There are two inevitabilities in life: death and taxes, so for job security start an undertaking or accountancy business. The demise of electrical retailer Comet has led to the latter being busy, both on the side of the administrators and those who are interested in purchasing the brand.
The challenge facing all parties is how to determine the value of Comet, and once stock is set aside the only remaining asset is digital: the website and the customer data that Comet has built up.
Determining the value of a website
The process of understanding a website's worth is not dissimilar from the process that we undertake at theEword when we engage with a client pre-campaign; drawing data from our own and industry standard tools to determine how successful a client is within the search market, applying metrics and market data and forming an accurate P&L. This allows us to predict every aspect of the campaign, through to the end profitability.
For the buyers and the seller of Comet the easy part is getting hold of the market data, although the margins may be hard to stomach. The commercial value of a website is based on the average order value and from that you derive the average margin, which in the online white goods sector is thin. (One sensible argument why their margins were so thin is that the offline retailers have struggled online because they're saddled with large overheads that the pure play retailers don't have).
There's a reason for needing averages and not totals at the start of the process, and that's because an online valuation should be driven by opportunity. The smart bidders for Comet's online assets will be looking at what the website could achieve, not the current performance, and that will be based on elements like Comet's previous rankings in the search engines (now that their site has been mothballed they're losing rankings and will likely lose almost all before a buyer can work on the site).
- Comet replaced almost all of their website pages with a legal notice.
- Google (and other search engines) will no longer see rich pages that contain information on products, but instead will see a redirection to the legal notice.
- The pages will be removed from the index, negating a large chunk of the work that Comet has put in to their search marketing.
- A new owner could "reactivate" that marketing value through forensic SEO.
A good valuation will also take in to account other digital channels, and in particular the performance metrics on them - at this stage the outside world doesn't know the conversion rate of their digital marketing, the rates they were paying or the quality of the deliverables, but the bidders will be privy to that. A smart potential buyer could easily spot an opportunity to drop 10% off the average cost per acquisition (a core metric within digital campaigns that determines what bang you get for your marketing spend).
Comet's Search Valuation
- Comet previously has strong search engine rankings for some key generic terms within their industry - these rankings deliver visitors to the site and have a significant value.
- To achieve rankings within the search engines Comet embarked on a search engine optimisation campaign which would have involved producing rich focused content for their site, making the code and technical elements of the site SEO friendly and getting external sites to link to their pages.
- A buyer of the Comet website would likely reproduce most of the content, and in a fast moving industry with new products being launched a large amount of the content will be out of date. However the content that currently exists could be quickly re-launched by a buyer to help re-gain search engine rankings quickly. The content on the Comet site has a low value.
- The links that Comet achieved from third party websites to Comet.co.uk have been built up over time and number ~1.4million links from ~14,000 unique websites. This is a significant number and at first glance has a value.
- Further investigation in to the links to the Comet site shows that the majority of links contain the brand keyword (that the Comet site would naturally rank highly for) and not a keyword focus such as "Dishwashers" or "Microwaves" (that Comet, and a buyer, would want the website to rank highly for). The text within a link impacts on your ranking for the term, so the value of links with a brand term in is lower than a generic product based term.
- The quality of the sites linking to the Comet.co.uk is good, as most sites are relevant or have a high value, but around half of the links to the Comet.co.uk site go to the homepage rather than to a page within the site. A strong SEO campaign will focus on the most relevant pages and optimise them for a batch of related keywords (for example you would optimise the Televisions homepage for keywords relating to TVs with the aim of having that page rank highly in the search engines leading the user to the most relevant page on your site).
- One of the most powerful links to Comet.co.uk comes from Android.com, the website for the Google mobile phone operating system, but there are some strong links from sites that search engines highly value such as MoneySavingExpert, PC Advisor and AVForums.
- The time and effort put in by the Comet team and their agency to make the technical structure of the website search engine friendly will likely be lost as a new buyer integrates the Comet site in to their own website management systems or moves to a new platform, so any historical work is valueless.
- Comet is currently being talked about on strong websites such as news or media sites and also within social channels, both of which may contain links to the Comet.co.uk website. This can have a positive, medium term impact on the rankings, and thus profitability of the website.
- The historical analytics data that Comet has within its back end systems and in analytics software such as Google Analytics will be valuable to any buyer. To someone from within this sector that data will give them competitor intelligence and a wider dataset to use for future campaigns and to a new entrant purchaser this is vital market data.
The marketing value of the Comet website is decreasing on a daily basis, so the key to realising the full potential of the asset is to make key changes to the website quickly.
Firstly the buyer should relaunch the Comet.co.uk website so that the search engines can start to re-index (add the pages on the site to their search results database) the site. From a technical point of view (which sometimes goes against brand) I would prioritise launching the pages over creating an attractive or functional site (or even a site that can sell products).
Secondly they should start a base level search engine optimisation campaign to increase links in to the site, which will help bring back lost rankings. Links that Comet currently has may be based on a relationship that a website had with the previous team or SEO agency, so attention should be paid to the most powerful links and any relationships rebuilt.
These two tasks can be carried out independently of the creation of a new website and the complex integration tasks that may be required, but are vital to sweat as much value from the purchase.
Any buyer moving forwards from this should engage with a strong SEO agency on a search strategy as soon as appropriate to the business, and that strategy should include a heavy slant towards social, content production and real engagement with your potential customers.
The Value of Comet.co.uk
The value of anything is always related to what people will pay, and DRL (the Bolton based owner of Appliances Online) have tabled a £1m offer for the comet website and brand. They're a smart business so they'll have done their sums, and they're also market leaders. Comet weren't beaten by their competitors on cost alone (although this is the key differentiator) they also lost out on customer experience and the way they engaged with their customers. At the time of writing the CometLtd Facebook account had 35,224 likes, compared to AppliancesOnline's 592,589.
Taking all of the above information into account, I would predict that a £1m valuation for the Comet.co.uk digital assets is accurate and would give a buyer a return within a three year period.