Web 2.0 Valuations and the Google PageRank

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Web 2.0 Valuations and the Google PageRank

 


I posted an article earlier today on the Small Business 2.0 internet marketing blog titled “Understanding Google PageRank”.  Most of the OnStartups readership is likely already familiar with Google PageRank (if not, I’d advise taking a quick peek at the article).

Now, I’d like to tie Google PageRank back to startups (and more specifically startup valuations).

As you might suspect, many of the startups I talk to these days are Web 2.0 companies (which I’m defining for now as web-based software companies focused on building a community of some sort).  This is not an accurate definition, but it works for me for now.

In any case, if you’ve been following OnStartups, you’ll probably know that I’ve written a number of articles on Web 2.0 startups being auctioned on eBay (the most successful so far being Kiko, which sold for over $250,000).

Looking at my own behavior, I have found that when checking out startups for sale, one of the things that I immediately do is look up the company’s Google PageRank.  (If you don’t have the Google toolbar installed, I’ve built a simple tool that does this.  Check out the Small Business 2.0 Google PageRank Calculator.  It’s quick and free (no registration required).

So, why do I care about Google PageRank when trying to determine the “value” of a Web 2.0 startup even though it’s nothing more than an approximation and an inaccurate one at that?  For one simple reason, it’s one of the few ways we have of actually knowing how Google thinks about a website (outside of a search for specific phrases).  PageRank is an independent measure (and does not rely on any particular search term).  Also, getting a high (6 or higher) Google PageRank is pretty hard to do and reasonably hard to “fake”.  It’s suspected that Google uses a logarithmic scale to assign PageRank, so a PageRank of 5 is much higher in value than a PageRank of 2.  It also has value because if I were to buy a web startup with a high Google PageRank that is somehow related to other companies I’m involved in, I can leverage the PR and SEO of one site to benefit others.  

So, PageRank is important for one simple reason:  It is one of the primary components in how Google determines the search rankings for natural search results (those that are not paid ads).  And ranking high in natural search is an immensely valuable asset – one that I value, and I’m sure others would to.

My advice:  If you’re running a web-based startup that in any way depends on web traffic and high volume user acquisition, you need to be tracking your Google PageRank.  It’s ugly, coarse and infrequently updated – but it’s important.  All things being equal, a startup with a higher PageRank is worth more than one with a lower one.

What do you think?  Have you built a website with a high PageRank?  Does it impact valuations of web startups at all or is my thinking misguided?

Posted by admin_onstartups.com admin_onstartups.com on Fri, Oct 20, 2006

COMMENTS

Much as I love your site Dharmesh I would have to disagree here.
I have been blogging only 4 months and have a Google page rank of 5, yours is 6
How do you account for this.
I am not the most prolific blogger or anything like that.
I havent don anything special for Google just normal run of the mill stuff

posted on Friday, October 20, 2006 at 2:13 PM by Pat Phelan


Dharmesh,

Well, as PageRank is essentially a measure of a site's popularity as measured by their inbound links, caring about a site's PageRank is basically caring about how popular the site is.

Given that PageRank can easily be gamed, saying that it has value as a measure of any business significance is a dubious proposition.

posted on Friday, October 20, 2006 at 2:28 PM by Mitchell Herman


All of you make good points. Though I don't have proof of this, I do believe there is some strangeness going on with PR calculations during the early days of a site. (I have a client on HubSpot that has a PR7 with a relatively new site and very few links.)

Having said that, I think PR does provide some useful data (particularly for sites that have been around for a while). As for Mitchell's comment that PR doesn't measure much more than popularity, that's precisely the point. Popularity has value (as it is one way that sites build traffic). Remember, we're still talking about Web 2.0 companies here. These seem to be focused on traffic aggregation (and later monetization).

posted on Friday, October 20, 2006 at 3:44 PM by


Of course you should look at PR. A page rank value below 5 is really bad for a Web 2.0 company.

I think it is more difficult today to get a high PR than 3-4 years ago. Our old name exceleverywhere.com had PR6, the new http://www.spreadsheetconverter.com has only PR5, but we have more traffic and contents.

I think, you can probably buy a higher PR by advertising a lot, i.e. generate more traffic.

I think Alexa Traffic Rank is better than PR if you want to value a Web 2.0 company,

A value below 100,000 is good, a value below 30,000 is every good, below 1,000 you find news papers.

http://www.alexa.com/data/details/traffic_details?url=http%3A%2F%2Fonstartups.com

posted on Saturday, October 21, 2006 at 2:29 AM by Mattias Waldau


Dharmesh,

I think you missed the second part of the comment.

It is quite easy to game the PageRank algorithm by simply purchasing inbound links from sites that have a high PR ranking.

Once entrepreneurs get wind that VC's are focusing on PR then you can bet such shenanigans will be commonplace.

PR ranking is just too simplistic a measure and too easy to game to be of any real business value IMO. Even Google itself has deprecated the weight of PR in its search algorithm.

posted on Saturday, October 21, 2006 at 10:35 AM by Mitchell Herman


I agree with Mattias, sort of...

I don't like Alexa because many surfers see it as spyware. So depending on your audiance you could get a lower rank. For example 'Gamers' are less likely to have it installed.

Although Page Rank is better in my opinion, it's also geared towards certain types of sites. For example one of the sites I run is GuildUniverse.com. It's been around for sometime, and is a portal to over 12000 sites. We get linked all over the web, some sites with high PR some with low. But because of the link backs from individual 'Gamer' sites that have a low PR we are still at a PR of 4.

posted on Saturday, October 21, 2006 at 12:06 PM by steve ciske


http://onstartups.com PR = 4 (Sat, Oct 28, 2006)

posted on Saturday, October 28, 2006 at 10:34 AM by Job Blogg


Dharmesh,

Just like you, the first thing I look for a website is its G Pagerank. However, I don't think it can be used for valuation.

"Also, getting a high (6 or higher) Google PageRank is pretty hard to do and reasonably hard to “fake”"

I don't agree with the statement. All someone with right skills need is less than $500 and about 3 months (for Google to update its indexes) and you can easily get a PR 6.

posted on Wednesday, November 08, 2006 at 12:51 PM by Gaurav


a good pagerank doesn't mean that the page is good too...

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posted on Friday, May 22, 2009 at 8:22 AM by san jose


he more votes that are cast for a page, the more important the page must be. Also, the importance of the page that is casting the vote determines how important the vote itself is. Google calculates a page’s importance from the votes cast for it. How important each vote is is taken into account when a page’s page rank is calculated. 
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posted on Tuesday, June 30, 2009 at 7:44 AM by anthony


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