I was part of selling 7 or 8 websites back in 2007 and 2008 when multiples were sky high and getting 2 or 3 years revenue was commonplace. In fact, I don’t think I ever received less than 2 years on any site I’ve ever sold. Over the last few weeks I’ve been watching Rick Latona and Flippa and trying to figure out what sites are going for in today’s market. There was also an article today on DNW that revived my curiosity . It was an interview with Ryan Moran discussing his experience with buying and selling sites. He says he generally pay 8 X 12 time MONTHLY revenue. My first impression was that this was extremely low so I went to gather some data.
First I put in a few of the sites that Latona had for sale and then I entered a few from Flippa’s recent sales
| Latona | Annual Revenue | Asking/Sold Price | Monthly Multiple |
| Games | $157,522.00 | $800,000.00 | $60.94 |
| Health | $194,788.00 | $800,000.00 | $49.28 |
| Directory | $118,000.00 | $600,000.00 | $61.02 |
| Insurance | $166,292.00 | $530,000.00 | $38.25 |
| Entertainment | $99,500.00 | $500,000.00 | $60.30 |
| Insurance | $97,492.00 | $170,000.00 | $20.92 |
| Education | $112,800.00 | $250,000.00 | $26.60 |
| Reviews | $23,400.00 | $129,000.00 | $66.15 |
| Housing | $28,824.00 | $125,000.00 | $52.04 |
| Comedy | $11,880.00 | $36,000.00 | $36.36 |
| Blog | $3,400.00 | $13,800.00 | $48.71 |
| Flippa | |||
| Google News Site | $600.00 | $6,500.00 | $130.00 |
| Search Engine | $13,200.00 | $4,900.00 | $4.45 |
| Gambling | $12,000.00 | $3,750.00 | $3.75 |
| Patent | $1,180.00 | $2,000.00 | $20.34 |
| FB | $8,800.00 | $5,000.00 | $6.82 |
| Directory | $123,600.00 | $15,000.00 | $1.46 |
| Blog | $16,800.00 | $20,000.00 | $14.29 |
| Logo | $96,000.00 | $4,950.00 | $0.62 |
There are some very obvious discussion points that come up. The first being is that there is no doubt the revenue numbers being offered are inflated/made up. So far I have been in discussion with three potential web site buys this year and all three turned out to have considerably less income than in the very first discussion of numbers. I am certainly not calling Rick Latona a liar but with multiples of 36 to 60 months those numbers better be correct and have some history. In my opinion, three years revenue of a site with solid revenue history is acceptable. When you start getting into 5 years multiples then you really have become speculative. Even a brick in mortar business with constant revenue for 10 years has trouble getting more than 3 years revenue in good times. Add in this economy and revenue gets thrown out the window. It’s all profit dollars.
Now lets talk Flippa. Officially you’re supposed to be able to verify income but I have no reason to believe anyone is telling the truth over there. Potential? Absolutely. Many of these sites are worth a lot of money in the head start they give you alone. But look at the logo site that sold. $8000 per month and it sells for $4950? That’s either the best deal of the century or nobody believes they can achieve those revenues. There seems to not be many “in betweens” in the multiples. They are either going for 1 to 2 month revenue or multiples of 100 plus. Either way I think there really is no multiple being used when it comes to numbers over at Flippa. Only a person’s belief on what they can make out of the site up for sale. Hopes and dreams, not numbers and reality.
So what if you could get real numbers? That would make life much easier but I’m not sure how many people will give you that kind of data to come up with a current multiple. Which brings me back to Ryan Moran. He most likely does get real data in his private buys. In that case, 8 to 12 times monthly REVENUE is probably realistic in today’s market. Remember it’s not profit ,it’s revenue. I would imagine that a very very high margin site would sell for a higher multiple. The next question would be. Why would you sell something that is bringing in good annual revenue for just one year’s worth? Simple. You get an entire year of revenue for nothing and you can move on to another project. Site builders love to keep building. Cash in and move on. It also takes a lot of work off the table. You hear the words autopilot but there are very few sites that are autopilot. Taking the work off the table and still getting the money for the entire year appeals to a lot of people. And again this is average and is probably for an average site. He mentioned that his average payout is $1000 per site. Using his multiple that site is making $100-$150 a month. Would I take the $1000? All comes down to how long it’s been bringing in the revenue, how hard it is to do, and what I think the future holds. I probably wouldn’t because I don’t need $1000. I’d only sell it if it was a lot of daily work. I DO need the time.
So there’s your analysis. My conclusion is you can’t trust anyone’s revenue so I have no idea what the real revenue multiple sites are going for. Latona thinks it’s 3-5 years. People on Flippa think it’s 2 months or really don’t care. Ryan Moran thinks it is under a year. Me. I think it’s 2 to 3 years with good historic revenue.
12-18 months seems pretty fair based on solid numbers. Clearly “other” things come into play as well, like the domain name, customer lists etc. which could make things add up a little more.
I don’t have experience in selling or buying websites. But my impression is that it is harder to off load your websites than with domain names. With websites you have to justify your price where as with domain name u just pull the price out from your butt and go find a buyer. Each domain name is unique so arguably u r holding onto a one of a kind digital product.
It would be very difficult if not impossible for anyone to acquire CosmeticSurgeons.com, but my CosmeticSurgeons.CO is for sale but probably no domaines would be interested in buying it because I am asking for $2.5million.
I agree that 2-3 years makes it a good buy and we are getting reserves on our newer listings in those lines.
As for the revenue stats, I’m happy to go over them in person with you. We do our best to verify them.
Thanks Rick,
I have no doubt that if someone showed serious interest in one of the sites that you would give them all the info they needed. Thanks for the comment.
I own and operate a number of websites and personally, I would not let any of them go for less than 3x yearly profit (my profit is essentially equal to revenue as the only expense is hosting).
And with established sites, it is possible to put them on autopilot. Especially if the site has a good UGC system in place.
A lot of the sites on Flippa are garbage. You really can’t compare selling a site that makes $100-200/month to selling a site that makes 5-6k+ per month.
Here’s an arbitrary situation: You have a site that makes 60k per year (profit) (or 5k per month). You won’t sell it for less than 180k, or 3x yearly profit. If you had a domain that was worth that much money and you had no experience in sales of that magnitude, would you try and sell it yourself or get a broker?
Personally, I’d get a broker.
And the same goes for a high earning website. I have a site that is currently earning around 30k per year in profit. I’m considering selling it and if I do, I’ll contact brokers to help sell the site for me. Maybe list it on Flippa with 3x yearly profit as the reserve, but probably not. Too much uncertainty in that marketplace to make it worth my time.
Just my 2 cents.
Thanks for all your insight and analysis, Shane!
I buy websites on Flippa on a regular basis for a year already, so I hope I can add my 2 cents to this too 🙂
There definitelly are “in betweens” in the multiples. My personal limit is 12-month earnings and I bought 15 websites withing the range 8-12 monthly earnings.
Only one turned to be loser in a long run. Earning of others exceeded the claimed numbers or are within the normal variance.
The thing is, there is quite a lot of neccessary “know-how” behind succesfull buying websites. I myself made many mistakes. Now I want to share this experience with others (but I’m not sure, whether there are other people interested in this topic)
Truth is, there is an extremely huge amount of gargage on flippa (I personally estimate it to 1:100 … I have to open 100 ads to find one, that looks acceptable)
Regarding the multiplier: there IS a multiplier
First of all, the multiplier is usually derived from EBITDA (not from revenues), which is in most web projects equal to gross profit.
BUT: The multiplier is not same across different segments. By “segment” I mean, that it’s a huge difference between a niche-site exploting the google’s “exact match domain hack” monetized by Adsense and the established eshop, that has employees, defined processes, brand, loyal customers etc.
So. If you want to make some serious research on this topic, you have to:
1/ filter out nonsenses, scams, faked numbers etc. (like 50% of flippa ads)
2/ segment the rest by monetization method, traffic sources etc.
3/ calculate the multiplier for each segment
Then you get some solid numbers, that can be used for market valuation.
For adsense niche sites, there really is a market multiplier 8-14 months earning (only adsenseflippers are able to sell these for 24+ multiplier)
For established eshops from my example above (which would be almost like whole company, not just website, but the processes and know-how in the back-end), the multiplier tend to be 3-5 years of EBITDA.
I am selling my sites starting from 5 month revenue(if the sites is up for few months, and are built to execute some short term trends) all way up to 3year revenue if I can provide traffic and earning details for the past few years with stable growth and niche that won’t decrease in popularity anytime soon
I’m currently selling a site on Flippa that says it has x,xxx per month revenue but I clearly state this revenue is not included in the sale (its recurring affiliate commissions earned during the time I owned the site). The first time the auction closed it went for three weeks revenue on this figure (buyer didn’t pay, its running again), so would look terrible/great in your post. However its not accurate and I’m not trying to paint it as accurate. It’s really just a flaw/limitation in analyzing multiples in the way you are attempting to. Not every site fits neatly into that little box. I would imagine the logo company for instance and others going for really low multiples are cases such as this. The owners aren’t attempting to mislead people its just a unique case that you can’t accurately define by $/month.
The problem with the valuations is there is no solid benchmark. It is a moving target.
This is part of the reason I’ve always tried to avoid auction platforms and mass marketplaces for selling websites, though they’re great for buying.
Take the $100 monthly profits earner example. It takes a lot of time investment to build and launch, then grow the traffic (assuming organic) to reach that level for the average site selling products or information to consumers, or earning through PPC ads.
But, once you’re at that $100 monthly point and the site has some credibility and search rankings, it’s typically a much easier jump to grow it to a $500 or more monthly level than it was to get to that first $100 monthly mark, so how can it make sense to sell for $1,200 (12 times $100) at this point unless you’ve suddenly found yourself homeless and hungry?
The problem with auctions and marketplaces, is that the mindset is typically to buy based purely on history and not account for the reality that growing an established site is almost always infinitely easier than growing a new site.
I look at it like physical commercial property. A gas station on a one lane dirt road is going to have a low selling price, but the next day when the state announces they’re building a 4 lane throughway over top of that dirt road the selling price of that same gas station is going to increase by leaps and bounds.
With web properties, building them to that first level of being consistently profitable is the difference between being on a dirt road or a busy highway in my mind, because it’s so much easier to increase profits once you have them than it is to establish them in the first place.
So, personally if I want to sell a site I look for others in the same market space as my site who already own multiple sites, then pitch privately to them. If they have multiple sites in the space already then it suggests that they’re active in that market, know the traffic values, and have revenue streams in place–so as soon as they look at my site they’re going to form an opinion of what its value would be to them moving forward, which typically makes it easier to negotiate on more realistic terms than just past history and earnings.
It’s more legwork for me as the seller than posting an auction is, but my experience has been a lot better than the 10 to 15 times monthly revenue pricing I see so often in auction based marketplaces.
Thanks for the mention, Inwebstor…your comment led me to this interesting post/site. It looks like a good site to read and to go along with Justin’s blog at FlipFilter.
Scott – One of the reasons we sell for X times monthly income and it makes sense is because we reinvest the profits into new site creation. We’re getting pretty good at creating sites and getting them ranked/earning, but have very little experience expanding those sites. To take advantage of our strengths, we’ve decided that building and flipping them seems to be a good strategy for us and it allows us to scale up our site creation quickly. If we had to wait until we had enough profits from the passive AdSense income, we wouldn’t be able to scale up and increase production at the rate we’re currently at.
That being said, we ARE testing out expanding some of our niche sites to see if we can take them from $50/month to $500/month without having to sell. If we can get that process down we’ll be doing quite well here pretty quickly.