Do You have a Youtube account? And does Your Youtube account generate earnings? Even if those earnings are low, Your Youtube account is worth money. And in fact, in theory You could sell Your Youtube account for cash.
But what is a realistic valuation of Your Youtube account? In other words; what is Your Youtube account worth?
On the Internet, You can find the wildest guesses about the value of Youtube accounts. I have seen both very simple and complicated calculation methods. For example; I have seen rules of thumb such as a salesprice of $ 1,- or even $ 10,- per subscriber. Both don’t make any sense.
Because the number of subscribers doesn’t say anything about the earnings.
The value of a Youtube account is determined by only two things; its earnings history, and the amount of time (in number of months) this account is likely to reproduce those same earnings. (the commercial lifespan). And that is exactly the same as the valuation of any other investment.
Now the commercial lifespan of a Youtube account is very unsure. The account could be suspended tomorrow, individual video’s could stop generating money and advertisers could step out of the program during the course of the year, etcetera.
Therefore, in general, the market assumes the commercial lifespan of an average Youtube account is 3-6 months. Big accounts that have been established for many years are likely to have a much larger commercial lifespan. The longer the commercial lifespan, the higher the value of the account.
Let’s assume that our Youtube account is small, but relatively established. Let’s say it’s earnings history is a $ 100,- per month for the past 12 months in a row. That doesn’t sound like much. But nonetheless that’s the kind of earnings that a vast majority of Youtubers will actually never make. Most Youtubers are way under that. But let’s assume our account does generate that $ 100,- per month. And we expect this account to keep generating that level of income for the next 6 months. Anything more than that is anybodies wildest guess and should be considered the bonus that comes with the risk that the investor takes.
So the anticipated lifetime revenues of this investment will be $ 600,- in a 6 month timeframe.
Now in general, investors are not so much interested in any investment that generates $ 600,-. For many investors, that kind of money is simply not worth the time, energy and hassle of the purchase.
But let’s assume for a moment that there is an investor interested in this Youtube account, then what would be a reasonable asking price?
Investors have millions of opportunies in this world to allocate their money. So in order to pursuade a buyer to purchase this Youtube account, we will have to set the asking price at a level that at least is competitive with other business opportunites that also will generate a $ 600,- revenue in a 6 month timeframe.
The most certain way for an investor to get a passive income is to put money in a bank-account with a fixed interest rate. If I were to put my money in a deposition account with a 1 year time frame, several banks would give me a 1,2% interest rate. I know, it’s sad. But the good news is that low interest rates enlarge the value of Your Youtube account. Because a savings account is not much of an alternative.
But if I want to generate a $ 600,- passive income in 6 months, based upon a 1,2% interest rate, I would need to bring no less than $ 100.000,- to the bank! Does that make this Youtube account worth $ 100.000,-? Certainly not!
Because if I put my $ 100.000,- on the deposition bank account as mentioned above, after 6 months I will still have my $ 100.000,- plus $ 600,- of interest. But when someone pays $ 100.000,- for this Youtube account, after 6 months they will only have that Youtube account plus $ 600,- of earnings. And that is if they are lucky. All and all that looks like an extremely bad deal!
So the valuation works a bit different.
Because of the very unsure future of any Youtube account, the starting point of an investor should be that he will lose the money that he invests. All he will get is a $ 600,- payout in 6 months. That $ 600,- should compete with an alternative where the investor puts in $ XXX, and then 6 months later the initial investment plus interest would add up to $ 600,-. Looking at 1,2% per year interest rate, that $ XXX would be exactly $ 596,43. So that is the value of this fictitious Youtube account.
So basically, You could say, just take the average earnings per month of the last year, and multiply that by the commercial lifespan. Well, yes and no. As I explained, the more profitable and reliable the alternatives are, the less a Youtube account will be worth. When high interest rates and high dividends will return. Prices for extremely unsure investments like Youtube accounts are likely to drop significantly.