ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Website Valuation Formula

Updated on December 30, 2011

Website Valuation

Every day, online businesses exchange hands for unbelievable amounts of money. The most recent enormous figure was $1.65 billion, the sum Google paid for YouTube in 2006. Other online businesses have been purchased for massive amounts include;

• Newscorp’s purchase of Myspace for a sum of $ 580 million in 2005

• Yahoo’s purchase of MyBlogLog for $ 12 million in early 2007.

• Yahoo’s purchase of MusicMatch for $160 million in

• Yahoo’s purchase of Flickr for undisclosed millions in 2004.

• Google’s purchase of Jaiku for $ 12 million in 2007.

• Google’s purchase of MeasureMap for $ 5 million in 2006

After hearing such figures, the natural thing for every webmaster (website owner) is wonder at the value of their own site. This hub takes you through how to establish the value of your website. 

Financial Formula Valuation

Traditional accounting formulas for valuing websites tend to suggest that the value of an online business is about seven times its net monthly revenue. Other formulas suggest that its value is equal to half its turnover or gross sales. In summary there are four main financial formula methods applied when valuing a website;

Asset-based valuation – a number of people looking to buy a business use this approach to valuing the business. Assets are the capital that a business employs to generate revenue and include such things as equipment, land, buildings, machinery stocks, bonds, cash and so forth. A potential buyer would consider the net assets to be the true value of the business. Net assets in this case arrived by taking the market value of all assets and subtracting the total liabilities as follows;

             Net assets = Total assets – Liabilities                                                                                                       

The problem with the asset based model is that the bulk of most online businesses is intellectual capital which cannot be easily quantified which makes this method wanting. A good number of online businesses are highly scalable meaning that revenue can be grown with minimal additional capital outlay.

Profit based valuation – still other buyers use the profit based approach to determine the value of a business. The profit based valuation model takes into account the profits that the business is generating. For this method to be reliable, then the profit figures availed must be availed. Unaudited figures are very difficult to verify and therefore in the absence of audited accounts, it becomes very difficult to value a business.

Comparable Sales Method

This valuation method takes into account recent sales prices for businesses of a similar nature. Hence, the valuation amount is arrived at by comparison.

“Rule of Thumb”

This method looks at the specific industry and then applies a valuation method using factors considered important to that particular industry e.g. sales, return on investment, gross profit, net assets and so forth. A popular rule of thumb approach for many businesses that sell highly intangible offerings such as most online business is the use of the company’s future cash flows to determine the current value of a business; basically giving more weight to cash flow and net profit.

Read this HUB to find out about the factors that increase the value of your website

Financial Valuation, + Website: Applications and Models
Financial Valuation, + Website: Applications and Models
Real world applications and professional consensus by nationally recognized valuation experts


Submit a Comment

No comments yet.


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)