Hey guys I got approached buy a investor/company to buy into a forum that I run. It's pretty decently sized and in a niche market. I do the sales. The other costs are minute relate to the earnings. Does anyone have a rough idea on the multiple I can use for negotiations?
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this may help http://www.yandalo.com/
[quote=GoldmanBallSachs]this may help http://www.yandalo.com/[/quote]
Thanks for the site. Thing is what those algorithms value the site at is just a little over what it makes in a month. It's being looked at by a company that strategically buys certain decent sized sites and then.. Well you guys know. So their current advertisers are fortune 500 companies. I have been approached because they know the size and are basing an offer off of EBITDA.
Any idea on a low multiple versus a high multiple?
I think you average niche internet forum would fetch in the neighborhood of 3x yearly income. Keep in mind that higher or lower growth prospects can change that number drastically. I've seen as little as 6 months to as many as 10 years paid for a forum. You will have to do a self assessment on your growth potential, and the amount of additional work you are willing to put into your forum to evaluate offers.
Dang WSO is worth over 100k
considering patty is reported to pay himself more than that in a year, I'm pretty sure WSO is worth way more than that.
Also factor in size, age and brand. I see a lot of niche blogs going for 1x yearly income. Check out www.flippa.com to see how some auctions ended up.
Guess it depends on the cash flows. He's probably bringing in dough from that conference and the guides he sells.
For anyone with a similar question in the future, it ended up being 4.5.
How do you value an internet company? (Originally Posted: 08/18/2009)
Say you have a website, like facebook or a company that makes independent instant messaging software (NOT tied to a parent like AOL, google).
They have little to no revenue. the only info you have is there total registered users, and maybe active users. How exactly do you value these companies?
You have no idea how the company will perform in the next few years...it could do well or bad.
Any pointers would be great thanks.
You'll look at comparable transactions, whether you're talking about a private investment or an acquisition. You'll look at similar raises at that stage of development. These are all private transactions, but talk to some angel investors or some entrepreneurs who have recently raised a round and you'll get a sense of the ballpark. The actual valuation will vary based on perceptions of the quality of the management team (experienced entrpreneurs or not?), whether they have customers and who they are, revenue, how "hot" the deal is, etc. There is no set formula.
In the bubble years, Internet companies were going public very early with modest revenue and no income. The Street was looking at revenue and ebitda multiples to value public companies.
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One article to give you some thoughts on it - http://www.techcrunch.com/2009/06/04/the-true-value-of-social-networks-…
formerMD has the basics covered, but always depends how much detail you care to know.
For back of envelope calc get their uniques from Comscore, and then take valuation points from historical transactions and divide implied EV into uniques to get some multiples... use those as a basis perhaps.
More advanced method you want to understand how much ad revenue the site can support and the quality of the uniques (length of time on site etc.) and create some blended methodology. It's basically BS... come up with something and defend it.
Notice how with Facebook uniques have gone up but valuation has dropped... maybe regress that forward as well?
Good luck.
Following on Canadian's comments...I recently worked on one such deal.... a lot of analysts use web rankings and stats from sites like alexa.com
You value it similar to how bankers value a piece of crap. How much money will the crap generate for the bank.
thanks folks. ended up just projecting revenues then multiplied it by a comparable.
How to value an e-commerce site (Originally Posted: 10/04/2010)
I just had an interview this afternoon.....
I was asked something like "A small e-commerce website , in a competitive niche market, 3 yrs old, fluctuating annual revenue, unclear growth prospects"
What approach would you take to evaluate the value of this business? Thoughts?
i think the point of the question was to address the fact that DCFs are not good for valuing companies with little to no revenue or unstable / unpredictable cash flows. Probably look at comparable companies and use a lower quartile multiple to be conservative.
yeah..i really doubt the interviewer expected you to actually come up with anything intelligent.
1) no dcf 2) no precendant comp - chances are they wont have any values for very new sites and the very old ones simply can't be compared 3) the best you can do is probably use comparable comps and perhaps use specific metrics (RPRs, CPMs) to figure out the best comparable...
I also should have added more creative multiples like unique visitors or pageviews. Commonly used with web companies during the internet boom and even still today.
If they have an affiliate program take a look at Lead/Sale ratios
How to value an internet company / website (Originally Posted: 09/03/2011)
Hi All,
I am currently interviewing for a relatively junior buyside analyst position with a website holding firm that acquires internet-based companies. Most of these portfolio companies are social media sites and the e-commerce ones only sell digital products.
As a part of the interview process, I am to complete a case study which suggests that I choose and value three target websites for the firm. I am quite familiar with DCFs and pro-forma cash flow analysis, but am not sure as to how a website's operating data would fit into such a model. The prompt does suggest that I utilize internet data such as unique visitors, monthly spending on search engine marketing, and sources of traffic. Also, I find it very difficult (and almost impossible) to find financial information for these companies without direct correspondence with the companies / premium access to website analytical software. I've also read that one source of cash inflow would be the # of visitors to the website x a $ multiple. How would I determine that multiple?
I would appreciate any information or tips on how to build such a model to value a website. Also, given that this is an exercise with no provided financial information (I don't think they expect me to call and source actual financial information from target websites), what would be the best way to "guesstimate" the cash flows in my valuation model?
Thank you all in advance!!!
Alexa and compete can help you get a rough idea of visitor info.
Use industry average CPM (cost per thousand impressions) to figure out potential revenue for a company.
For example, assuming a $1 CPM and the website has 1,000,000 page views a month, then its revenues would be $1,000.
To build out comparables and multiples, you can check out sites like techcrunch.com to see recent funding rounds and buy-out multiples.
If you really want to get into it, sign up for a google adwords account and you can see how much certain keywords are bid. Use those figures to extrapolate keyword spend and marketing expenses.
You can also use revenue per subscriber. This is a popular metric among sites like Travel Zoo and LivingSocial
Alexa and Compete are utterly inaccurate. Google Analytics, Quantcast, comScore are industry standard but you won't easily get access to those stats unless provided by the websites.
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