No sooner did I suggest that the blogging phenonmenon was merely a waystation on the road to becoming big media publishing companies for a handful of A-list "bloggers" such as Mike Arrington, Om Malik and others, than Henry Blodget comes out with the idea that CNET should buy TechCrunch. For $100+ million.
He gets this figure from Doug McIntyre, who actually floats the $100+ million figure as the price tag that The Washington Post or New York Times might pay for the Huffington Post. And McIntyre appears to pull this figure out of thin air.
But that doesn't stop Blodget from speculating -- only in the headline weirdly enough -- that TechCrunch must therefore be worth "$100+" million to CNET. Even weirder: this post comes mere hours after TechCrunch's Arrington wildly and inexpertly (at least from a financial analysis perspective) attacked Blodget for a presumably tongue-in-check post that suggested Google might be worth $2,000 a share.
Arrington said that Blodget, a former analyst who was charged with securities fraud and banned from the securities industry for life back in 2003 for inflating his stock price predictions, should be "muzzled" for touting his "essentially bullshit predictive models." I wonder what Arrington has to say now about this even more bullshit number about his own company, which is based on nothing at all. Not even a bullshit model.
But that's not the point. The point is that what once were individual blogging sites are now big deal media companies. TechCrunch and Huffington Post and all the others took advantage of cheap and easy-to-use blogging software to build major web publishing empires. Or as Blodget writes "these companies have filled a niche that appeared when traditional media began cracking apart--and they've taken full advantage of it."
Coupled with the rise of traditional newspaper blogs, "this will soon make it tougher (but not impossible) for start-up blog networks to gain traction." I agree with that.
Whether TechCrunch or any other major "blog" is worth $100 million is not really subject to any kind of rational analysis. It's possible that the site could fetch that much or more from an ailing but cash-rich publisher such as CNET, which might be desperate to gain a short-term jolt of momentum at the cost of long-term financial viability.
But using a multiple of 1X or 2X revenue, not uncommon valuation benchmarks in the publishing world, TechCrunch should be generating $50 million to $100 million in annual revenue today to justify Blodget's price tag. It's hard to say for sure, but my guess is that TechCrunch is generating less than $10 million in annual revenue now and, at most, would likely only double or triple that next year.
That's outstanding no matter how you look at it, particularly for a company started by one guy two short years ago, but that $100 million acquisition price would be 3X or 5X revenues, a very expensive proposition indeed for any rational publisher. However, rationality is often thrown by the wayside in dealmaking. Just look at what happened to eBay in its deal to buy Skype, and the current craziness surrounding the value of Facebook ($15 billion, $20 billion, who knows.)
Update: No need to wonder what Arrington now thinks of Blodget. He says that "So first of all I owe Blodget a big apology. The guy is bright, insightful and dead on with his valuation predictions."
Cynthia Brumfield at 7:40 AM|Comments(1)
The figure for Huffington is not "pulled out of the air". It is based on the $10 milion investment from Softbank and other VCs
Douglas McIntyre
24/7 Wall St.
Posted by: douglas mcintyre at October 3, 2007 10:41 AM
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