Online Business Valuation Multiples — How Much Should You Pay? (Updated for 2024)
One of the most interesting things about buying a website is the return on investment of a website. If you know what you’re doing, then buying a website or online business is the easiest way to turn cash lying around in your bank account into a revenue stream.
But what should you pay to buy a website or online business? It seems so ethereal. It’s just data in the cloud, right? (Not always. There may be inventory somewhere, a warehouse, and even employees.)
Nonetheless, online businesses hard to build. They generate real money. So they’re worth something.
If you ask around the internet (in forums or on Reddit), you’ll find that the price you should pay to own any online business is around 2-4x annual profits.
But firstly, that’s a huge range. And secondly, finding where you are in that range takes some research, analysis, and thinking. (“Damn it, Dana!” you cry. “Just give me the answer!”)
You should ask yourself:
- What’s a “good” valuation multiple for a website? Are you getting a well-priced asset, a total bargain, or are you getting ripped off and should tell ’em they’re dreaming?
- What factors should drive a website’s valuation multiple up or down? A website where people love clicking into it and then buying stuff is great; everything else is less great.
- Is the earnings multiple the only factor you should consider when buying a website? Hint: no.
I’ll go all over this below.
About me in online business and valuations: I’ve got a dual background that makes this of interest to me. Firstly, I used to be involved in corporate M&A and strategy at a top-tier strategy consulting firm, Bain & Company. I was just a junior schlepper there, but I did a lot of work deep diving into the bowels of companies to find both risks and opportunities. I continued this work in private wealth, where I managed funds for bad-tempered billionaires.
But aside from that, I’ve also been in online business since the 2010s. I’ve built apps and websites, some of which failed and some of which work (and some of which failed then worked, or worked then failed then worked again… you get it). I’ve made offers and bought sites and am selling one right now. So anyway, I’ve been around.
That said, the below still has a lot of details that could be missed in valuing a website. Contact me if you want more assistance on the matter.
What is a Good Valuation Multiple for a Website or Online Business?
In the last 2010s, when online business investment really grew, on Flippa (one of the more popular marketplaces), you could buy a website for 24x monthly earnings (2x the annual revenue). This meant in two years you would have had your money back — and then after that, profit!
Of course, in those days, you were much more likely to be ripped off than even today (and I’ve had bad experiences investing in websites — see this one, here). Scammers would buy a domain, throw some random pages on it, buy fake traffic, and sell them for $1,000 to suckers looking for a quick buck.
A multiple of 2x the annual earnings might seem shockingly low to you if you’ve never invested in an online business. A “blue chip” stock is typically priced at 10-15x earnings, and tech stocks can have valuations above 50x. But paying 2-3x annual earnings (plus assets) is quite common when buying fixed-asset businesses like cafes and gyms.
The difference is, of course, that there are no fixed assets, and you can operate your business from anywhere.
Let’s take a look at the listings on Empire Flippers (at an arbitrary point) for example:
If you take the weighted average of all these, you’ll find that the average price is 36x the average monthly profit — which means you would pay, on average, three times annual profits (something like an EBITDA multiple) to own any of those businesses.
This is right in the middle of the range for valuation multiples for a website. Multiples these days, start at 28x (and rarely less), and go up through to 50x (and rarely more).
If a website is priced at less than 24x or more than 48x and it’s on a big marketplace, there’s typically something specific that makes it worth that little or that much.
Because I first published this in late 2020 and updated it in early 2021, I’ve re-checked the prices again in 2024.
There are many more listings available on Empire Flippers these days — 150 live listings as of early 2024, excluding one with no asking price.
Here’s how the valuation comes out
| Item | Value |
|---|---|
| Total value | $80,724,231 |
| Revenue | $7,237,320 |
| Earnings | $2,241,163 |
| Earnings multiple | 36x |
Why a profit multiple and not a revenue multiple? Because the online businesses vary in business strategy. Some have inventory, some don’t. Some earn through subscriptions, some through ads.
The devil, as always, is in the details, which is why it’s worth getting a valuation done by experts.
Another site, Motion Invest, tends to list smaller sites. Many are pre-revenue, and those that have revenue often make less than $1000 a month.
Of those that are post-revenue in 2024 (39 site), I did a similar analysis.
| Item | Value |
|---|---|
| Sites | 40 |
| Earnings | $34,761 |
| Asking price | $1,009,623 |
| Earnings Multiple | 29x |
So, why does Motion Invest have a lower average earnings multiple? The nature of the sites listed there is very different — they’re more basic, technical sites. They tend to have lower domain authority, lower traffic, and less stability.
But that doesn’t mean they’re less attractive investment targets. For people looking for sites with unlocked potential, Motion Invest can be a great place to find bargains.
Let’s look below at factors that can affect the valuation multiple of an online business.
What factors can affect the valuation multiple of a website or online business?
These days, valuation multiples tend to hover around the 36x range, by which I mean 36x monthly earnings (or profit).
But there’s a lot of variability. Valuations can be as low as 12x, and sometimes higher than 50x! However, you’d be wrong to assume that just because a valuation is high, it’s expensive, or because it’s low, it’s a bargain. There are many factors at play that can affect the valuation.
So what can affect the valuation multiple of an online business? Here are a few things I’ve noticed and learned from speaking to sellers and agents, and also my own intuition.
The following are factors that can increase the earnings multiple of a business. Not having these things means the multiple may decrease.
In a nutshell, the factors that can increase a valuation multiple for a website are:
- Demand for online businesses in general
- A great domain name (good name, good authority)
- High-quality traffic — predictable shape, steady growth
- Predictable revenue — memberships are best for predictable revenue. Relying on one affiliate is the riskiest.
- Well-managed site (easy to use platform, all up-to-date)
- Contracts and SOPs with content creators, editors, and maintainers
- Natural traffic (not relying on ads) — if profits are near revenue, that’s perfect
- Diverse revenue streams (e.g. multiple affiliate vendors, or affiliate + advertising)
- Website age — one that has been around for 2+ years is ideal
- Low maintenance — not having to write or update constantly is a bonus; not having to manage inventory is another bonus
- Uncompetitive industry — tractors is uncompetitive; cellphones is competitive
There are undoubtedly more here. I’ll add them to the list as they come across my table.
Factor 1: Demand for Online Businesses
As I mentioned above, just a few years ago, valuation multiples hovered around the 24x mark, according to my vague memory and some Google searching.
Before 2020, online businesses were received with scepticism. There were also more shysters around, creating thinly built websites, buying backlinks, and selling the websites before Google figured them out and the traffic crashed.
By 2020, working online had become more mainstream. Chatter among people buying and selling websites was that multiples were now north of 30x, and that a good website would cost 36x.
These days, probably partly because of more people working at home, working from home and being self-employed has forced a lot of people to look into other ways of generating income — and buying ready-made websites has been one of them. So multiples have increased again — roughly by a factor of 6x. I.e.
- A basic affiliate website that used to sell for around 30x would now sell for 36x
- An established affiliate website with a great domain and good design that used to sell for 36x would now sell for 42x, and
- A decent SaaS app with steady recurring revenue that used to sell for 42x would now sell for 48-50x — or more.
The multiple I’ve observed for the kind of websites that your average person (like me) could buy and manage is around 36x — and more for something that comes with more.
One aspect of demand that’s within your control is where you’re finding your website. If you’re finding it on a big marketplace, then you’re competing with many other prospective buyers, and the multiples will be higher. If you decide to find it yourself… then you may have an advantage in that a) your bid won’t be competing and b) you can avoid commissions. Remember, there’s more than one place to buy a website online.
Factor 2: A Great Domain Name
You can build a good website on any domain, but the name counts for a lot, as does its authority.
But if you have a great domain name — one with high-trustworthiness keywords, and a .com domain — you’ll find it easier to attract traffic and thus pay more, all other things equal.
For example, if two websites in the laptop space were for sale, one called “LaptopNews.com” would sell for more than “BestLaptopsNow.com”, which would in turn sell for more than “BestLaptopsNow.net.au.”
The second part of a great domain name is one that has a high degree of authority.
If a domain has many unique backlinks from high-authority sites that are relevant to the niche, then it’ll be worth more than one that doesn’t.
Factor 3: High-Quality Traffic
High quality traffic is traffic that is
- Predictable (even if it’s seasonal)
- Growing (even slightly)
- From high-value sources (the US, Australia, Europe, the UK, more expensive Asian cities)
By contrast, low-quality traffic fluctuates a lot and comes from low-income places. I remember when we had a lot of traffic coming from Egypt, we had trouble getting advertising sponsorship.
Factor 4: Predictable Revenue
Nobody would buy a site that makes $1,000 a month today, but which will make zero the next month.
But if you could buy a business guaranteed to make $1,000 a month for at least the next ten years, that’d be worth a lot – it would be easy to sell for over $50,000. It’d be considered the same as an annuity.
In the world of websites, things change a lot. Products change, content goes stale, and competitors come and go. That’s why I wouldn’t say that owning a website means earning “passive income” — unless you’re happy with passive income dwindling down to zero.
So the more predictable the revenue, the higher the valuation. And the higher the risk, the lower the multiple.
If a website gets its revenue from steadily growing traffic, memberships, and a fairly constant RPM (revenue per mille – see my glossary), then it’s worth more. If there’s a bit of cyclicality, that’s still OK.
But if revenue swings around wildly, or worse, has been decreasing – expect to pay less.
Factor 5: Well-Managed Site
A well-managed site is on a stable, reliable platform, with everything up to date, using a CMS that’s well-maintained (like the most up-to-date version of WordPress).
By contrast, if a website is on an obscure or custom CMS or is built in some other weird way, or if it hasn’t been maintained, uses out-of-date or bespoke plugins, the valuation multiple would go down — you’d have to invest in the site to get it working well (or to keep it up to date).
Factor 6: Contracts and SOPs
Unless you’re planning on doing all the writing and publishing yourself, your site will need writers.
Some sites I’ve inspected (and bought) just come with the articles and that’s it. There are no guidelines for how to create more content.
Some sites come with guidelines — but with no writers. The guidelines are known as SOPs (Standard Operating Procedure). A good SOP should be brief and very clear – such that if you give it to a total stranger, they could follow it without any questions.
The best sites come with writers, editors, and contracts! If you inherit a site and the writers stay on for at least a few months, you’ll have a smoother transition.
Factor 7: Natural Traffic
It’s best when a site has traffic you don’t need to worry about, from a variety of sources, like Google search traffic and members who keep coming back.
If a site’s traffic relies on ad spend, the multiple always decreases. This is true even when there’s predictable return on marketing spend (e.g. cost per click is $2, conversion rate is 10%, meaning cost per sale is $20, and each sale results in more than $20 revenue). The reason for this is that it adds one more variable into the viability of the business – a good ad campaign.
Sites with ad-driven traffic still sell, but for lower multiples (roughly 6-12 months revenue less).
Of course, I’m excluding sites with fake traffic from bots – this was common maybe 5-10 years ago but no longer is – it’s too easy to spot (because there’ll be traffic but no revenue).
Factor 8: Diverse Revenue Streams
My own strategy is to own multiple sites, even if each one only has one main revenue stream.
But good sites will have diverse revenue streams in and of themselves. For example, very well-established news and information sites get money from memberships, ads, and affiliate sales. Think New York Times. They make money from ads, they make money from your membership fees, and they own sites like Wirecutter that make bank from affiliate sales. Those guys know what they’re doing!
If a site only relies on one affiliate stream, it’s usually Amazon. That’s OK, but even so, there’s risk in being very concentrated in Amazon, because their policies change so often… people who invest in Amazon too much feel like they get screwed over sometimes.
Further, if a site sells many products (either through direct sales or as affiliates), you should check to make sure it earns its money from a diversity of products. Otherwise, there’s a lot of risk. I’ve seen sites where 36% of revenue comes from one product and one page… that means that there’s a lot of risk tied up in that keyword, page, and product.
Finally, some sites earn a lot of money through one affiliate partnership, like promoting one software product. If that relationship goes south, it would be of high risk to the site.
Factor 9: Website Age
The older a website is, the more it’s worth.
This isn’t a measure of a domain’s age. It’s really how long has the website been actively generating traffic and revenue (in other words, how long it has been an investible website).
I loosely see websites in three tiers:
- Less than one year history of meaningful traffic and revenue — new, and could all drop away quickly
- 1-3 years history — established, not fly-by-the-night
- 3+ years — basically blue chip
This is very loose, and it’s very debatable. My point is broader — the more history (and the more consistent the history), the higher the multiple.
Nonetheless, I’ve seen many websites with just six-nine months of history sell for decent multiples.
Factor 10: Low-Maintenance
If a website only has to be updated irregularly, and needs just a couple hours a week of effort, then that’s great, and the multiple goes up.
If, however, you have to spend 40 hours a week replenishing stock, updating articles, and adding new content… then you have a new full-time job that might not even pay that much, and the multiple would go down.
The majority of websites I see require something like
- 2-6 hours per week
- 2-4 new articles a month
- Quarterly updates to existing articles
The websites I’ve seen with the lowest multiples have been Amazon FBA-type sites where you have to constantly be watching inventory.
Factor 11: Uncompetitive Industry
This metric is a personal one, not one applied by companies by Empire Flippers and the such.
Basically — a website in an uncompetitive industry is more attractive than one in a highly saturated industry.
All else being equal, I’d prefer a website that sells industrial machinery to one that sells laptops, for example. In industrial machinery it’s easy to stand out and hold a position (for now).
But in laptops, I’d already be competing with CNet, The Verge, Tech Republic and so on. And new laptops would be coming out every couple of months… keeping up would be a challenge.
So what earnings multiple should use to value a website? You get an intuition for it after a while.
In one sense, the website is worth whatever someone pays for it. But in a more absolute sense, a website is only worth a value if you can get more of a return than in other assets — like in the stock market, for example. It’s up to you to make that analysis (but I will, later).
Is the Earnings Multiple the only factor to consider when buying a website?
I want to point out something that might be obvious — that it’s not just about the multiple.
If you’re very analytical, it’s easy to go down a path of trying to find one multiple to rule them all. But in reality, there are other things to consider. Like
- Do you have time to transition and manage this new website?
- Is it an industry that you intuitively understand (or can understand with a bit of research)?
- Is it an asset that will be interesting to you in a few years?
There are more things to think about too. Some of them are quantitative, like growth curves and whatnot, and some are qualitative, like “Hey, is this website full of scammy clickbait and that’s why it makes money?” (I’ve seen it!)
Everyone has their own list. If you have one you’d like to share, I’d like to hear about it.
