The most important part of website valuation is the data. Without access to good data, the valuation is useless. A proper analogy here is "garbage in, garbage out!" If your data is sub-par, your valuation will be sub-par as well. Earlier I discussed the reasons we would need to value a website. They primary include a transaction to buy/sell a site or measurement purposes on one's own site. There are other reasons of course, such as seeking investment or other financing, but primarily we are looking at the first two. Either way, the website valuation methods used here are legitimate for any of the reasons.

In the case of the owner's own interest, the availability of data is not an issue. The owner may need to know what data to use, but access to the data is a moot point. In the case of a deal, there needs to be a fair degree of negotiation, research, common sense, and trust. The risk surrounding the trust part can be mitigated by legal documents. I'll discuss this a little later. If you are entering a deal to buy a website, you'll need access to all relevant data and as much backup documentation as possible to be able to apply some degree of assurance around the numbers you are looking at. In any website transaction, the seller should be perfectly willing and able to supply such data. At what point along the way of the deal process may vary, but at some point all data should be made available. Some sellers may provide all info up front to anyone that asks while others may hold back until they have more seriously interested potential buyers. In some cases it would not be uncommon if the seller asked the potential buyer to sign a non-disclosure paper which basically says the potential buyer is legally bound not to share the information he is given. This is a normal business practice.

The primary data needed from the seller is traffic and revenue data for as far back in history as possible. In the traffic department this would include, at a minimum, unique visitors and page views on at least a daily basis. The more detailed the data, i.e. hourly page views, the better. Depending on the site, you may need data surrounding traffic or click patterns. For example, if the site sells a product, you will need data related to what percentage of visitors click on the BUY NOW link from the home page. From there you would want data showing how many of those clicks resulted in sales which can be derived from combining the click path data with the revenue related data. See? The more data the better. I'll get into an example in a moment but let’s cover some more important data. What do people do when they get to the site? Visitor data such as how long someone stays at a site or what path they use to leave or enter is all very important and only helps to better refine the valuation. This is all common data made available from various tracking software that most all website publishers use.

Here is a quick list of reliable, popular web statistics programs that will generate the type of data necessary to make an accurate website valuation. Some of the programs are downloadable to be installed on one's computer and others are online versions. Prices vary so do your shopping wisely.

• OneStat • Website Reporter • Faststats • Linktrakker • Webtrends • VisitorVille • iwebtrack • SiteTrafficStats

You may be asking, "Why the heck is historical traffic pattern data important to the price being asked for a website?"

Good question. Here is why: First recall that the very basics of website valuation revolve around future earnings. Let’s say you study the data on site visitors and notice that 5% of people that stay on the home page for more than 30 seconds end up clicking the BUY NOW link.

Additionally, you notice that .001% of the people that stay on the site for less than 30 seconds end up clicking BUY NOW. The reason for this may be any number of things such as a misleading link to your page, a boring home page, or a really convincing fourth paragraph in your home page content. Let’s say that it's the third example and the new owner moved the convincing text to the first paragraph and did some other spruce-ups to keep people a little longer. It doesn't really matter what, but the point is you found some obvious issue with the site that can be fixed with little effort to increase future sales which in turn increases the present value of the site. The current owner would not have this in his pricing model and therefore the site is technically worth more than what is being asked. When we learn how to do scenario analysis, we'll go through several of these examples and compute various valuation boosters.

The bottom line here is that not every site owner sees or knows the true value of her site, and with the proper analysis the purchaser can easily end up with a site worth much more than what she paid.

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