I have often wondered what are the variabes that determine the market value of a website and how do webmasters place a going concern or carrying value on their websites.

After-all I personally believe a website should be treated as either a non-performing or a performing asset because cash-flow follows only two directions: north or south.

It doesn't matter one iota whether or not money is being generated from a website that your designed and published to the world wide web. If you built it yourself, your time of course should be considered as an input for monetary value: every single webmaster's time is worth something! There has to be an average market value for the ordinary website out there.

With the foregoing in mind, how do you determine the "fair value" of your piece of "cyberland" because I know it falls into the category of intellectual property rights which would have taken some cost to acquire whether it was built by owner or by contracted professionals.

I recently ran across a method being used by one of the website selling services and found this method to be quite practical in terms of a current value assessment along with projected economic benefit.

as under:
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Market Value Assessment for websites

The easiest method is to use the Net Income the website has produced over the last 12 to 24 months to arrive at a value range.

However, we at BuySellWebsite® use a monthly average of the last three months of Net Income and Unique Visitors and then multiply by a nine and twelve month multiplier to obtain a value range.

An example: If a site had an average monthly Net Income of $4,533 for the last three months. And if the site had a monthly Unique Visitor average of 8,660 for the last three months. Then we can value it in the following manner.

To put a dollar value on traffic we take one-half the average of the top fifteen pay-per-click bids on overture.com for a relevant keyword and multiply it by the unique visitor average. In this example we'll say the average Pay-Per-Click number came out to .16¢ (Multiply .16¢ by 8,660 to get a unique visitor value of $1,385)

Then to get a value range we add the two numbers together and use a nine and twelve month multiplier to come to a value range.

$4,533 (Avg. Monthly Net Income)
+ $1,385 (Avg. Monthly Unique Visitor Value)
= $5,918

Multiply by a 9 and 12 month multiplier to get...

$5,918 x 9 = $53,262 (Low Value)
$5,918 x 12 = $71,016 (High Value)

This can give you a reasonable idea of how much a website is worth; however there is also something called the "content value" which is all the other variables that make the site more or less valuable; for instance the websites uniqueness, professional design, proprietary software and market position.

This is why we recommend getting an Website Appraisal for your website. The content value can sometimes sway the value of a business by as much as 40% either way.
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This was provided by : http://www.buysellwebsite.com
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I will now encourage responses to the following:

How acceptable is the above approach, is there any vital issue that should have been taken into consideration?

Are there other comparable methods of reaching a determined value for your website?

Does the niche or industry factor count?

Should the accounting for value or the accounting for popularity principle be used?

Should there there be a governing standard probably imposed by w3 and accounting bodies in valuing website from the ground up?

I would welcome some feed-back from the more konwledgeable experts within this forum so as to broaden and enlighten my knowledge of applying business principles to the internet.

Royan Shaw
http://www.search4article.com

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N.B: I am planning on proposing a method of valuation to be used to determine the market value of a website. This will be posted as soon as completed.

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Royan is a self proclaimed expert on finance, accounts for any business both online and offline. Also contributing to the development of the newbie webmaster on matters of affiliate programs,advertising and marketing ideas.

graysofte,

I have a problem with the "Market Value Asssessment" outlined in your post. The term "Net income" (for the purposes of assessment) should be more defined. Interest on debt, owner's salary, etc. can have a huge impact on the bottom line. Also, I don't see the rationale for using the profit figure from the last three months. Most businesses are cyclical and the annual profit would give a more realistic picture of the operation.

I also find that paying for the number of visitors, who generated the profit for which you would are also be paying, is unrealistic. I note that, in the example shown, 8660 visitors generated $4533 profit. That is, the average profit per visitor is $0.52. The method of assessment shown calculates the worth of each visitor at $0.16.

If I were trying to assess the value of a website, I would look at the book value of the business, the cost to create a similar business from scratch and, most importantly to me, the return on investment.

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Margaret
Christmas Ornaments by Tree Treasures