Bloomberg have reported that IBM’s value yesterday reached $214 billion while Microsoft’s fell slightly to $213.2 billion.  IBM has been steadily gaining on Microsoft in the last year by adding 22% to its overall value, while Microsoft’s value has seen a drop of 8.8% in the same period.

This isn’t at all surprising given the drive towards the cloud now for all technology companies and the servers required to get their presences there being supplied predominantly by only a few major firms, of which IBM has always been a leader.  We could probably see Fujitsu, HP and others significantly climb in value too in the next couple of years, again off the back of the move to the cloud.

Microsoft’s business focuses predominantly on Windows, Windows Server and Office with other aspects of the company’s products, namely their Bing search engine and their Xbox gaming division being propped up by revenue from the company’s traditionally strong products.  With very few exceptions Microsoft have never made hardware and certainly haven’t got into the server market.

This is the first time that IBM has topped Microsoft in value since 1996 and is now the fourth-largest company in the world by market value.  IBM sold their own PC division to a Chinese company in 2005 and HP also now look set to sell their own PC division to concentrate on the prospering server market.  IBM could clearly see which way the wind was blowing.  While the rest of the world believed that processing was coming down from servers onto the desktop, they stuck to their ground and were soon proved correct that processing would continue to be done on servers and, indeed this market would grow significantly.  In an interview with Bloomberg, Ted Schadler, an analyst with Forrester Research siad “They were early to recognize that computing was moving way beyond these boxes on our desks.”

Microsoft are still the world’s largest software company but in 2000 were worth three times the value of IBM.  This shows just how much IBM’s business has grown in that time, and the company has announced plans to grow their business even further by 2015.  Back in the summer of 2000, Microsoft was valued at $430 billion but dropped to $135 billion in 2009 at the height of the economic downturn.

Microsoft will continue to be a dominant player in the market but the rise of alternative operating systems from Google and Apple have proven that it’s no longer all about the operating system you run, as I point out in an article today on our sister site Windows8News.  This move then does not mean that Microsoft won’t still be a technology giant ten years from now.  They may still see this dominant place slip however and could be number five by the end of next year.

Several factors play an important role: The domain name, (unique) content, the age of the domain, the pagerank, visitors, pageviews, revenue, daily work and dominance in a certain niche. The value would then be determined by analyzing all factors which would then lead to the value of the website. If you want to just quickly calculate it and get only a rough estimate you can simply multiply the earnings with a figure between 6 and 24. That would be the revenue for the next 6 to 24 months. It depends on the site if you use a figure near 6 or 24. Proxy sites for instance normally receive only 6 or even less times the monthly revenue while sites that have earned solid revenue for years will most likely be closer to 12 or more months of revenue.

The revenue method is not always working that well of course. What if you want to buy or sell a website that never used ads on their pages, it would surely not sell for $0. The price for such a website depends on other factors, the most important ones in my opinion are: Content, Traffic, Daily Work, Pagerank and ways to monetize the site. Let us take a closer look at all of those factors:

• Content: Content is important. Content not only describes the type of a website, for instance sports forum, technology blog, but also how unique the content is. Good unique content for instance raises the value of a website while copied content makes it drop. Who needs a website with a youtube video downloader script if there are thousands sites that offer such a script as well ?

• Traffic: One important factor. How many unique visitors visit the website daily ? Where do they come from ? How long do they stay on the site ? Traffic that is coming from search engines is more valuable than most traffic from other sources. It is very easy to purchase thousands of unique visitors that push your stats but do nothing good for the site besides that. They come and go quickly.

• Daily Work: A website that requires no work at all is better than one that requires many hours of daily work. The first one is better simply because it leaves more time for other websites or activities. Even if you can work 18 hours a day you will reach that limit pretty soon and that means you will have to make a decision to either sell a website, hire someone or reduce the daily work on another site.

• Pagerank: Pagerank might not look important at first glance but is when you consider the possibilities of selling links on such a site. Pagerank begins to be important starting by a pagerank of 4. You can make hundreds of dollars each month by selling links on a pagerank 6+ website. It takes lots of good backlinks to get to pagerank 6+ but I still think it is worth it.

• Ways to monetize: Some sites can be monetized pretty good while others pose serious problems. Forums for instance aren’t good money makers while blogs or product websites are. You can probably use a very conservative figure of $4 per 1000 impressions on most websites.

  Selling text links would be another option which could be anywhere from $5 per month on a pagerank 4 site to $1000 on a pagerank 9 site. Many other ways to generate income exist. Sell direct advertisements, use affiliate systems (work best with product related sites of course), ask for donations, sell a product and use CPM systems for instance

Now, how do you determine a value of all those factors ? One way would be to take the ways to monetize the website plus the pagerank and calculate the possible revenue that you expect and multiply that with a figure between 6 and 12. I would probably use a figure closer to 6 and see how the owner reacts.

Unique content can push the price up quite a bit. If the website offers something that no other site offers you could have to pay for that as well. It is hard to determine the value of content though. Just expect a price close to 12 or even more times if the content is really unique and attracts the interest of a large number of visitors.