Some buyers I have worked with in the past will use only potential revenues as a measure of how to value a website. They won’t even care about what your revenue is, they’ll do something like take your verified traffic figures, multiply that by what they can make, and that becomes their valuation.
For example, if the site produces 1,000,000 page views a month and they have existing ad sales for $10.50 CPM, and they can run two above the fold ads to achieve that rate, then they know the revenue for that site should be around $250,000 per year.
It wouldn’t matter to them that you’re only making $50,000 on that, because they’re just going to put their own ads on the site. They may use the revenue that you’re making to justify the offer price they give you though.
The big problem with “potential” is, though, that you end up with people who want to sell their forum that think they know what the potential is, and they try to sell it on their own concept of potential. I come across people all the time who try to tell me what the potential of the site they want to sell. And, they’re just stupid. Really. Because, if they know their site could be making ten times what it really is, then why don’t they just do it?
In other words, when you’re selling you should not try to convince anyone what “potential” you believe there is in the site you’re selling. Just present the facts. If you’re buying, it’s perfectly fine to apply proven methods of monetization, but realize that unless you’re Internet Brands or VerticalScope, you probably are just being a jackass if you’re trying to talk about potential on that level.
