Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

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It really is that low.

BCC might get a slight premium because I have better options for buyers than Flippa, it has an exceptionally long history, and there's some value from association with me, but websites are not valued like businesses or startups.

There exist plenty of excellent reasons why this is true: extreme risk from sites which are overly dependent on one or two traffic sources, implicit cost of operation often not being counted as a cost by the owner (BCC runs itself... It only requires the very occasional attention of a Rails-competent Ubuntu sysadmin. That's "free" to me but not free to the new buyer, and that sort of stuff adds up quickly when compared to five figure revenues.), transaction costs (time, training new owner or staff, etc) having to get recouped, a risk premium because it is a market for lemons and buyers feel that sellers may sell because of material no disclosed information like "I recently pissed off Google and the site may vanish from the Internet", etc.

Ultimately of course things are worth what a buyer will pay you for them, but market is about 1X for "typical" sites at the moment.

> Ultimately of course things are worth what a buyer will pay you for them

An example of that would be finding someone (or more likely them finding you) who needs to build your product and can choose between starting an $XX.000 development project delivering in X months or your product which is ready right now.

Yep. A telecom did that for Appointment Reminder within a week of launch day. They wanted to do what Square recently did -- acquire a drop-in offering to cross-sell to SMBs.

Anecdata: they opened with a $100k offer. I said that I had built it to run rather than to flip, but that everyone has a price, and that I'd be unable to turn down a million. No deal happened, obviously.

Just ignore if you're not happy answering, but do you regret asking for that specific sum or are you content that it was the right amount to go for?

I feel like I'm hijacking someone else's thread now, so ask me some other time.

As far as I know patrick hasn't released sales numbers, but I'm confident that he's got to at least be glad he didn't take 100k for it.

How would you value a site that has no current revenue but many users? Would it just be something like PAGEVIEWS * POTENTIAL_CPM * RISK_AND_DIFFICULTY_FACTOR? I'm sure it largely depends on the type of site, but I was wondering if there's any general concepts to keep in mind.

It's not that he doesn't have revenue, I doubt it even has persistent users.

Users are generally 30-day active (trailing average). Here we're talking about a spike in traffic that the project got after some public exposure on news sites, I doubt we could predict at this point if everything will drop into the Trough of sorrow [1] or stick. Personally I tried the game and it seems to be at the first iteration in terms of usability for the masses, so I assume there will be little (if any) retention and more usability work to be done.

[1] http://andrewchen.co/2012/09/10/after-the-techcrunch-bump-li...

Some improvement feedback:

(1) develop more game-ability before explaining concepts on 5+ pages of text. Try to have a full-blown gaming engine with as few clicks as possible, and add concepts on top of it when the user levels-up.

(2) watch your page loading speed. If it's not as fast as browsing a magazine, it's too slow for a game.

(3) work to simplify the interface. Consider showing part of the vertical tabs only when the user levels-up. This should go hand-in-hand with (1).

(4) try to move at least partially some content before the login screen. Give people a reason to sign-up.

A perfect example to guide progress on those items: http://adarkroom.doublespeakgames.com/

Highly dependent on why it has no current revenue.

Is it easy to introduce ads? Would it be AdSense-friendly? If so, what kind of ads would it attract?

The best way to come up with comparables is browse the "for sale" section of Flippa https://flippa.com/websites/established

Since I studied finance and investment management and also passed CFA level 1, I have to tell you: How much a company is worth depends on your investment horizon, which might be more than 1 year or you use more than 1 year's earnings forecast. But mostly you value dividends (discounted of course) and expected growth in price. This holds true for stocks of course. In this (I am talking about the OP) case you would probably estimate how risky the investment is and say if you would invest similarly risky in the stock market, you would want 10% per year. You estimate annual earnings say $500 and use your return to estimate the company's worth: $500/.1=$5000.

Congratulations on successfully completing your studies.

A question for you: let us hypothetically assume that you have identified a particular basket of stocks worth $5,000 using this approach, applying your personal estimate of their risk and your investment goals, and purchased them. Three weeks from now you receive a call from the CTO of one company you invested in saying that a vulnerability in the hypervisor at your VPS provider allowed a compromised co-tenant to execute commands in your instance as root. What is your plan of action for preserving the value of your investment, and does this retroactively change your approach to valuing the stocks you have purchased?

This is a silly question, of course, because if one invests in publicly traded securities one does not have to operate their businesses for them. That is one of many reasons why owner-operators of businesses do not value them as if they were equivalent to investments in publicly traded companies.

I think this is good case of Black Swan (it would be highly improbable the same problem hit all the companies in a diversified portfolio but could happen a la hearthbleed). There's an extremely insightful book written on the subject (the black swan by Mr Taleb). Wich I do recommend.

Discounted cashflow = bullshit used to rationalize the sale price ( it can have some use in super long term predictable business like real estate with 10 year lease and well diversified tenants)

Hope this was helpfull

I just included my background to point out the fact that my explanation is purely academic. Right now I cannot say whether your congratulations was sarcastic or not, but thank you ;)

To your answer: I wanted to point out what is being valued and how it works. In this case the only thing that is being valued is the income. All risks associated must be accounted for. This was also supposed to be a hint to another question regarding how to value a website that does not yet create revenue: here you value future estimated revenue.

To your argument: You are absolutely right, of course. But still you start with expected future income.

Similarly, icu argued that you do not have just one figure. I completely agree. But that also happens if you consider a range of assumptions instead of concrete numbers. And even if you have a limited amount of potential buyers and they might pay more or less, you have to have an idea of whatever your are selling is worth.

Congrats on passing CFA Level 1, however I would politely ask that you consider that valuation is an art and not a science. I have done lots of work valuing illiquid shares, for example series A in tech companies, as well as established SME businesses. Of course this is a whole different game to valuing publicly listed liquid stocks and their options--which I trade. I also respectfully reject that the best answer to "what is something worth?" is "whatever someone will pay". I know it sounds similarly cryptic but my answer is, "it depends". Therefore IMHO it's best not to get stuck in one point of view but to try different methods and techniques for estimating value. Some people might say, "build it top down and bottom up" but I say, "build it from all sides". By doing this you get a 'range of value'. There would be valid arguments for the price within the range and different buyers will sit on the continuum. I know this is obvious, but if you are an entrepreneur your job would be to convince a buyer to give you the highest premium possible.

Relating all this back to the post, I'd say that this entrepreneur is trying to do just that... Basically trying to give arguments for as high a valuation as possible.

This is why I believe comments giving an exact figure of $x are invalid insomuch that your method for answering "what something is worth" is not the optimal approach.

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