Flippa will soon be releasing their next “State of the Website Economy” report and they’re focusing this time on investment multiples – the number of years revenue that buyers are paying for a site.
There’s no surprise that the multiples tend vary depending on the sort of site you’re looking at.
Website niche and revenue model are two big influencers – not all audiences were created equal.
Sports, health and automotive websites score higher than other niches, with a price-to-earnings ratio of 1.5-2.5.
Compare this to the ratios for tech sites and even internet marketing sites – the latter typically go for less than the equivalent of 6 months of revenue. Even home and garden sites, which, on average, sell at 14 months revenue, tend to fare better.
The lowest-valued niche, however, tends to be shopping sites, with an average price-to-earnings ratio of just 0.4. This aligns with the findings that sales multiples are also highly variable across different monetization methods –especially for online shopping.
Online spending by consumers may be on the rise, but ecommerce sites typically sell for lower multiples than ad-based sites.
The lower price-to-earnings ratio of 0.5 on ecommerce sites, may be due to the costs and risks associated with holding inventory – ecommerce sites were classified separately to referral or drop-ship sites that sell for ratios of over 1. Ad-funded sites come out on top with an average price-to-earnings ratio of 1.4.
Finally, we’re reminded that as businesses grow, so do their valuation multiples.
“The price-to-earnings ratios on a typical revenue-generating website on Flippa is around 1.1, which means many buyers are earning their acquisition price back in just over a year,” said Flippa General Manager Dave Slutzkin. “Someone looking to buy out AOL at the current share price would be waiting over 20 years for the same outcome.”