The Hidden Factors in a Website’s Value

Where is the true value in a website? It’s a question that you will think about deeply if you are ever involved in the purchase or sale of a website. Traditional business metrics focus heavily on the financial component, such as:

1. Month to month revenue for the last 2 to 24 months
2. Margin for those months
3. Stability of the revenue and margin
4. Go forward financial prospects for the business
5. Markets, and stabilities of markets the site is in
6. Stability of the revenue sources
7. Potential to add new markets
8. Is the site under-marketed now?

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These factors certainly remain key in evaluating a website acquisition or sale. But in a world driven by search traffic, there are many other factors you need to consider. The first factor to consider is that in my experience acquirers do not care about your PPC based revenue and margin. The acquirers I have worked with all have crackerjack PPC search marketing teams, so to them, the PPC revenue and margin is highly replicable.
They can already do this themselves, so they don’t need to acquire another site at a premium to expand their PPC revenue. To do that, they would simply build another site, avoid the premium price, and implement the PPC campaign using their already extensive expertise in this area.
Acquirers buy organic traffic, and the resulting revenue and margin. This is what’s special to them because this is what they can’t easily replicate. Building a single site with a high volume of stable organic traffic (many tens of thousands of search based visitors per day, or more) in a competitive market takes years to do. Note that you can build up to a high volume of traffic in other ways, such as obtaining a large subscriber base to your RSS feeds, but that’s a topic for another post.
If you are looking at acquiring a site for its organic traffic, there are many factors that affect the stability of that traffic. Here are some of the factors I would look at:

1. Analytics data
   1. Is the traffic showing a steady upward trend? Note that all sites have little dips (10% to 20%) in traffic, so these should not alarm you. But, does the site show a steady trend over the past 12 months of growing traffic?
   2. Have there been any “outages” in the past 24 months? In other words, these are periods of time where the search engine traffic seems to go way down. These are potential indicators of marginal practices that the search engine is not fond of. Google tunes its algorithms constantly, perhaps as often as every single day. If a site pops “in and out of the index” the site is being flagged for something by Google and represents a big risk.
2. Link Profile
   1. How many purchased links does the site have? The ideal answer is 0. Each purchased link represents a risk, ranging from its being detected and discounted to becoming the source of an outright penalty.
   2. How many swapped links does the site have? There is nothing wrong with a swapped link, but it adds little ranking benefit to a site, and if the link is swapped with a site that has little direct relevance to the one you are thinking of buying, it has the potential to have a negative value.
   3. How many high-quality .edu sites link to the site? .edu sites tend to carry some authority, so this is a great way to get a measure of the authoritativeness of the sites link profile
   4. How many high-quality .gov sites link to the site? .gov sites tend to carry some authority, so this is a great way to get a measure of the authoritativeness of the sites link profile
   5. What other potentially authoritative sites link to the site?
   6. What is the total number of links to the site?
   7. Lastly, what is the page rank of the site being evaluated?
3. Content Depth
   1. How rich is the content depth? Is it loaded with thousands of pages of unique content? This is a major factor in stabilizing traffic and traffic growth.
   2. What is the potential for expanding the content? If it’s happening through user-generated content, that’s a great thing. Of course, there are other ways to achieve this as well.
   3. How much duplicate content is there on the site? Is it a large percentage of pages? The lower this number is, the better.
   4. How many poor quality pages are on the site? Keep in mind that a search engine will evaluate nearly any page with a small amount of unique text on the page as a poor quality page. Is this a large percentage of pages? The lower this number is the better.
4. Spam Technique Review
   1. Overly high keyword density
   2. Any instances of hidden text?
   3. Doorway pages?
   4. Instances of cloaking

 
These other factors are critical because they speak to the long term stability of the search engine traffic stream. A review based on financial metrics alone can easily lead you into trouble. Search traffic is not like traditional brand based businesses, where the customer base and customer loyalty are major factors.
The stability of the traffic to the site depends on the nature of the SEO implementation. Did the SEO team for the site focus on rock solid techniques that are compatible with the search engines goals for high-quality sites? This is what you need to assess, in order to make sure your acquisition dollars are well spent.