Comparing Accuracy of Valuation Tools
There are various "tools" out there that claim to appraise sites. Many openly claim to be just novelties rather than tools. For the others, we decided to see how reliable their appraisals were. This is easily done by taking some examples of sites that sold recently (and for which the final selling price is public knowledge) and running those sites through each valuation tool.
EBizValuations: Our own valuations did come out more accurate than the others but the graph masks some truths. When you exclude Tidget and Dnscoop, this is what our own results look like:
Not as good as the first graph suggests. We admit, there is scope for improvement and we intend to monitor our algorithms and adjust them based on feedback from live marketplace data. This is to ensure not just that our valuations stay more accurate than others' but to make sure we keep improving their accuracy.
Background to the test
We took a random sample of 13 content sites and blogs. The data we fed into our engine was just the mandatory fields of domain name, earnings, length of history of earnings and type of site. We expect that when users fill in the optional fields they'll get a more accurate picture of a site's worth.
Tidget: This service comes up with a high, low and "median" price. We used the "median" prices in our chart above. Tidget does require the input of a lot of subjective data and the input of any data here is skewing their results even further away from real prices. For example, it suggests you value the domain name, scripts etc., yourself. For the purposes of the chart above we provided the age of site, traffic and the profit figures i.e., the real data that wasn't subject to opinion.
DNscoop is one of the better known valuation sites but wasn't as accurate as we hoped. That's surprising because they've been around a while and have a lot of data from past valuations to provide feedback for improvement. However, dnscoop is hampered in its valuation because of lack of adequate information - the only information it takes from the searcher is the domain name (more later).
Website Broker: Requires you to provide revenue and traffic but also requires you to assess your "visitor value" and talks about an average of around $38.
If a value were to be attached to each visitor it would be Total Earnings divided by Number of Visitors (TE/V)and it would be in cents rather than $38. A $38 value to each visitor would put your eCPM (earnings per 1,000 visitors) at $38,000 when most sites earn between $1 to $50. It costs cents to buy visitors via PPC programs like Adwords. If they could be then sold on for $38 each, that's a recipe to make more money than Google does.
Even if the value per visitor is entered in cents rather than dollars (which, to be fair to the site, is a possibility they do suggest), the logic that a visitor has a particular value in excess of the revenues already stated ... is flawed. The value of the visitor is already reflected in the earnings. So, given that the tool is requesting traffic and earnings figures, the "Visitor Value" requirement is redundant and its presence suggests a double count of "visitor value".
Further, the tool requires other user-provided data that is highly subjective. The more subjective the input data the less reliable the valuation.
SiteValueCalculator: This valuation "tool" requires no information about your site, your earnings, your traffic or anything beyond your domain name. That's it - just your domain name (just as with dnscoop). While a lot of information - from PR to Alexa rank - can be investigated from your domain name, that is not sufficient information for a valuation. In their defense, they do present some other useful information such as Page Rank etc for the submitted domain.
When we ran the domain names of some recent site sales through this "tool", the results were so poor a match to sale prices that it was not worth including them in the chart.