Flippa will soon be releasing their next â€œState of the Website Economyâ€ report and theyâ€™re focusing this time on investment multiples â€“ the number of years revenue that buyers are paying for a site.
Thereâ€™s no surprise that the multiples tend vary depending on the sort of site youâ€™re looking at.
Website niche and revenue model are two big influencers â€“ 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 â€“ 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 â€“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 â€“ 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, weâ€™re reminded that as businesses grow, so do their valuation multiples.
â€œThe 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,â€ said Flippa General Manager Dave Slutzkin. â€œSomeone looking to buy out AOL at the current share price would be waiting over 20 years for the same outcome.â€