Whether you're planning to sell your blog or looking for direct advertisements, calculating the right value of your blog is an important exercise.
Failing to do so can result in loss of revenue or profits.
But the big questions is - "How one can assess the value of a blog?".
There are several ways to come up with a reasonable price of a blog, but relying on just one of the value determination techniques is not advisable. Although there's no perfect way to quantify a blog's worth, we can certainly come close to the right value by combining several methodologies. These methodologies may change depending on the type and niche of the blog.
We'll go through different strategies used by seasoned players for calculating their blog's value. You can improvise these techniques to come up with a right price for your blog.
Your Blog's Niche Directly Affects the Base PriceA blog's valuation metrics includes its niche too. In simple words, your blog's niche can increase or decrease the overall calculated value by miles. This is independent of your blog's traffic, revenue or reach.
Let's try to understand it with an example.
If you're running a blog (with decent traffic) about insurance or finance sector, you bound to get the price several times higher than the price for a blog about meta-blogging with equivalent traffic.
What's the REASON behind it?
One of the reasons could be extremely high cost-per-click rates for contextual ads for both finance and insurance sectors. In simple words, the profit margin is several times higher than several other niches.
A blog's niche directly affects the valuation that eventually increases or decreases the base price substantially. Meatier the niche, higher is the base price!
Buyer Always Want To Know Running and Maintenance CostsWhatever final price you'll quote during the deal, every potential buyer will try to deduct the running and maintenance costs from the gross amount. This does make sense as the money spent in the maintenance of a blog is simply an expenditure amount and has nothing to do with the actual revenue generated after deducting the expenses.
A potential buyer may ask for the following details while the valuation is in progress.
- Hosting fee - Although a typical shared hosting plan ranges anywhere from $5 to $10, it can be much more depending on the traffic and load your blog experiences in peak times of the week. For example, if the buyer finds your blog chokes in peak hours and needs a VPS plan to function properly, maintenance costs can inflate significantly.
- Annual fee of premium tools and software - If you blog is using multiple premium products like plugins, themes, analytics software, email marketing service and social media marketing service, the overall maintenance cost shoots up further and the buyer will take account of all these expenditures too.
- Payments to writing staff (if any) - Once a blog starts giving handsome returns, bloggers often hire staff to generate premium content on a regular basis. If contract-based writers are working for your blog, that also comes under the radar of the potential buyer.
Remember, this list should not be given in the preliminary rounds of the negotiation. If you do it, you'll be putting cap on the deal even before it is matured. Nobody like to hear about expenditures rather than profits while purchasing a digital asset.
Brand and Social Value MattersTraffic has its own value, but brand and social reach outweighs it easily. For large number of niches, brand value and the scale of social connections earned through the blog are good enough to generate huge business.
If your brand is well recognized among the community and you have active and effective social media presence, the quoted price can easily go up. Some people relate it with accounts having massive following on popular social media platforms.
Well, number of followers has nothing to do with your ability to generate business through these platforms. What matters is, how actively you're engaged with your connections and do they listen to you?
If people recognize your brand on social media and you're getting leads from these platforms on a consistent basis, your blog's price shoots up.
Process for Valuating a BlogAs I mentioned before that there is no standard way to calculate blog's value. We'll mix some common as well as unique techniques to understand how the entire valuation process works. You can definitely make necessary changes in this procedure to get a near to accurate price for your blog.
Step #1: Start with good old method for calculating the base price.
The most common practice to come up with a reasonable price for a blog is to multiply the monthly revenue with multiples of 12.
For example, if you're earning $500 per month from your blog, you can multiply it with 12, 24, 36 or 48.
Why these 4 different multiples?
The more profitable is the blog, the more is the price. For a relatively new blog, a buyer may pay up to 12 months of blog's monthly revenue. For highly popular blogs, this may even go up to 48 months of monthly revenue.
Here I must tell you that this method has several flaws though it's used widely for calculating a blog's price. One of the major flaws is incorrect calculation of monthly revenue. Let's try to understand it with a simple scenario.
A blog giving $100 to the owner may give 5 times the revenue when it is sold to the new owner. This can happen due to several reasons. The most common reason is failing to monetize the blog to its full potential. Another common reason is poor design of the blog that drives away leads and prospects.
There are several other variable factors that may further increase or decrease this base price. We'll look into each of these factors one by one to see how its affects the base price of a blog.
Step #2: Evaluate and add social media & brand value.
Bloggers holding strong presence on Twitter, Facebook and Google+ can afford to add more cushion to the base price. Although there's no hard and fast rule for the same, it can be done in several ways.
First, you must present concrete data about your social reach including examples of leads generated through the same. Once the data is verified and evaluated by the potential buyer, you can safely add reasonable value to the base price.
A typical example can be fixing a value for an active and genuine follower and multiplying it with the total number of followers.
For example, let's say we set $0.01 value of a genuine follower. If all the combined followers across all the social media platforms are 75,000, the final value comes out to be $750. Remember, you're not selling your followers but simply adding value of your strong social presence to the final price.
Step #3: Evaluate high conversion traffic channels.
Unless you're looking to monetize blogs through CPC contextual ads, high traffic doesn't necessarily signifies good returns. The quality of traffic coming to your blog decides how much more cushion can be added to the base price.
Even with low traffic, a blogger can earn huge amount of money provided the inbound traffic is qualified and is looking for the services and products already being sold on your blog. A potential blog buyer always asked for web analytics data (for up to 6 months) to evaluate the kind of traffic and conversion rates.
If you're able to show him a perpetual source of very high converting traffic, you can certainly ask for a higher price. This demands proper tracking of all the conversion funnels through your web analytics software.
Once the buyer is assured of quality traffic on your site, numbers don't matter.
Step #4: Analyze citation index and valuate the credibility.
If authority sites are quoting and citing your content on a regular basis, you can further elevate the price of your blog. These references are not only vital for SEO but also acts as a seal of credibility.
If you can highlight this data to the potential buyer showcasing leading blogs linking to your content, you can again add some cushion to the base price. Remember, these references should link deep to your internal pages.
Blog's citation index is one of the important metrics to quantify its value. The healthier is your citation index filled with links from authority sites, the more liberty you have to increase the price.
Step #5: Balance the gross amount by deducting a percentage of expenses.
Not all the expenses for running your blog should be included while balancing the final blog price. For example, expenditure on a typical hosting plan is quite obvious and every potential buyer is well ware of that expense. It makes no sense to consider it for your deduction list.
However, recurring yearly expenditure of vital premium tools and services must be mentioned in a separate list and you must show it to the potential buyer before the deal is finalized. It may lower the final price a bit, but it will help you close the deal by giving the right information about the maintenance cost of your blog.
This step is only applicable if the running costs are significantly high and the blogger is using several premium services for critical operations.
In fact, if the buyer has no plans to continue the use of a specific premium product, there's no need to consider including it in the expenditure list.
What's Your Methodology?This was my general outline of calculating a blog's worth. If you have some more useful methods to assess the value of a blog, do share your experience with us.
In case, you're planning to sell your blog but are struggling to calculate the right price, you can contact me to valuate it for you.