The internet can be extremely profitable. The websites that are created by the likes of entrepreneurs can be sold for thousands and thousands of dollars, making it a great place for many people to start their company (since the initial start up costs are relatively low). However, if you are looking to create a website and profit from it by selling it after 1-5 years, it is worth knowing just what makes a website profitable. With this, here are some of the main elements website investors look for in a website to see if it is worth buying or not.

#1 How Much Does the Website Make?

Of course, the first and most important question is how much profit does the website make per month. From this, the general calculation that investors do is multiply the figure by 12-18 (representing a 1-1.5 year breakeven time). Businesses are usually valued at 3 years mutliplied by their monthly profit. However, because websites depend on external factors such as search engine algorithm updates and more, they are deemed more risky since traffic could drop overnight.

A word of warning – The website valuation also depends on the profit the website made in the past. For example, if there is a general trend of increasing profit, then it is likely to increase and this is taken into consideration. However, if the only month the website has made a profit is the current month, it is deemed more risky and will be valued less.

#2 How Does the Website Make Money?

Continuing point 1, a website can make money through a multitude of ways – for website investors, some are preferred more than others as they carry less risk, easier to understand and, potentially, easier to optimise to make more money from. Below is a rough list of what is the preferred way to make money for website investors:

1. PPC advertising, such as Google Adsense.
2. Affiliate marketing, such as Amazon Affiliates.
3. Subscriptions.
4. Private advertising.
5. Private affiliates.

Again, the list is based on risk. What is more likely to continue and what is more likely to stop all of a sudden? Private profit streams are more risky since they involve a building a relation privately, whereas large companies require no such thing, such as Google or Amazon.

As well as this, Google Adsense could be further optimised to use a program such as Ezoic, so will be valued higher.

#3 What Your Website is About?

Most investors want to be familar and understand what the website is actually about (and even contribute to it). For this reason, a website that is about technology review would be more profitable than a website about understanding the Higgs Field in Physics or the thermodynamic principles behind an Otto cycle theoretical engine (extreme examples but you get the idea).

As well as this, what the website is about will tell the investor how niche your website is. The more niche, the better as the competition is low and will not steal away traffic. However, if you are in a high competition sector, you are more likely to lose SEO to competitors, reducing the value of your website.