If the first three points are really strong, revenue may be less important, but buyers still want to know that the site can make at least a little bit of money. Otherwise, why not just donate the money to a nonprofit cause, cool art project or their favourite blogger?

    What would I suggest to a developer who wants to sell their site? Don’t rush it. If your site isn’t quite where it needs to be in order to sell it, keep working on it until it is. Build up those backlinks, tweak your monetization methods, promote your site. Selling a site isn’t a get-rich-quickly game, but it can be hugely rewarding with some good old time and effort.

    Everyone who is interested in selling their site should have a look at the Flippa blog, starting with this post:

    http://flippa.com/blog/guest-post-5-ways-to-value-a-website/

    • Steve Sammartino said, on May 9, 2012 at 5:29 pm

      Loving this summary from an “expert” in the market.

      Thanks for the additional thought Ophelie – freaking awesome.
      Steve.

      • Mildlycurious said, on May 12, 2012 at 4:54 am

        Great post, @sammartino and points from @ophelie

  4. Hitesh Mistry said, on May 16, 2012 at 7:22 pm

    Takes time, A good website is not built over night. Needs time to grow and get established.

  5. Kristen M said, on May 20, 2012 at 11:02 am

    When we hear “great potential” or “I don’t have enough time to develop this” … we run. Concrete (and verifiable) measures like traffic and revenue are what we look for. Totally agree … buyers are not buying the seller’s dream.

  6. Shahzad said, on January 19, 2013 at 3:42 am

    Nice Post Steve..keep it up :)


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