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Site Flip: Buying and Selling Websites for Profit

Thursday, August 17, 2006

Website Appraisals: Traffic Appraisal

Appraising traffic is an important part of deciding whether or not to buy a website. (If you enjoy the read, consider my free newsletter. )

Essentially, there are two points about traffic: quantity and quality.

Volume can be measured in sheer unique visits, and in page views.

Quality can be measured by the estimated cost per thousand impressions (CPM) the site's publisher can earn from showing ads to his visitors. Furthermore, if the clickthrough ratios (CTR) on ads, and conversions ratios (CVR) on affiliate programs, and sales of his own merchandise contribute to determining the traffic's quality. Obviously, the higher the CPM, CTR, and conversions/sales, the better the traffic.

To appraise traffic, the following formula is appropriate:

Traffic Appraisal = Volume x [.3CPM + .7CPM X (CTR + CTR/CVR + CVR)]

The .3 and .7 reflect the greater trends in online advertising today. More publishers and owners prefer to use cost-per-click ads (AdSense, YPN) and cost-per-action ads (affiliate) on their sites rather than CPM ads. The numbers in the round brackets are a way of valuing click through rates, click throughs to conversions (to see if traffic is converting once it clicks through), and conversion rates proper.

The difference between CTR and CVR as compared to CTR/CVR is in what is being compared to. CTR and CVR compare to traffic stats, while the CTR/CVR ratio - my own invention - compares conversions to clicks.

Related articles are archived in the topical categories ,, .

4 Comments:

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