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Make Money Online- the baby steps part 39

We have already said on numerous occassions that it takes time, effort and patience to make money online. Nevertheless, we have had to asnswer loads of questions regarding how much a certain website is worth, how to sell a website, what makes a website valuable and so forth. As alwasy we stress that these type of questions should generally come later in the process, when your website is established and you have some basic things firmly in place. A website doesn´t neccessarily have to be super-big in order for it to be worth some money. Serious website money has changed hands for a number of reasons that are less known among the general public. It´s not always as logical as you would expect it to be, however there are som guidelines that you might want to consider if you want to learn the business aspects of buying and selling websites. We know from experience that people definitively want to know about the money aspects of it all and since our site is after all about how to make money, here is a list of things that will make a website valuable from a potential buyer´s point of view.

1. Profitability. While websites that are actually making money are few and far between their numbers have certainly increased dratamatically over the last couple of years. Gone are the days when nobody was making any money online, yet everybody believed that the gold mine was just around the next corner. Today a healthy revenue stream can be expected if you only have an established website, with solid traffic and an effective technical setup. In general, if you have a solid revenue stream in place you should never expect to get less than annual revenue stream that your website is generating. But, that is really only the bare minimum, and if you have a number of the other items on this list in place your website could be sold for so much more. We would argue that the revenue stream need not be that important to the valuation of the website providing that the other items on this list are in place. If you have a well-coded, content-rich website with good traffic, an established brand name, a good domain, and a profile that fits a potential buyer strategically the price tag could reach the stratospehere even if you are not making a dime. Of course, the logic is that it is fairly easy to monetize a website if you only have all those things in place. If the website has a revenue stream in place a theoretical price tag can be quite easy to arrive at by simply using a multiple of the annual or monthly revenue stream. The multiple is dependent on a number of factors, but one of the more prominent ones is  the revenue history of the site. For instance a website that has been around for 6 months could be worth 8 times its monthly revenue, whereas a website that has been around for 5 years could be worth twice the annual revenue of that site.

In most cases though, you will be approached long before you have all those items fulfilled. Thus, if you are only looking at the revenue side of things, the valuation of such a website will not make any sense whatsoever. Since the valuation will go up dramatically once several of the items on this list have been reached, msny venture capitalists will try to get a foot in at a much earlier stage. Still, if they like what they see, or think they see looking into the future the price tags can be impressive even at this early stage. The potential rewards from investing in a website with potential are so massive that the valuation in many instances will reflect this potential windfall opportunity. Getting in early on a website with potential is like buying an option. The downside is limited to your investment. The upside could be greater than your wildest dreams. If you own several of these promising websites, like many venture capitalists do, you are likely to hit a home run with at least one or a few of them. Even if only a few of these websites ultimately become blockbusters, that is usually enough to offset the costs of the others and then some.

There you have it. Some basic guidelines to consider. But like we have said so many times before, don´t focus on the money. Focus on making your vision a reality. As we have said before, by focusing most of your efforts on building a great website with loads of nice features and not think about the money, the money will paradoxically come a lot faster. Forget about money, revenue and profits in the beginning. Just think about creating the best possible user experience and the money will come.

2. Content. Creating content is time-consuming. Creating unique high-quality content requires a specific skill set. And if your website has a solid base of quality content that is original (i e it has been written for your site only and is not a rewrite of something else that can be found easily on the web) your content has even more value. If you have a content-rich website, chances are your site has been around for a while. All that content has been indexed thoroughly by crawlers over the years and if the content has been around for a while Google will rate it higher than the new stuff. Every bit of content on your site can be considered as a tiny piece of magnet. Each post, page, pic or comment is valuable. It attracts generic traffic. Every time a search is conducted you stand a chance of getting some free traffic. The more content the bigger the chances to get traffic. Once all those small bits of magnets are added up you get one pretty big magnet going for you, drawing large numbers of free visitors to your site. And all those visitors are wort something. On the internet attention is worth money. And the right type of attention can be worth lots of money.

So what type of content is worth the most? Is it fresh content with a limited shelf life or is it evergreen content that will stand the test of time? It´s a difficult question, and as is usually the case with difficult questions they have several answers. In general you will want a bit of both. While fresh content with a limited timespan is likely to keep visitors coming in through the front door a solid foundation of evergreen content is a good way to keep them in hanging around in the store. A reputation for providing good fresh quality content that deals with this moment is fantastic for traffic. But if we are looking at the valuation side of a website, the evergreen content certainly ups the price tag. This is especially the case if there is a lot of it and if it will take lots of time and effort to replicate it. Every content-rich website will struggle with this question., Do we go evergreen or do we go fresh and short shelf life? The solution in most cases is to do a bit of both. As the years go by your website will become a consíderable resource and all that content will represent serious value to a potential buyer. Get the content in place. It is, in many cases, the very foundation of your website.

3. Traffic. Whatever your website is about a nice solid daily number of visitors will make it valuable. On the internet you get payed for the total number of eyeballs that you can mobilize and the amount of attention you can muster. In general, the more people tune in to your website, the more you will get paid. The reason is that Google Adsense is the primary choice of revenue for many a websites. It´s a numbers game and once the traffic is there it´s not terribly difficult to convert that traffic into money. So how much is your traffic worth? That depends on a number of factors. What kind of traffic is it? What kind of website do you have? What kind of keywords are you targeting? For instance, if you are running a niche website about exclusice watches and you have a documented hit rate from rich potential buyers of those watches, you could get payed a handsome amount of money. On the other hand, if you run a website about poetry with a disparate group of visitors, you will find that it is harder to collect that paycheck.

The internet is still considered by many business people to be one gigantic marketing vehicle. The logic is simple: you have a bunch of people surfing around looking for information and if you can catch their attention for a minute you can sell something or market something to them. In the business world, people are still seeing the internet as a way to grab the attention of potential customers. But the power of this media vehicle is twofold. First of all you can make money by simply having a large volume of traffic. If the volume of traffic on a website is high enough it doesn´t really matter what demographic or socioeconomic background the visitors have. The principles of merketing still apply. Mass traffic means a potential market which in turn could be transformed into a massive revenue stream. However, you don´t really need a mass market to be able to make a considerable amount of money on the internet. If you have a niche site that targets a specific type of audience you could walk away with a lot more than some higher-volume websites do. If for instance the visitors of your niche website are affluent, represent a target market segment, and are in “buying mode” (meaning they are actively pursuing information in order to be able to make a sensible buying decision) your website should be able to make loads of money. Whether a website is mass or niche the underlying principle stays the same. The internet remains a marketing channel among many others and the attention of potential customers is a hot commodity. On average, every individual that visits your website is worth between 1 and 12 american cents, dependingon your experience in ad incorporation and CTR strategies.

4. Code. A website that has been custome-built in order to adress a specific problem or need is potentially worth quite a bit of money to the right buyer. In general, the harder it is to replicate the coding effort the larger the value of the website. The explosion of more effective CMS software has certainly upped the challenges custom website coders face. Even a fairly computer illiterate individual can make an acceptable website. The overall quality of the web is growing for each day that goes by. And since the number of websites has grown at an exponential pace the difficulty to make it across to potential users has increased dramatically. There is so much to choose from, and the attention span of the average surfer has been decimated time and time again. The writing is on the wall. You had better be good. You had better provide value. And you better do it quickly. Or else we will move on. That´s the way the story goes these days. In such an environment it´s more important than ever to stand above the crowd. Adding a cool and useful feature on your website is a good way to accomplish just that. And once that piece of code is in place, it is not only drawing repeat visitors, it´s also increasing the value of the website.

The competition is fierce though. The gap between custom-tailored websites and CMS-based websites is narrowing. This can to a large extent be attributed to an ever-increasing selection of good plugins (there are tens of thousands to choose between), but also a higher general quality of CMS software out there. The assembly line methodology has entered the website development market with a bang. Completely custom-built websites are few and far between. Many coders simply buy a CMS and alter it to better suit their needs. Or they simply write a suitable plugin. In this way they can often realize the better part of their vision but at a fraction of the time and cost it would have taken if the site was to be completely handcrafted. The numbers speak for themselves. The world´s most popular CMS, WordPress, now is powering approximately 15% of the top million websites of the world. And out of every 100 new US domains, 22 are running on WordPress. We believe this trend will grow even stronger in the future. Why pay a fortune for something when you can have 95% of what you want for a few bucks. The added value of going custom is just not there. That being said, we still believe that a custom-built website has great value if it fulfills a need or provides entertainment. And since everybody else is going CMS, you just might want to consider going in the opposite direction. If you do it the same way as everybody else, you are going to experience the same results as everybody else. And while the CMS market is impressive, the next Facebook or Youtube ain´t going to be built on WordPress, Joomla or Drupal. For the more fine tuned websites out there custom is still the way to go.

5. Brand name awareness. If you have been operating a website for a number of years that means that your website has a reputation, a following and a brand name in place. And since all those things imply traffic, they are worth money. A brand name implies user awareness and a base of repeat users. One of the reasons a brand name has value is that it takes time to build. By buying it a motivated buyer can get a shortcut and save years of hard work in trying to establish some form of market presence. Doing business on the internet is very much about time. Everything takes time. Lots of it. It takes time to get some meaningful amount of content in place. It takes time to get some good backlinks going. It takes time to get noticed in a relevant way by the crawlers and to rank well with Google. It takes time to establish a base of loyal followers. It take time to build a brand name and brand awareness to your domain URL and your website. It takes time before you can start to monetize in any meaningful kind of way. The internet is not as simple as many people believe it to be. You need to be present on a number of different platforms simultaneously. An active Facebook page or a widely followed Twitter account will add major value to your website and its brand name and market presence.  An active forum with a history of engaged users is definitively worth something. Some good press over the years might not hurt. In general, anything that takes time to accomplish and anything that makes  a website a prominent memeber of its natural community is something that enhances the value of that website. The barriers of entry are extremely low nowadays. Technology has made internet presence readily available to anybody with a couple of hundred bucks to spare, a medium computer experience, an internet connection and a website idea. Everything takes time. An existing brand name can kick-start the process of establishing a strong market presence for a website. And that´s exactly why a solid brand name is so valuable.

6. Links. A website that has been around for a while is likely to have a number of links to it. Even websites that are quite new can get a large number of links in  ashort period of time if it provides value to their users. Of course having a large number of links in itself is not worth anything. There are links of different quality, and if your links are low-quality they are practically worthless. In fact low-quality links might even hurt you as your website is likely to be penalized by Google if your links for instance have been bought rather than aquired by real users who liked your website and found it useful. If your links are high-quality on the other hand they are worth something. High-quality links are telling Google and the other search engines that people are finding your website useful, relevant and enjoyable. They have to, otherwise they wouldn´t link to it. And since a lot of people have added your website to their favourites or created a link to it Google and the other search engines will figure you´ve got the goods and start ranking you higher in searches. These links are particularly valuable if they come from significant sources (such as a big website with heavy traffic) and if they are only going in one direction (you don´t have a link in place going in the other direction).

While links can dissapear fast, that is highly unusual. A website with a large number of links to it is likely to stay that way, unless something dramatical happens to the content or features of the site. And since a large number of incoming links will drive generic traffic to your site, those links are worth money. How much money they are worth is dependant on a large number of factors such as the quality of links, the type of links, how the link has been constructed technically, and if these links are going one way or in both directions. It is a catch 22 type of situation really. Great content creates many links which creates traffic. But in order for people to realise that you have great content in place it helps to drive traffic to your site and for that you need some quality links. This problematic relationship represents difficulty for the online entrepreneur, but given enough time, effort and patience it can be solved.

7. Domain name. A good domain name is hard to find these days. That in itself makes domain names a valuable commodity. If you happen to be sitting on a domain name that is short, to the point and has both meaning and marketability to a specific target audience it is definitively worth something. A good domain name doesn´t even need to have a website attached to it. It can be worth large amounts of money in and of itself. A potential buyer will often have a vision for what they want to do with that name and if they are about to invest a large amount of money on creating a strong internet presence you might be surprised as to what a solid domain name can be worth. Domain names can be valuable for a number of reasons. Some domain names will dramatically improve the SEO of the website. Some names will convey what your company is about in a good way. Some will be easy to remember. Some will be short, sweet and easy to spell. Some will be a dotom. Some will be the only option that is around in a particular business area. Some will be related to a business area with dearly priced search keywords. No matter what the reason is, great domain names are worth money and as time goes by the numbers are likely to get even bigger. Think of a great domain name as a peice of property, or rather a piece of land with really good location. As time goes by the location of your domain starts to look even better as all the surrounding spots have been built on or exploited in another way. As long as the location is good, the money will be good as well.

8. Strategic value. A website can be worth quite  bit of money if it fits the bill from a strategic point of view to a major player in that business sector. For instance, if you happen to own a network of travel sites covering Eastern Europe that will go down well with a potential travel agency that wants to establish itself in that particular area. Your digital business represents a good strategic fit for that particular company and as every business major will be able to tell you; a strategic fit implies an improved price tag of your internet presence. Another strategic value of a website is that by aquring you are eliminating a threat or a potential competitor down the road. This is especially true if a large company for any reason feels that a much smaller company has some kind of new technology or concept that could pose a threat in the future. The solution to this problem is pretty much the same everywhere: “Pay them now, pay them big”. Yet another potential strategic value that can increase the value fo a website is if a good customer database is part of the deal, and that customer database can be put to good use by the buying entity. In some cases a website can be aquired in order to scoop up the talent behind that wensite. For instance if a group of expert programmers have created a new cool website another company could offer premium money not only for the website but also to get their hands on the talent behind the website. This is also to be considered a strategic deal.

In some cases the website being bought will complement the existing value chain of the buyer in an effective way. They will do so by adding a supplementary service in a neat way to the primary site. For instance a well-trafficked social media community could find massive strategic value in an app software that provides social photo sharing. Much like Facebook and Instagram. In fact, exactly like Facebook and Instagram. There are so many forms that strategic value can appear in that it is nearly impossible to reflect on all of them. But one last item we would like to include in this list is the strategic value of patents. We see this one as a strongly trending item. The importance of a strong portfolio of patents that enables you to delay or destroy the effeorts of your competitors is a strategically important and valuable tool in the tool kit of multi-national corporations. We suspect this will soon play a strategic part of the internet world as well. We don´t like it, and we believe that it is destroying the underlying business climate of the countries where this kind of behaviour is practiced. Yet there is nothing that can be done. In some unfortunate business climates the truth is written by the players with the largest pool of lawyers, the deepest pockets and the widest diversity of their patent portfolio. In other business environments the truth is written by market forces, supply and demand, and a level playing field regardless of how big or small you are. We know what kind of business environment we´d rather operate in.

So there you have it. We have concluded an overview of the major factors that make a website valuable. You don´t need to have all of these factors in place to have a valuable website. But in general the more of these things you´ve got covered the more money your site should be worth. This list has not been written with the intention to provide you with a road map to achieve riches through your website. But the obesrvant reader will have noticed that all the actions that add value to your website are also the very same actions that bring value to your users. This is kind of logical, don´t you think? The more value your website provide to users, the more it will ultimately be worth. So go to work. Improve the overall experience of your visitors. Look to add value in every action you undertake. And make your website a highly valuable commodity in the process.

Oh and after you do sell that website of yours for an undisclosed juicy sack of money a couple of years from now, don´t spend it all at once.

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