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  1. #26
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    This is a great question and observation, and just what we are getting at here.

    In this case traffic was given a value close to PPC because of the nature of the site, and where the traffic was coming from.

    I think you make a great point here, and there is certainly a possibility there to develop a traffic valuation based on those principles, someone just needs to do a study to split up the work % wise as you suggest for PPC, SEO etc. And it could come up witha ncie rough calculation. Maybe this is something my company could work on in the future, but nothing in the pipeline as of yet.

    I think you are correct with DCF to a degree, you have to look especially at the sites longevity and if its a product etc that is going to last that long, customer retention/loyalty etc. Most of our valuations are with a 3 to 4 year DCF and then terminal value (normally very low or 0). In this case it was a tough choice, but we decided the business could continue well into the future as people have been buying dash kits for their cars for as long as I can remember. And the main point ehre is that it did not add a significant amount to the valuation if you look at the spreadsheet, a couple of hundred bucks. So it wasn't a significant decision to make.

    But yes getting abck to your other point, it really is a fantastic idea!




    Quote Originally Posted by ArtDeco View Post
    It seems to me that traffic should be broken out into at least three sources: PPC, SEO, and SMO , after deleting the bots and other junk traffic. Then different values can be assigned to each (as well as possible, I'm just thinkiing out loud here). Perhaps traffic from PPC or Affiliates at full value, Search at 25% of PPC value, and Social at 1% of PPC value, just as an example. Something like that would reflect the difference in conversion rates and the risk of the traffic disappearing overnight the way Digg or Stumble traffic does. Once someone opts in or sets up an account, then they can arguably be counted as an asset, but someone who just dropped by to see a linkbait video probably isn't going to return or buy, IMHO.

    And not to be an jerk, but for sites selling under ~$100,000, I don't think Discounted Cash Flow matters, just because no one is considering the value of traffic or sales from 2 or 3 years out - it's just too risky. For the biggies like Amazon or eBay, then future traffic is likely to continue, but not for an ordinary automotive affiliate site.

    Anyway, I'm interested in what you experts have to say on this. I'd really like to have a spreadsheet to blame when I end up selling a site for half of what I thought it was worth!
    nEquity
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  2. #27
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    And not to be an jerk, but for sites selling under ~$100,000, I don't think Discounted Cash Flow matters, just because no one is considering the value of traffic or sales from 2 or 3 years out - it's just too risky.
    You're right, they don't sit with calculators. My position has been that the sale price always reflects the Net Present Value (what you get when you use DCF) but an experienced buyer may come up with a bid price based on just gut feeling. That gut feeling is underpinned by his knowledge of the market and how much other bidders pay. In essence, it's what he feels the future revenue of the site is worth today (before he adds his skill to improve the site/earnings). So, it's his NPV even if he's never heard the term .

    I've bought six figure sites on here as some people know and even I haven't actually drawn up a DCF chart or calculated NPV! In practise, buyers focus more on the age of the site and history of profit, how steady the traffic and earnings have been (provides clue to risk) and how easy it is to run. I plug the Adsense CSV into a spreadsheet and do some analysis on it. I take the traffic logs and run them through a log analytics program. I let Xenu linksleuth loose on the site to check for linking problems/bad neighbourhoods. Those things are far more important in real life.

    It's mainly those who need to justify a charge who calculate value of organic traffic

    I'd really like to have a spreadsheet to blame when I end up selling a site for half of what I thought it was worth!
    I love that!

  3. #28
    SitePoint Enthusiast ArtDeco's Avatar
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    @ Fruit Medley I use Xenu and the SEO plugin for FF; but I'd appreciate a good log analytics program if you have a suggestion.
    I believe in free speech, free markets, and free software.

  4. #29
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    There are good free programs like 123LogAnalyzer, shareware ones like AnalyseSpider and paid ones like Deep Log Analyzer. No program is a 100% solution. Where the seller has some javascript tracker it's likely to be more accurate but, of course, it excludes the js disabled visitors. However, because spiders tend not to parse js you don't get massive bot counts contaminating the results. Where the seller doesn't have a javascript tracker you may still be able to get js quality figures . I've covered that in more detail here along with other suggestions for due diligence checks to add to the Xenu etc that we've already discussed.

  5. #30
    SitePoint Enthusiast ArtDeco's Avatar
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    Wow. Looks like I've got some reading to do.
    I believe in free speech, free markets, and free software.

  6. #31
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    Enjoy. I can't claim that my thoughts are in any way an exhaustive look at the subject and I'm happy for any feedback/suggestions/ideas.

  7. #32
    SitePoint Enthusiast ArtDeco's Avatar
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    OK after much reading (Thanks FruitMedley) and downloading my server logs and the trial version of 123LogAnalyzer and some google and spreadsheet work I have decided the basic traffic to my site is either bots or Russian webmasters, plus the occasional spike of real people.

    Might be why conversions suck, eh?

    So I'm diving into htaccess and going on a BBB - a Bot Banning Binge. When I'm done there will be much less traffic, but more wallets I hope.
    I believe in free speech, free markets, and free software.


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