There has been a poorly kept secret circulating among personal finance bloggers over the past few years. And with the publication of a Wall Street Journal story yesterday, the secret is out of the bag. So I thought I’d bring it until full focus today. And the secret is that several popular personal finance blogs have been sold to major corporations over the past few years for seven and even eight figure deals.
Here is a list of personal finance blog sales based on publicly available information:
Date of Acquisition
|Bankaholic.com||Bankrate Inc |
|September 2008||$11.9 million (plus $500k indemnification escrow)||Bankrate Form S-1 (page F-44)|
|GetRichSlowly.org||QuinStreet, Inc. (Nasdaq:QNST)||2009*||Undisclosed||Wall Street Journal|
|Bargaineering.com||Bankrate||January 2010||$3 million (plus possible $500k earn out)||Bankrate Form S-1 (page F-34)|
|FiveCentNickel.com||Quinstreet||2010*||Undisclosed||Wall Street Journal|
|TheSimpleDollar.com||Cut Media||December 2011||Undisclosed||The Simple Dollar|
|ConsumerismCommentary.com||QuinStreet||October 2011||Undisclosed||Wall Street Journal|
A few things to note about the above table. First, the asterisks next to the dates indicate my best guess at the date of sale. I could not find a source to confirm those dates. Second, for moneybluebook.com, I’ve referenced the whois record that shows Quinstreet as the owner of the site. Third, as you can see, Quinstreet does not disclose the purchase price of the personal finance blogs it has purchased. Under SEC regulations, it must disclose acquisitions material to its financial statements taken as a whole. Apparently, it concluded that these acquisitions were not material. I firmly believe, however, that each of these sales were for at least $1 million and some perhaps as much as $5 million or more.
And that raises an important question–how in the world could a personal finance blog be worth so much?
The Value of a Personal Finance Blog
What do personal finance bloggers write about? They cover debt, credit, banking, investing, credit cards, retirement, and a litany of other topics related to money. Each of these topics relates to industries that are willing to pay large sums of money for marketing and online exposure. Any website that can rank well in search engines for keywords related to these topics can generate a lot of advertising revenue. And the sites that have sold to the likes of Quinstreet and Bankrate have done just that.
Will I Ever Sell the Dough Roller?
In the spirit of full disclosure, I have discussed the sale of my site to large companies in the past. But these discussions never went very far for one simple reason–valuation.
Let’s assume that a blog generates $100,000 a year in income. We’ll assume that the $100,000 is after expenses and after taking out the value of the time the blogger spent on his or her site. In other words, the $100,000 a year is pure profit. What is this site worth?
Buyers typically value websites based on a multiple of yearly income. So the big question is what multiple should be applied to a personal finance blog. And the answer depends on one critical factor–how well is the blogger monetizing his or her site.
Imagine we have two blogs each making $100,000 a year. Blog A makes that income even though the blogger has not maximized the potential of the blog. As a result, a buyer could come in, make some changes to the site, and immediately increase revenue. In contrast, the blogger behind blog B has done a great job maximizing the site’s potential revenue, such that a new owner could not easily increase revenue.
In this hypothetical, Blog A will sell for a higher multiple than Blog B, all other things being equal.
Now back to the real world. What I’ve found is that for a personal finance blog that is well monetized, the typical multiple is 2 times annual income. Note that I have no idea what multiple was used to value the above blogs; 2 times annual income is based on my own experience and research. And at that multiple, I would never sell my site.
When we evaluate stocks, one consideration is the P/E ratio (price to earnings). A typical P/E ratio of a large corporation might range from 10 to 20, although many companies trade at much higher multiples. At a P/E of 10, it will take an investor 10 years at current earnings to earn back the purchase price of the stock. At 2 times annual income for a blog, we are talking about a P/E ratio of 2!
In fairness, it’s not meaningful to compare the valuation of a large publicly traded corporation to a personal finance blog. Because these blogs depend heavily on search engine traffic, and because search engines are extremely fickle in how they rank sites, any business built on this type of traffic comes with substantial risk. But a valuation of 2 times earnings for a site generating a full-time income is, in my opinion, a non-starter. In fact, I turned down a verbal offer for this site a little over a year ago. Since that time, the site has earned almost the value of the offer.
I don’t know about you, but I find the above sales to be inspiring. Each of the bloggers behind the blogs worked hard, built great sites, generated presumably a full-time income for themselves, and eventually sold their sites for a lot of money. Most bloggers I know want to generate enough income to blog full time. The above bloggers show us that it can be done, and they deserve a lot of credit for what they have accomplished.
Now It’s Your Turn
If you’ve thought about starting a blog, the sooner the better. The most valuable blogs are those that have been around the longest. So starting a blog today is better than starting one tomorrow. And if you don’t know where to begin, check out my tutorial on how to start a blog.
I’ll be updating the above table as new sales occur and as I learn more information about the above transactions. If you know of sales that should be added to the list, let me know.
Photo Credit: ~jjjohn~
Published or updated April 23, 2012.