How Website Revenue Trends Affect Website Sale Price
Two websites may have the exact same total revenues in a given year. However, if one website has a downward revenue trend and the other one has an upward trend, the website with the upward trend will sell for a higher price.
Website buyers place a significant amount of value on revenue trends. Buyers are risk-averse and do not like websites that have declining traffic and revenues. They fear that the downward trend may continue after they acquire the website and take over its operation. This could put their original investment in jeopardy.
As such, buyers expect to receive a discount when acquiring websites with declining traffic and revenues. The size of the discount depends on how steep the decline is. The steeper the decline, the higher the discount expected.
Websites with upward revenue trends can expect to sell for a premium. The buyer feels more secure in the fact that there’s a high chance that this upward trend would continue. Buyers are therefore more willing to pay higher prices for such websites.
As no-one can predict the future, buyers use revenue trends to attempt to forecast how the website would perform in the future after they acquire it.
Of course, the revenue trend is just one of many factors that buyers look at prior to acquiring websites. There are numerous other factors that are used to appraise a website. But the revenue trend is one factor that plays a major role in a website’s value.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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