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The advertising industry is worth over $30 billion. Those in the advertising sector have a wide source of clients given that all businesses require marketing and advertising services in order to have a sustainable flow of clients. Therefore, there are immense opportunities to scale and grow your advertising business. In addition to this, businesses in the industry are high targets for purchase all year round. So how do businesses owners value their businesses in the industry? We analyse Advertising Valuation: How Much is My Advertising Business Worth?
Factors affecting valuation of advertising businesses
Types of advertising businesses
There are two major classifications for advertising businesses- passive and direct advertising businesses and these are valued differently. Passive advertising is considered the easy option since it mostly involves the use of Google Adsense while direct advertising requires the formation of strategic partnerships, negotiations and the maintenance of adverts. Businesses that are engaged in direct advertising spend a considerable amount of time building networks in the industry and are therefore usually less valuable compared to businesses that only engage in passive advertising.
Cost per mille
T6his is the cost of running an advert on Google or the average revenue generated from 1000 clicks in the case of passive advertising. The CPM is determine by the level of traffic vis a vis the conversion rates and the niche market, if any. The higher the CPM, the higher the revenue generated from advertising and therefore, the higher the value of the business.
The level of organic traffic generated by the advertising business
All advertising businesses must create organic traffic to their site and to their clients. Therefore, as the advertising business owner, you ought to ensure that your back links are well done, that the keywords are properly and seamlessly placed within the site and that the site is optimized for search engine results. The higher the level of organic traffic generated, the higher the value of your business. The site must be optimized for use on mobile phones without presenting problems to users since more people are accessing the internet on their mobile phone devices.
Value of other businesses
It is true that the actions of competitors have an effect on your advertising business because, you are all fighting for the top position. Besides, when their actions deprive your business the required traffic, it will reduce your revenues levels and therefore your value in the market. It is therefore good to keep abreast with what competitors are doing, the methods they are using to increase their value and so on. Besides, the prevailing market prices for advertising businesses are also affected by the most recent acquisitions. It is therefore paramount to ensure that you are informed on the value of other businesses in the market. However, do not let this distract you from your core business.
Get your valuation done professionally
Advertising businesses can generate traffic through a myriad of ways. Instead of trying to keep up with the evolving valuations methods, it is better to focus on your core business and let a professional value your business. This way, the end results are more accurate and reflective of the prevailing market conditions. Professional valuation experts have the latest tools and knowledge on the valuations models in force and will take less time to come up with accurate valuations of your business at different stages. They can even help you in valuing the constituent departments or advertising arms of your business, where there are several.