Forums: Discussions for entrepreneurs and small business.

First, thanks to all who have made Startup Nation possible.  It has been a true inspiration to me.

Here`s my question:

- Recently many websites have sold for a lot of money.  YouTube.com sold for 1.65 billion, dispite losing between 3-4 million dollars per month.  Google stated that to reproduce YouTube`s technology would cost between 50-60 million.  So why did it sell for so much? Answer: their network

Now it`s time for me to sell my website, www.MoonTownCafe.com.  We don`t have quite the size network of YouTube, but it`s pretty big.  I posted a 1st draft of a Spec Sheet on Startup Nation at:

http://www.startupnation.com/forums/6115/1/1

I`d like to know about how much it`s worth and if anyone out there has experience selling established websites.   

Thanks in advance,

 

Kyle

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Visit our poetry website today at:

www.moontowncafe.com

First of all ... you never mentioned how much money the site *makes*.
You are only making $1,124.25 in memberships per year. That is not going to make you the next YouTube!

So you have to know the value. How much do you make in advertising? How much do you make in your store? How much do you make in memberships?

What is the growth chart on memberships, ad sales, and traffic? Can you extrapolate and tell your investors how many of each of these things that you predict in the next 1, 3, 5 years?

What is the whole thing programmed in? Is it all custom programming, that the purchaser would inherit a jungle of code and a lot of problem if they wanted to upgrade?

These are things I would want to consider, to know the value of the thing I am buying.

Why would I want to purchase your web site when I can make one just like it myself?

That will be the first thing you will need to be able to answer before anyone will be interested.  Give me a good answer to that I will tell you the question that will follow.

 

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

What you`re buying is his traffic and users.

But what increases the value is how much money the site makes now and is projected to make in the future. Otherwise, the only value of it is a slight boost for traffic on top of the cost of making a similar site because you are buying the code.

For someone to start from scratch and design and build a website with this functionality and look, it would cost between $100,000 - $150,000

SEO work and the results would take between 2-3 years and cost about $50,000; but there would be no guarantee that the new website would have similar results.

To build a database to that size would take 2-3 years.  This large database, is part of the reason we have good success with search engines. 

To build a network that size would take several years and lots of advertising value.

All the code is custom, which is actually a good thing, nhgnikole (are you from NH?).  Packaged code cannot be easily modified.  It`s all written in ASP, which is easy to code in (even for an engineer like me).

The bulk of our income comes from advertising.  YPN is a very small portion of that.  Our site is profitable.  Did you know that YouTube was losing 3-4 million per month when they were sold? There is a value in a well established network, and that`s what I`m trying to figure out. 

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Visit our poetry website today at:

www.moontowncafe.com

I heard that youtube sold for a figure of $65 per user. I feel as though many purchases of community sites are more about the user-base than the technology. In terms of youtube losing money, I feel as though 2 points are critical...

1.Server costs will become much less in the future.  
2. Google will be able to increase advertising revenue for the site on a per page view basis.

Thanks for the feedback.  For the record, less than 10% of the people who use our site are registered members.  Just like YouTube users, most people don`t open an account, they just browse what`s out there. 

When YouTube was sold, they were serving 70,000,000 videos per month.  We`re serving 500,000+ poems per month.  Or a little less than 1% of what YouTube served.

Our strength, unlike YouTube, is that our audience is a fine niche that advertisers can target.  With YouTube, ads are mostly what are considered "run of the network" since the website attracts all types of demographics. These pay out much less (about 90% less) than targeted ads.

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Visit our poetry website today at:

www.moontowncafe.com

According to CyberWyre`s website value calculator, your site is worth just under $1000. You can read how he arrives at this figure on his site. This should help you decide what to focus on.

Quick analysis shows that you are getting under 9,000 U.S. visitors a month but you could probably get more if your site was better optimized. For example, you are missing alt-tags on 63 of 77 images on your site and your link URLs use query strings. I see 973 backlinks from Yahoo NOT 1500 as per your spec sheet?

Given that you feel that your audience is a fine niche that advertisers can target, you might want to consider adsense to see if it pays off for you. The more data that you can provide to a potential purchaser the better to help her value your business.


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A good idea is a good idea NOW![sup]TM[/sup]

ethnicomm inc. | sales | marketing | web | strategy consulting

Moontown,

I have had the good fortune of selling two companies (one in a private transaction and one publicly) - and I discovered in both circumstances that an outside valuation was worth squat. Ultimately the value of my company, in both circumstances, was what I was willing to accept and the buyer was willing to pay. I know this sounds trite, but it is really what it boils down to.

Once you know that your worth only what someone will pay, you need to go out and look for unique situations that will make someone want to pay a lot for you. 

Maybe someone that wants to take your site and leave it status quo, might not be willing to pay much. But maybe Barnes & Nobles, would pay top dollar for your site and utilize it as a platform for customers to write short stories, poems, etc.  This is a weak example, but there may be someone out there. If you look, you might just find.

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--
Mike Michalowicz
Author of The Toilet Paper Entrepreneur

Obsidian Launch has a good point.

I don`t think you can say "this is $150,000 worth of programming" because honestly, someone might be able to replicate that for a very small fraction using more recent software packages. So you are not going to get $150,000 for "$150,000 worth of programming". If I can make it for $10K and not deal with someone else`s code, that is better for me.

So really you need numbers about value and how much income the site brings.