Digital assets includes
- domain names,
- online businesses, and
- smart phone applications.
These digital assets seem foreign and confusing to some people but digital assets are similar to physical assets. They are worth money as an asset and can be income producing.
Online assets give their owners a way to earn an income in the digital world with the main benefit being that the owner can live anywhere.
Domain Names are valuable and can be bought and sold
Domain names are similar to land in that they don’t usually earn an income unless an income producing website is built onto it. If it is a fantastic name or a name that another company wants to buy then it can be incredibly valuable.
If the domain name is a good relevant keyword that a lot of businesses would like to own you just need to go out and find someone willing to pay for it. Domain names are fairly inexpensive to buy and inexpensive to hold.
Domain names are purchase and renewed via a domain name registrar for less than $30 per year for most developed countries. They are similar to buying a business name – it’s not until you add products and contact details that you begin to be able to earn revenue.
Websites that produce an income
Website building software like WordPress is inexpensive because it is open source software and it’s very similar in concept to using Microsoft Word to create a flyer, advertisement or brochure for a business.
With a simple website you can create pages and products using words and images that are used to attract visitors and ultimately buyers/customers.
If the visitors like what they see at the website they can take action by
- clicking on “affiliate” links,
- clicking on ads at the site, or
- buying products/services.
Online Business and income
Once a website earns an income it’s a business which can be bought and sold, just like real estate.
It’s important to know that a business website uses several different ways of attracting potential customers, educates customers and then makes a sale.
Through this process the website is used to create a database list of prospects and a customer list – these are assets which contribute to the value of the online business.
Prospect and Customer Lists are valuable
A customer list and prospect list are business assets that are worth money, particularly if the website owner is able to send marketing messages to those people to encourage them to either buy more products or tell their friends about the business.
These assets are often visible on social media profiles at Facebook or Twitter and less visibly in an email list.
The most common email list software is Mailchimp which enables every online business to capture leads, send regular messages and measure conversions.
Advertising, Referral and Organic website visitors
Organic traffic is understood to be a free source of visitors to your business website, but that doesn’t mean it was always free. There is usually a cost to get your business website discovered and the most common way is to generate and publish a lot of relevant content via a blog.
Website owners use money, content and resources to bring visitors to a website and if designed well, with compelling products and services that website will start to receive organic traffic from search engines like Google.
If the website owner is paying to bring traffic to a website it is often because that advertising spend is earning more money than it is costing. If that’s the case then it means that not only is the website getting free organic traffic but it can scale or grow with the addition of advertising.
Scaling, up selling and cross selling
Scaling means that you can spend a dollar in marketing and advertising and the website will earn more money than it costs. If a business can spend $500 per month and increase it’s gross profit by $1000 then it can technically spend twice as much in advertising to earn even more money.
The only way a business can grow in size is by
- selling more products/services
- selling products/services to more people
- increasing the amount it sells to each customer
Valuing a digital asset
A business is worth what someone is prepared to pay for it and that can be determined by a lot of different factors, including
- replacement cost
- cost to replicate
- multiple of earnings or profit
A website is relatively easy to create. A domain name is cheap to buy and hosting is also cheap but getting traffic and converting website visitors to customers is hard, even converting website visitors to real people that you can followup with can be hard.
The ability to followup and remain in contact with a potential customer (prospect) until they are ready to buy can make a massive difference in the income, profitability and ultimate value of an online business.
If a business is growing it’s worth more than if it’s steady or slowing down and all these factors go into the mix of what a business is worth and how you can make it earn more money for you in the future.