Comment by wongarsu
20 hours ago
If you had a steady investment opportunity with 10% return (about in line with long-terms stock market returns), $9000 per year indefinitely is worth the same as $99000 now (in an idealized finance world. In the real world you can't invest $99000 and withdraw $9000 per year because withdrawals during downturns will take out too much. But it's a quick way to calculate equivalent values).
That's obviously an upper bound, because those domains won't make $9000/year forever. But valuing them at $10k if they make $9k/year is equally unsound. Not to mention the domain is worth more than its ad revenue. You could also end up selling it to a company that came up with the name and saw that the domain is available for purchase for some reasonable 4-5 figure amount (like in the example of this very article, where someone buys a domain for a five-figure amount)
Obviously there is a lot we don't know (is the $9k pure profit or are there substantial costs? How likely is the domain to sell?), but it sounds like the seller got the better end of the deal. He got more than $40k in value, in return the author got a deal he could afford
I have a calendaring site (won't mention it here b/c I don't want to be seen as plugging it) that has been generating revenue from ads and subscriptions for 26 years now. At its peak, well over 100k/yr but now more like 15k/yr for the past 5 years. Still a very steady income b/c the site is sticky. The only expense I have is about $3k every 36/mo for VPS hosting. At this point the code base is so mature that I only do minimal user support. I've looked into selling but people only want to offer 2x annual revenue. Why would I do that when I can just hold onto it for another year? I wish more people saw the math your way.
I would have several questions before negotiating seriously, and I could actually be in the market for such a beast.
At what multiple would you be comfortable considering selling? If revenue has dropped 85% from its peak, have you identified the cause of the drop? Has it been steady that past five years? Do you have a record of the time spent on it, or does it just feel minimal? How much of revenue is from ads vs subscriptions? Is it sticky mainly because a user can’t export things and import them to Google Calendar or something?
Is it custom software, heavily customized software, or are you basically selling the calendaring component of something like Citadel or Horde? What languages are in use? Does the buyer get just the site or full ownership of the codebase and the rights to derive new products and services from it? Does it come with the domain and trademarks?
Are you selling outright, or are you reserving some royalty for yourself?
What does the handover look like? Does the buyer just get an email with URLs and login credentials, or do you plan on familiarizing a buyer with the whole thing?
The site is localendar.com (you can reach me through the Contact Form there and I can share more financials). Short version: I started back in '99. There were no good calendaring engines back then so I had to build my own (with wicked performance btw ;_). The site is Java/SQL Server. It's sticky b/c it targeted webmasters who needed an easy-to-update calendar for their own site.
The original goal was to aggregate all these local events into a single searchable index and serve up local ads alongside. I never really got that part to take off, though I did get a very early patent for local search on the web. Since then, calendaring libs have come along which allowed many site-builder tools to offer a built-in solution.
The primary reasons for declines are 0) Not as many people build raw sites anymore; people migrate to things like Wordpress or Wix) 1) Google showing less profitable ads and 2) Webmasters w/ a popular site can remove ads via a subscription (which are drastically underpriced; some are still on a legacy $9.95/year). Everything is exportable (and importable) via iCal if desired. Buyer gets everything, w/ no residual royalties to me. I'd have to have an active role in the handover since it's all bespoke code. The buyer would need some level of Java+T-SQL since I don't want to teach coding from scratch.
I love my users and many rely heavily on the site - it's meant to be very simple to use and I tend to draw an older demographic that doesn't need a lot of fancy bells and whistles. 26+ years is a lot of time and I don't have the passion for it I used to. I had a recent health issue and my wife is concerned that she wouldn't know how to close this out gracefully if the worst ever happened.
The main reason this is an issue is that it's a lemon market. Many sellers claim their sites will require "no time to maintain" and that future returns will likely continue, but it's often a lie and thus you don't get the multiple that is truly justified. Even without lies, no one knows the truth of your business like you do. The unfortunate result of this -- and I've been in a similar position in the past -- is that you are incentivized to lazily run things into the ground slowly rather than find a new owner who may bring new passion.
Good analysis. if I was the author I would have just borrowed 20k in a personal loan and paid it off in three years. Of course he may be exaggerating that he gets 9K in Ad revenue per year or he knows that it's going to decline
What's the best network currently to put a domain to generate ad revenue?
Adsense
Doesn't Adsense require website with proper Content ?
2 replies →
I imagine that $9k ad revenue is a site that had an actual user base. And that the guy taking over the domain is going to just put all ads and no content, like he had on Friendster.com. And if so, the expected ad income is probably much lower.
I believe it's 9k/year in parking revenue.
Nobody gets 10% a year
S&P 500 average return over the last 5, 10, 50, and 100 years was higher than that.
...unless there's considerable uncertainty about future payments. Happily for the sellers of dubious assets, the world never seems to run out of people who can't resist a deal that's too good to be true.