Niche websites are generating value through various means. As evidence from the just-sold listings at Flippa, it is evident that people are willing to pay for the rights to acquire niche websites. Now lets us spend sometime understanding the key factors that are driving the value (or market price) of these websites.

Like any other asset, the current market price needs to be the discounted value of future cash-flows that the business is able to generate.

Due to the nature of the business models of website with little investment heavy needs and less capital expenditures and assuming all transactions happen purely by the way of cash, we can approximate the cash-flow to the following equation.

Cash-flow = Profit = Revenue - Expenses

Let us look at the avenues that driving these two parameters of the equation.

Drivers of Revenue

The drivers of Revenue can be one or more of the following:

  • ### Affiliate Revenue

Affiliate revenue is the revenue generated by selling products or services of another provider through your publishing network. A few examples of business models that generate revenue through affiliates are:

  • Fresh Apps generates revenue through the iTunes Affiliate program
  • +
  • ### Subscription Fees
  • ### Advertising Revenue
  • ### Referral Revenue

Drivers of Cost

The drivers of Cost can be one or more of the following:

  • ### Employee cost
  • ### Advertising cost
  • ### Software cost
  • ### Hosting cost
  • ### Referral cost

Drivers of Content

The niche site that is being developed will need to be continuously updated offering something new that customers want.

The content should be of quality that users will want to subscribe to. Content needs to be fresh, rich and interesting.

For example, consider a fashion website. There are continuous supply of events to keep having a roundabout update of inventory. Spring Fashion, Autumn Fashion, Carnival fashion, Halloween fashion … you name it!

How to use the internet to make money - Economic Times

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