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Valuing internet firms with advertising revenue
Valuation of internet firms is a very specific area in financing. Valuating a business that is solely doing its business online can be valued in a variety of ways depending on the business model of the website. Below I will identify the types of business models a website can have, of course some website have multiple models.
Content site (no current revenue model) ? The value of such a website is based on the Value of the domain name, the value of content and the value of backlinks.
Content site (advertising revenue model) ? Valuating a content website with an advertising revenue model is based on future traffic projections and earnings based on past earnings/net income per unique visitor or based on multiples of annual revenue.
Subscription site ? Value is based on current mailing and subscription base. A calculation of the number of users times the average time they are subscribed, also taking into account the way the website is able to adjust to change.
Service site - based more on traditional business model of a service company.
E-Tailor - Net sales or profit times the time period desired
Central question:
How can content websites with an advertising revenue model be valuated?
1. Content websites and advertising income
The content of website's (in this paper also referred to as portal and content/community website's) with advertising revenue can vary a lot. Search engines are content websites, often their advertising revenue comes from sponsored search results. Let's take Google as an example, their advertising income is based on sponsored links to other web publishers ...