What is the value of a website?

by Arvo Elias 06th September, 2017

What is the value of a website?

Buying or selling an accommodation business today invariably includes a website. It does not really matter whether you are the seller or buyer because either party has to establish a dollar value as it is an asset. Just as obviously, the vendor's view is a mirror image of the purchaser's considerations and diametrically opposed. So why does a website have a value?


The reason that a website has value is because a potential buyer can make a profit from it just as the seller can claim he has derived that profit. Nothing more, nothing less.


If you seek the help from a plethora of various professional valuers, you may well become totally confused and arrive at a very inflated value.


Their usual equation looks something like this:


'Total worth of the website' = 'The value of the amount of revenue earned from the website' + 'The value of age and inbound links' + 'The value of the domain name' + 'The value of the page views and the unique visitors to the website' + 'The value of the amount of the website’s content'.


I have actually copied that from one of the majors' website. My first reaction is to wonder how one can possible establish the value of each variable in that equation. The monetisation method of each factor is debateable and often quite obscure even before that view is flavoured with the assessor's own agenda.


That equation is fine if one considers the website as a stand alone commodity. In your case, that is not so because the income generated by the website is invariably included in the trading account's income column. The other components often break down into sub-components and unless we are dealing with a major enterprise like the eBays or Amazons of the world there is a far simpler and,  in my view, a more realistic way to unravel this conundrum.


To begin, I would start to rearrange the order of the factors in that equation.


The first component to inspect is the domain name. If it mimics the business name, we are doing well; if it ends in dot com or, preferably, dot com.au; the first goal has been reached. In other words, if your enterprise is called 'My Great Resort' then the preferred  domain name should be "mygreatresort.com.au".


The second most important component is the actual content. That should be extensive but without repetition. Reading the content should be akin to a book; lots of valuable, concise, relevant and interesting text. The sole purpose of all this content is to sell. Sell whatever the business you are buying offers to your potential guests. The most important information, complete with a call to action, should come first.


Clever selling prose relies on emotion rather than cold facts. Effective content has to have keywords accurately placed within the text with sentence structures playing a major part in search engine optimisation. There is also a relation between the visible text and certain aspects of code structure. If you have any doubts about evaluating these aspects, then professional advice is highly recommended.


Today, the compliance of the design for mobile rendering is very critical. Even though we have not seen this yet, Google has declared that dual indexing will commence and ultimately evolve into an index of mobile sites only. This means that, currently, a website will be listed in the normal manner irrespective of its suitability for mobile devices; while, at the same time, a second index of mobile-friendly sites is generated. We are already seeing this by notes adjacent to search results describing the reference as mobile-friendly or 'not mobile-friendly'.


The current classification of the site could, at worst, then mean that the whole design may have to be scrapped because of this non-compliance; or,, at best, just have some minor code modifications applied. So this is your first serious warning flag. Obviously, to satisfy yourself of the true status just direct your mobile phone to the site and see if it displays properly; better still, go to the horse's mouth at 'https://search.google.com/test/mobile-friendly' and do a more thorough check. If the site displays problems, it is best you obtain assistance from a professional designer.


Inbound links as a generalisation have little if any value; links from major brands however could have significant value, it really is a question of relevance and the amount of traffic they direct to the domain in question.


Finally, check the server log for the website. This will describe the number of unique site visitors, the pages viewed, where the visitors originate from and even the search terms used to land on the site. Make sure you view this log because, if nothing else, it will validate any claims as to the number of bookings/sales the site may have generated. Many logs will also display the time a punter has spent viewing a page and the last page viewed. Short visits can indicate a wrong search target having been reached. In other words, the visitors had no real interest in whatever was on offer; if, however, the majority of visits fall into this category there are grounds for questioning the overall effectiveness of the site. Again, it may mean a full redesign is desirable.


How you decide on the value is a vexing question for you. If a redesign appears necessary, you could be facing a significant outlay and professional guidance should be sought. It is very important that you have the registration and ownership of the domain transferred to you. Included in this, should be the domain access keys; all the passwords and access data to allow you to manage the website, email system and the automated reservation systems that may be attached. This is pure paperwork and must not be neglected.


I hope these brief comments may work as a guide for you before to acquire the keys to your new kingdom. Good luck! 

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