I came across this tool for calculating the worth of your blog. I got $15000 which is not bad for 6 weeks of writing. I’m not sure exactly how this is calculated though. Is this a pure play estimate of what similar blogs have sold for. Quite possibly it is just a measure of some intangible goodwill. If that is the case, does that assume that the blogger keeps writing? Still, dividing that amount by the amount of hours I have spent developing this site, I get an hourly rate well in excess of $100. Of course this money has not been converted into cash so like home equity, it is not a useful estimate of real wealth.
Another way of evaluating the worth of blogs is by the income stream they produce. Based on loose reports from other personal finance blogs, I estimate a potential monthly income of $0.50-1.00 dollars per subscriber. I am not at all sure this scales linearly. My guess is that income per visitor follows an S-curve. Less popular blogs get almost no advertising despite having some readers and very large blogs probably do not keep growing their income exponentially. I think the pareto range is somewhere between 500 and 5000 subscribers for this subject area. Another way of evaluating the blog is by using the discounted cash flow model (DCFM) which I also used to calculate the latte factor. Assuming that I keep blogging for free forever, a zero growth rate, free hosting, and 50c/subscriber, and a required rate of return on equity of 5% (hey, I’m a safe investment!), the value comes around to
which is in the same ball park as before, so maybe the estimate above makes sense.Why is this interesting?
- I could have spent this time watching TV or even worse spending money to entertain myself. Instead I have created something of value which was fun as well.
- There is a direct correlation between the effort of my input and the rewards of my output. In other words, I sit in the middle of the cash stream. This is more empowering than being an employee where you are subject to the vagaries of employer compensation schemes.
- If monetized the hourly rate of my value creation easily exceeds the pay level most jobs. The only issue would be to spend 8+ hours a day. Currently I spend 1 hour on average. This could be solved by starting more blogs and in fact many successful bloggers run more than one blog.
You do not need to start a blog to generate income streams. There are other ways of generating income streams. Thinking about everything in terms of income streams is very helpful. For instance, I pick up pennies from the ground. The reason is the large associated income stream. It takes me about 2 seconds to pick up a penny from the ground. What hourly wage does that correspond to?
The hourly wage of picking up a penny:$0.01×3600/2 = $18/hr
Not bad! Even more assets can be generated by removing negative income streams e.g. outflows. Consider the latte factor again. What if you found a way to not spend $1 a day. What would that discovery be worth?
The value of a discovery that saves you $1/day:$1×365/0.05 = $7300
Unless you got a black belt in frugality, it is probably much easier for you to think of a way save $1/day than it is to make $7300. This amount sounds huge, but this is really the cash stream equivalent of $1 day, so when people say they need a million dollars to retire, it mainly because they have not thought about ways to save money. These ways of saving money are worth a ton of money. I estimate that my knowledge in getting things cheaper would be worth at least half a million in lifetime savings This may sound impressive, but it isn’t. It is not hard to think of ways where the cash flows per effort are much larger than the cash flows associated with jobs and consumer based solutions.