What would you pay for a "perfect" site?

[benitez17]

I assumed that the site also was fully monetized and picked 3 - 4 years, because above that level, other investments offer a better return.

If I don't assume that, there is no top limit. One of my best buys was a site that was losing money due to mismanagement that someone was desperate to unload, and I have bought sites for over 10x annual earnings on several occasions because I knew I would be able to signfigantly increase the revenue.

[KenW3]

I wish I could respond with an intelligent multiple for the parameters you set forth. Several sites I have bought for 2 years turned out to be 8 years. Looking through websites offered for sale, I see sites that can be built easily enough. It is difficult to rationalize paying a high multiple for a site that can be built for much less. Most of the sites I've purchased so far have been for the purpose of seeing how they were put together, so I could make more The only difficulty is building traffic.

Not at all. I'd pay 20x or 30x even, depending on the circumstances!

If I came across a quality, self-running site making $100 a month and I were confident I could increase it to $400 a month ($4,800 pa), I'd happily pay $9,600 as, to me, it's only 24x what I expect to make per month.

@Clinton, the 'depending on the circumstances' qualifier in your statement indicates the multiple you would pay is dependent upon your ability to lower the effective multiple, by applying knowledge of monetization methods. What the statement above says to me is: You would only be willing to pay 9600 for a site making 1200, if you were somewhat certain you could adjust your actual multiple down to a more reasonable number. In effect, this example says you are willing to pay an effective two years for the site.

The multiples selected in this thread seem to be in direct correlation to the comfort each member has with buying and operating a web site, and in receiving a faster return by application of knowledge. The consensus is a maximum of four years, which seems high given the instability of most web sites, but is probably given only for a site that is the perfect hypothetical described by Domain Magnate.

[Clinton]

Spot on, Ken. Sometimes it's not just about multiple, though. A premium domain name may hold its value even if future revenue drops to zero. An online business may have a relatively small income but hold some patents and other IP that the buyer is willing to take a gamble on. If the gamble works there could be a big payoff coming.

In fact, buying web businesses for their patents is taking off in a big way with the likes of Google investing millions in businesses just to get their hands on the IP. It's not even like they want to use the IP to create products. They're targeting IPs that their lawyers are advising them have a slim chance of winning an infringement case against a big player like Adobe or Apple. They're buying IPs just so they can launch lawsuits, it's a crazy world!