Wow, I wonder if this this post by Marshall Kirkpatrick on TechCrunch is indicative of today’s mentality around valuing web startups. In particular this paragraph which discusses the $65M valuation of Grouper (a YouTube competitor acquired by Sony):
“However, the Grouper acquisition price is out of whack when compared to other recent video acquisitions. US Comscore data says Grouper had about 542,000 unique visitors in July 2006, compared to YouTube’s 16 million. Viacom’s recent acquisitions of iFilm (December 2005, 3.3 million U.S. uniques) and Atom/Shockwave (August 2006, 1.3 million U.S. uniques) for $50 million and $200 million, respectively suggest a per-unique-visitor valuation of $15-$20. Grouper’s per-unique-visitor valuation, by comparision, is roughly $70 - $120, depending on whether you look at June or July 2006 data.”
A valuation metric of based on a dollar value per-unique-visitor? Does it smell like 1999 to anyone? :) I hope Sony actually used some kind of discounted cashflows calculation here - I thought we had all learned that revenues and dare I say it, profit, are the only sensible metrics for valuing a company, dot-com or not.
To be fair, Marshall redeems himself in the last paragraph saying the “comparisons are inappropriate” - I just think we should all avoid these kind of valuation metrics like the plague. Forget they ever existed :)
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