Written by Fernando Maciá
Calculating the price when you want to buy or sell a web portal or an online store is extremely difficult. There are factors that affect the increase in the value of a business on the Internet. Having an optimal positioning in search engines can result in improving these factors that add value to your digital business. If you want your Internet business to have a higher value tomorrow, start with raising those value indicators that do, and the lever that moves the whole mechanism is none other than Search Engine Optimization.
Company Valuation is a tool used to measure how much a company is worth in monetary terms at a given point in time. This technique is used to establish prices in the acquisition and sale of companies, corporate mergers, valuation of the different sub-businesses of a company or to give an appropriate price to a share of a company that wishes to go public.
Valuing an Internet company is more difficult and imprecise than valuing a traditional company. The criteria used for the valuation of this type of business are still under discussion with more or less scattered flats pointing to the same tune.
Valuation based on cash flows
According to the most widely used valuation technique, the value of a company is equal to the value of its net cash flows discounted at a discount rate appropriate to the risk of the industry in which it competes. The values taken by the net cash flows depend to a large extent on the company’s revenues and the investments it plans to make in the future. On the Internet, forecasting both revenue and investment trends is very difficult, and in some cases can go no further than very arbitrary estimates.
Assessment based on relevant online indicators
However, one of the first and most widely used methodologies for valuing Internet companies consists of taking a series of relevant indicators. Such indicators are easily measurable for a business of this type and can in some way forecast future revenues. These parameters are:
- Unique users of the website
- Registered users of the website
- Total Page Views, Average Page Views per unique User
- Conversion Ratio from a View to a Sale
- Single Visitor Repetition Rate
- User Acquisition Cost and Average Web Revenues.
We can see from the above list that the first indicators have to do with the traffic that a website receives. Since there is a certain consensus that the most effective Internet marketing tool for obtaining qualified traffic is search engine positioning, we should therefore think that the effective use of search engine positioning will become the best generator of value for an Internet business.
With respect to the conversion ratio From a visit to a sale, it is logical to think that there will be a higher conversion rate of a visitor who has entered a website through a search engine because he is looking for this information, than if we compare it with the case of a user who enters because he clicked on a banner located in a certain portal. Likewise, the cost of acquiring users will be lower in a search engine positioning plan compared to using a banner campaign in certain web portals. Two more points to prefer search engine optimization as a financial value generator.
Search engine optimization inertia
Another reason that has a lot of weight is the following: when you stop investing in search engine optimization …. How long can the good positioning achieved up to that moment last… 1 month, 3 months, 1 year? It is not known, it all depends on the competition and the new changes in the search engine algorithms. On the other hand, when you stop investing in the insertion of a banner or a sponsored link, the level of traffic drops in its entirety the next day. This means that search engine positioning assures us for some time a good performance of many of the traffic indicators previously mentioned and that are what are taken into the formula to calculate the financial value of a digital business.
In conclusion, demonstrating that a web business has an excellent positioning in search engines, and that this positioning generates an important level of qualified traffic, will give a greater financial value to your company on the Internet when selling it, or perhaps, it is so much financial value that you have achieved that you will prefer to continue investing in this excellent Internet marketing tool.