Online Business Valuation: The Crucial Role of Often Underestimated Factors

Introduction

Valuing an online business is far more complex than it appears at first glance. While "hard" metrics such as revenue, profit, and growth rates still play a central role, they alone are insufficient. To determine the realistic market value of a digital business model, a whole range of additional factors must be taken into account—factors that are unfortunately all too often neglected in practice.

Whether you are an entrepreneur looking to sell your business, seeking investors, or simply conducting a strategic assessment, any valuation will remain incomplete and potentially misleading without a careful analysis of the crucial "soft" factors. This article addresses exactly that by highlighting often underestimated aspects and demonstrating, through concrete practical examples, how they impact the company valuation.

Factor 1: Traffic Quality and Scalability

Of course, sheer traffic volume provides an initial indication of an online offering’s reach and popularity. A business generating 100,000 unique visits per month initially appears better positioned than a competitor with only a tenth of that traffic.

However, quantity is not everything. Equally important for valuation are the origin and quality of visitors:

• Does the majority of traffic come from a single source, such as Google? If so, the business is highly dependent on algorithm updates and thus carries significant risk.
• Does the website mainly generate random traffic through "long-tail" keywords that are hardly monetizable? Or are users attracted through targeted campaigns and search terms?
• What are the average session duration, click depth, and bounce rate? Do visitors stay on the site for a long time and consume multiple pieces of content, or do they leave after just a few seconds?

Christopher Heckel (CTO of viaductus) is well aware of the pitfalls in traffic evaluation: "We once had a case involving an online store for photography supplies that boasted huge visitor numbers. On closer inspection, it turned out that two-thirds of the traffic came from a single, extremely popular blog article about 'vacation photos'—the conversion rate there was practically zero. Only about 5% of visitors arrived via commercial search terms like 'buy camera backpack.' Adjusted for the blog traffic, the shop was far less attractive than the raw visit numbers suggested."

Building on the traffic analysis, the scalability of the business model must also be assessed: Can traffic (and thus revenue) be expanded easily, for example through intensified SEA activities? Or is the business operating in a tightly limited market with little additional potential? Tools like Google Keyword Planner or SEMrush help estimate the untapped search volume in the respective industry.

Factor 2: Customer Structure and Profitability

Alongside traffic, the composition and value of the customer base are critical factors in valuing an online business. First, it is important to identify the main customer groups and their respective shares of revenue:

• Is there a broad distribution with many small orders? Or do a few large customers generate a disproportionately high share of revenue, which would represent a significant concentration risk?
• Are customers primarily one-time buyers (e.g., for pure trend products), or is there a high proportion of repeat customers with recurring orders (ideal for consumables)?
• What is the churn rate, and how many new customers are continuously added?

The next step is to determine the average profitability per customer and order. This involves considering not only the shopping cart value but also acquisition costs, return rates, service efforts, etc.:

• Do revenues per customer at least cover the variable costs for production and fulfillment?
• Over how many transactions do advertising expenses for acquiring a new customer amortize (Customer Lifetime Value)?
• Roughly, how much gross profit remains per order after deducting all sales and administrative costs?

E-commerce expert Vanessa Aberle explains: "To assess profitability, we often segment the customer base into cohorts based on their entry date and then analyze the average revenues and costs of these groups over 12, 24, or even 36 months. This shows whether a customer brings long-term profit to the shop or whether they might even cost money due to excessive returns. Additionally, tracking profitability over time reveals whether customer profitability is increasing, for example because acquisition costs are decreasing."

Factor 3: Market Positioning and Competitive Advantages

The attractiveness of a business largely depends on how it is positioned within the competitive landscape and whether it can differentiate itself through unique selling points.

• Does the company serve a clearly defined, profitable niche or offer a product with high "recognition value"? This would be a positive indicator.
• Conversely, is it a generic offering with high comparability, where competitors engage in ruinous price wars? This significantly reduces margins and company value.
• Are there characteristics that make the business unique compared to competitors—such as a strong brand name, a broad product range, a special shopping experience, a convenient ordering and payment process, or excellent customer service?
• How easily can competitors copy the company’s products and services? Factors such as patent protection, exclusive supplier contracts, or the development of complex, hard-to-imitate processes (e.g., same-day delivery) play a role here.

"For the strategic evaluation of an e-commerce player, it is also essential to look at the entire customer journey," says Aberle. "Where are the strengths and weaknesses compared to competitors? Where is there potential for improvement to strengthen market position? This could be product presentation, user navigation, the checkout process, delivery options, customer service... Systematic tests and benchmarks, as well as user surveys, often provide valuable insights."

Factor 4: Visibility and Reputation

In an era of social media, price comparison sites, and online review portals, the perceived value of a brand strongly depends on how visible and reputable it is online. Therefore, digital reputation must also be scrutinized during company valuation:

• Through which channels and in what tone is the business discussed online?
• How frequently is it mentioned, liked, and shared on social networks?
• What do customer reviews on platforms like Trustpilot, Google My Business, or Amazon say? How have ratings evolved over time?
• Is there active social media and community management that responds to feedback and professionally handles negative comments?

Mentions and links from other websites (publishers, blogs, associations, etc.) as well as collaborations with influencers also significantly contribute to the "link profile" and thus the reputation of an online business. "We carefully examine which external links point to the site and whether there might be critical posts or spam comments from the past," explains Christopher Heckel. "A high number of backlinks is not always positive—if they come from dubious domains or were generated through SEO tricks, they pose a risk because Google might penalize the site."

Factor 5: Technical Infrastructure and Processes

Finally, "under-the-hood" factors such as the technical platform of the online business, its operational workflows, and the efficiency of internal processes should not be underestimated.

• Is the company running on outdated, inflexible software with a confusing "patchwork" of systems? This can severely limit flexibility and responsiveness.
• Are there interface issues, data silos, and labor-intensive manual steps where continuous automation would be possible?
• How reliable and scalable are the shop, payment, and logistics systems? Are there performance bottlenecks or outages?
• How well is the company protected against hacker attacks or data breaches?

The structure and documentation of the website itself can also become a critical point, for example, if SEO-relevant areas in the content management system are poorly maintained or product URLs are assigned chaotically. "We once had an online retailer whose category and product URLs contained only cryptic number codes—something like 'www.shop.com/catID=384/prodID=85616'," Heckel recalls. "That’s an SEO disaster and cost the shop a fortune in lost rankings. During technical due diligence, such weaknesses and legacy issues must be uncovered."

Conclusion

Valuing an online business requires, in addition to analyzing "hard" financial metrics, a look at numerous "soft" factors that are not always immediately visible. From traffic quality to customer structure and profitability, to market positioning, reputation, and technical foundation—a e-commerce company is a multifaceted entity with various "levers" that significantly influence its market value.

To make reliable statements about the attractiveness, risk profile, and potential of an online business, a holistic view is necessary—one that combines classic business analysis with insights from data evaluation, user testing, and technical assessment. This requires time, interdisciplinary expertise, and experience.

However, the investment is worthwhile in any case—because ultimately, the solidity of the valuation process determines whether you sell your online business at a fair price that reflects its true market value or, as a buyer, end up purchasing a pig in a poke.