Hi guys,

Aussie guys are already in 2008 and I hope that new year will be good for those involved in web hosting business there? My question to you however is "Do you expect shared web hosting companis to increase their selling price... on average in 2008?"

... you remember that host owners used to sell their companies 5 times than its annual revenue, but this rate droped to 1.5 in 2006. So, what do you think?

dawhb,

Happy New Year to you ...

To answer your question, no i do not believe the prices go up at all, what makes you believe they would?

Hello,

I do not even believe that you can look at fixed ratios like this (5x or 1.5x, etc). A company is worth what someone is willing to pay for it and what someone is willing to sell it for.

There are alot of factors that go into the selling price of a company. How about if the company owns all of its own infrastructure? software? rights and ownership of other physical and intellectual property that has value? I cant speak for others, but, our assets are worth more then 1.5x our annual revenue - so, selling for that price would be absurd...

For just clients, I think the going rate is 12 months of revenue. That's usually what the going rate has been. Like Andrew said though, the rest is extra, and should be included too. For example, if you have a WHMCS license, and let's say you paid it up until 2010. That would be 2 years of the license included with the company and that would add 382.80 to the company's assets and therefore increases value. So the fixed ratio wouldn't really cover items like that. You could do that for clients, but not for the other stuff.

owm

The prices seen on webhostingtalk are usually for small hosts with very little assets. When you start talking about very large hosts then you're paying for things such as their assets, the brand of the name ect. on top of the actual customers.

I do not believe prices will go up. In fact, I think they may fall a bit - perhaps to 1 times revenue. Here's why: Web hosting is becoming a commodity business, at least in terms of shared hosting. Providers with the bulk of their business in VPS, dedicated server, or gaming server solutions will fetch more. But shared hosting won't.

I think we will see the common 10 - 12 times your monthly revenue switch to about 6 times your revenue for shared hosts, and increase for contract based providers.

great comments - but, I also think its dependent on the types of customers. I "think" the reason you have seen the value of shared hosting customers go down is the increase in churn rates as more and more providers are selling a valueless service based on price. With such a high churn rate, value will ultimately drop. However, I could not see providers like hostopia for example selling their clients off for 1x annual value or less - their clients are worth alot more. Considering our churn rate, I would not even dream of selling off shared/reseller clients for anything less then 2-3x annual revenue - similar for dedicated clients...

this is a really tough question to answer on the whole - as value is based on alot of factors - but, if you are simply selling a shared client base with a high churn rate, then yes, I would expect this value to keep dropping...

Great comments by Andrew. So spot on as usual.

General valuations for hosts will either decrease due to the market being saturated, or increase due to the market being saturated. It could go either way, but like Andrew said, it comes down to how much someone is willing to pay.

I didn't express any opinion in my question. Since it became a great conversation I can add some thoughts... I agree with Andrew and UH-bobby that intelectual property and assests worth the money... and I can add that a good brand also does it. I presume that if a web host manages its servers with its own branded control panel that would increase the selling price.

Another thing is that seling hosting customers should be different from selling a hosting company.

Someone said that shared web hosting became commodity business... if it is like that, this is good news for shared hosts. Isn't it?