The Return of Monetized Eyeballs

36 Comments

How much do you think Slashdot is worth? Or Nick Denton’s Gawker Media or TheFaceBook or Boing Boing? You can find out the answers here… in my latest Business 2.0 story, The Return of Monetized Eyeballs. A sharp rebound in the online advertising market, and big media companies like AOL (a division of Time Warner) buying up folks like Weblogs Inc, has prompted a sudden increase in the value of the “eyeballs,” the dreaded phrase from the early days of Internet mania.

This time, the buyout metrics are slightly different as new variables like cost of customer acquisition and stickiness. In the article, I point out that the acquisition price per unique visitor had fallen from an all time high of $710 (Yahoo’s purchase of Broadcast.com) in April 1999 to about 73 cents in November 2001. How are we doing these days? About $10 a unique visitor! Weblogs Inc. co-founder Jason Calacanis advises “And build a brand. Because without that, you’re going nowhere.”

Full story @ Business 2.0 website.

36 Comments

Rich

I have a four year old web propert with a 3 mo Alexa rating of 390 and currently at 290 and rising. We get approximately 2.5MM users per month and over 20MM hits per month. We also have more search engine links than Napster and Target. Through surveys of our users we know they love the site and the free tools we provide. We will not take adveritising but instead sell premium versions of our free tools at a low cost so users do not have to come back over and over again. The technology is considered the best in the industry. We also have inquries from other countries to create foreign language versions. I belive this is a new category of social networking. Any thoughts on potential value or what I should ask for a valuation from VC’s?

Peterson

I am not necessarily agreeing with Om’s valuation methodology but I don’t agree with Jason’s view point.

I checked out his Blog and the reasons for why he is disagreeing with Om. I dont think his reasoning ties out. If you use his assumptions at http://www.calacanis.com/2005/11/29/ok-lets-stop-the-bubble-machine-right-now#c123226

The numbers at the high end of the range come in the same ballpark as Om’s.

But, as I mentioned in that comment, I didn’t fully read Om’s article but the table seems to be catching everybody’s attention and Om should have probably used a range instead of an absolute number in that table atleast for CYA purposes.

Ian Bell

I think a lot of people are missing the point. The article IMO is taking a number of factors and brings them down to the lowest common denominator – cost per unique visitor. I don’t think OM intended to break open the gat and flow charts to figure out some sort of elaborate equation to a company’s net worth.

The reason why there is an average dollar amount tied into each visitor is because each site is different; their readers behave and react differently and create a different ROI depending on the sites business structure and market segment.

I found the article interesting and sort of fun/light-hearted to read. It’s like listening to those bizarre sports facts you hear the announcers talk about during the football game. You wouldn’t base a business decision on them, but it’s still interesting to know.

Ian Bell

What a genius comment:

“And according to Weblogs Inc. co-founder Jason Calacanis, the most valuable online media companies are those that are already generating revenue. “

Carsten

Hmmm… I have to believe the value of a site can’t be derived simply by the number of visitors… There has to be a viable business model for any real value to exist, no? Maybe I’m too Web1.0… oh wait, that was the web of the bubble wasn’t it.

Shanti

Hey Om,

> At $38 per user (the average for recent deals)…

How did you calculate the $38 per user figure, exactly?

I’m guessing the MySpace (Intermix Media) deal and … ?

It does, after all, seem a little high.

Not that your calculations were wrong (because the acquiring co’s could be going a little m&a crazy)… but, seems a tad off.

Shanti

Allen

Frankly, sites which rely solely on traffic (the majority of which rely on adverting for revenue, including blogs) seems too heavily dependant upon search engines to be any solid business plan. Granted larger companies sleep easier at night, but no one who in organic search is immune to Google’s wrath.

Gopi

Jason, 30x yearly earnings may be common for corporate buyouts but unheard of if you buy/sell sites among mom/pops (that too if the web property depends on search engine traffic)… Many SE traffic dependent adsense content sites can sell for 1-2x earnings max.

Gopi

>> gopi, what are your sites? just wondering

Om, I am a Search Engine Marketer & this question is a Big No-No in our world :)

Om Malik

jason and michael, perhaps first thing would be to realize that eyeballs is metaphor for web content properties.

if you read the full piece and not just focus on the headline – that is the average price per user – and if you read the full piece you will realize that we are making it categorically clear that not all page views are created equal.

revenues (and potential revenues) are based on page views, users etc. they don’t happen in isolation. Jason should perhaps explain to me how he was “projecting revenues” if not projecting the page views aka eyeballs.

Michael Moncur

I have to agree with Jason, those numbers are insane. I have a popular site that generates a substantial revenue and have turned down a couple of offers to buy it at 10-20x its monthly revenue in the last year.

According to your $38/monthly visitor model, the site is worth 962 times its monthly revenue, or approximately what it would make in 80 years. I’ll gladly accept an offer for that amount, but I just don’t see one coming.

Jason

Om… you know I love you, but this is absurd. Like really, really crazy.

Weblogs, Inc. was bought by AOL because of revenue and revenue growth. Eyeballs and pageviews had nothing to do with it–zero.

No one in the marketplace is buying things based on eyeballs–no one. It’s all based on revenue.

Boingboing, like any other web property, is worth 1-10x revenue and 5-30x earnings. So, if BB does 30-50k a month/360-600k a year (which seems possible to me based on the 5m page views a month) it would be worth between 500k and $3M (based on revenue since with five mouths and server hosting to pay for it doesn’t really have earnings–yet!).

Paying much more than that amount wouldn’t make much sense unless you were an affinity buyer or buying the talent (which is all part time and spoken for on other projects anyway). You would be much better off putting the $3M to work on hiring a staff of 10 writers @ $100k, putting 1M towards a management team, and $1M towards marketing.

That’s how these deals tend to go down.. people look at the cost of buying vs. building and the numbers Om puts out are so absurd it’s laughable.

Om Malik

not a chance brian, for my site is just me. look at most of the sites/properties that have been sold are multi-author properties. and well, so is boing boing, gawker media and everyone we created the matrix for.

weblogs inc sale, or anyone else that was sold fell into that bucket.

David Newberger

well since it doesn’t look like trackbacks are workign on my site I thought I would do this the old fashion way.

I wrote the following in “Bubble-Era Buyouts, more signs of the Apocalypse”:
One more sign of the impending apocalyptic return of the bubble-era. This is the first thought that came to mind when I saw the teaser but I read further.

Gopi

Om, According to your valuation model ($38/monthly visitor) my sites are in the 50 million plus range – I can give 50% discount for a cash deal, anyone interested :)

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