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Is Your Blog Worth a cool $1 Million?

It seems that blog earnings posts are coming out fast and furious these days.  Paula has recently released her list of Blogger Salaries, and more recently Worldwide success compiled a list of whom they consider to be Millionaire Bloggers

They calculated a blog’s value using a Price to Earnings ratio of 15, and using that valuation came up with a list of 9 blogs worth at least $1,000,000

“To calculate the value of a blog, we assumed a price multiple similar to the way stocks are valued.  The average price multiple of the S&P 500 stocks (also known as the Price / Earnings or PE ratio) is currently about 15.”

 However I think there are two significant flaws in their valuation methods.    The first is that they are using gross income, instead of net income.  Companies trading on the stock market are valuated by their net income, which is their income minus their expenses.   Valueing a blog solely on its gross income can be vastly overestimating its value.  High traffic blogs may have large expenses, such as hosting or site design fees that need to be taken into account.

Secondly, a PE ratio of 15 is too high for a blog.  Many of the blogs listed on that site are less than two years old.  Why would anyone pay 15 times yearly earnings for a blog which can be recreated in less than 2 years?   I think that a more realistic valuation of a blog is something like 5.  And that is only a good valuation for a blog which is still experiencing strong growth.

The bottom line is very few bloggers will be selling their sites for more than $1,000,000.   However that doesn’t mean that the Millionaire Bloggers post is bad.  It is great for seeing how much bloggers can earn.  For seeing how much you can potentially earn.