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You are absolutely right and that jumped out at me. I should also point out the obvious: if people were selling online assets making $9k/year for $9k, there would be a line out the door of people lining up to buy them. If anyone here is selling an asset that makes $X a year for $X, I'll buy it! I make my money back in 12 months and everything else is profit.

So let's value it as it would be valued on, say, Flippa, a decent proxy for "the market." We would look at the monthly revenue: in this case, around $750/mo (which is 9k divided by 12). Then we'd do a multiple of the monthly revenue: 20 is low, 40 is normal. I would actually say 30 here, because this guy created the asset and I would bet he did it well and it's not junk. So let's say it's worth $22.5k.

So I think it would be more accurate to say, "I purchased the site in a deal through assets valued at about $42k, total."

[edit: updated the comment as I got confused about the thing being exchanged - it's a site the guy created that he transferred to make the sale]

Yeah, but you have to scale the projections for uncertainty about the future, and exaggeration by the seller.

In particular, if someone on the internet tells me they’re making $x a month from spammy ads on a squatted domain, I immediately discount the claim substantially due to bullshit. I increase the discount rate if the person making the claim is trying to sell me said domain.

True, but if the guy contacting you is the actual owner of the website you use to buy domains, his credibility increases enormously. He said this person was a customer on his platform. When that guy says "I have a website which is making 10k/year," and I already trust the domain platform he created because I use it as a customer, I believe him.

> I believe him.

Enough to be motivated to proceed with due diligence.

Whatever any potential buyer considers that to mean for them.

You really think the owner of the marketplace doesn’t have an incentive to convince you to make a sizable transaction?

Projected revenues for this domain is at $100k this year!

How much are you trying to sell the domain for?

Uhh...about $100k.

There are tons of those offers. Carefull that 9k revenue doesn't come from $9000 of ads.

I'm probably being dim here, but can you elaborate a bit more. Where's the rest of the non-ad revenue coming from?

He means "careful that the 9k of revenue doesn't come from ads that the scamming owner placed so that the site could show higher traffic => ad revenue." In other words, paying $2 for ads to send people to your website, to make $1 on the ads that the ad platform now shows to your "audience."

I doubt gray market sites have any kind of longterm value or predictable revenues. Who knows what kind of site it was, but to be valued so lowly the regulatory risk might be very high.

To "get your money back" you would actually need to get $x+risk free interest (or maybe + inflation rate), no?

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

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

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.

Exactly, and the fact that friendster failed was because nobody was going onto it anymore, so there's nobody going to be hitting ads, other than bots.

The WayBack machine shows the redirect to the ad page offering the domain for sale.

https://web.archive.org/web/20231018214628/https://friendste...

So doesn't seem like it was serving ads anyway

What's the best network currently to put a domain to generate ad revenue?

Adsense

Doesn't Adsense require website with proper Content ?

Yes

Yes this is what im confused about. They described it as a parking domain, but the old strategy of "buy a popular domain and put ads on a one pager" hasn't been something that pays substantively for a long time. Ads sales have plummeted in general but not being able to use adsense would make it worse.

Nobody gets 10% a year

...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.

S&P 500 average return over the last 5, 10, 50, and 100 years was higher than that.

Last 5 Years: ~12.5% Last 10 Years: ~14.0% Last 50 Years: ~11-12% (reflects performance since the mid-1970s) Last 100 Years: ~10.4%

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.

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.

>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.

This, the numbers they show are often a result of a pump that isn't sustainable. I've watched a bunch of youtube videos from people on the buying and selling side of things, and it's readily apparent that the values are temporary for most of the sites. The scam sites outnumber the legitimate long term ones and both are sold on the same platforms.

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.

From what I can tell, The upper bound on price for any site making less than 100k a month is 24 months of revenue, but the more common is around 12 months.

The buyer takes on substantial risk because it's easy to fake the numbers, and google updates can tank the site at any time.

Also, most sites will require maintenance/upkeep to keep earning, or they can tank quick. Even if they have got evergreen content, without updates google might drop their search ranking.

I see it more as 20-40 on Flippa. Where are you seeing 12x monthly revenue sales?

it's been a few years since I looked into it, but the 12x-24x was the range I saw for sites that actually sold. I guess it might have changed since then.

You can check out similar sales on flippa.com - ad revenue does not last forever, even if it’s existed for years. And revenue is very much not profit, you could create a site and get $100/day in ad revenue tomorrow but it would cost you $200 in ad spend.

What does the spend go to, besides hosting costs?

Advertising costs, to drive traffic to your site(s).

So, spam?

Surely generating spam has a cost.

You can’t just send tens of thousands of emails via your typical email service.

Malware goes BRRRRRRRRRRRRRRRR

They said “a domain that was making about $9k/year in ad revenue”, not “a domain that was making about $9k/year in profits”.

Also, even if it were making about $9k/year in profits, if that comes with large costs (be it labor or dollars), it still might not be worth it. Let’s say it costs $100k a year to keep that site making $9k in profits. That would be 9% return on investment. Good but not spectacular. Add in uncertainty about whether that site will keep doing that, and I can see such a domain not being worth much.

>Let’s say it costs $100k a year to keep that site making $9k in profits. That would be 9% return on investment. Good but not spectacular.

That's not investment, that's just the cost of upkeep. It's possible you simply cannot afford to keep up with that expense rate, but the fact remains that it's net profit. With a $100k investment and a yearly $9k profit, if you stop at the first year you lost $91k. With a yearly $100k cost and a yearly $9k profit, if you stop at the first year you earned $9k. No matter how you slice it it's a money-printing machine. The question is much it cost you to buy the machine, not how much it costs you to run it, because you'd be a fool to turn it off.

Well did they sell the website too? Or just the domain? Because the domain doesn't generate ad revenue, the original website did. Like just because I sell the domain name for my blog doesn't mean you also get the content of my blog too.

If Friendster.com was making around $9,000 per year, this would explain why paying $30k + domains returning a similar amount would make sense?

discounted cash flows - DCF