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March 17, 2005
Can Gawker Media Be Worth $274 Million?
We know it sounds high, and until Nick Denton decides he might want to sell the company, we obviously won't know the market value of Gawker Media - owner of Gawker, Gizmodo, Wonkette, eight other blogs and perhaps the largest combined audience in the blogosphere. But bare with us on this: we found it to be useful exercise as we contemplated some new and old deals in the media space.
Here's the math to show you why we think Gawker Media fares well in relation to comparables at $274M. To be clear, we think this math could apply to other blogs as well, from BoingBoing to Instapundit, though we think Gawker is the clear leader of all blog media ventures.
Investment bankers and VCs will tell you that there are innumerable ways to get to a valuation, and market timing is always a factor. If you've ever tried to raise money, as we have in other ventures, you'll know that valuation is essentially a best guess. One method, albeit a Bubble Era favorite, is to base a valuation on the value of unique visitors - a figure that is often reached by considering intangibles like the impact of the brand, audience demographics, and the people involved. Gawker Media is a private company so we do not have access to bottom line figures, but we are certain that the margins are healthy given its super-lean operation.
So how do we get to the $274M valuation??
We peg our valuation on a recent company sale that makes for an interesting valuation baseline - the acquisition of Name Development Ltd. by Marchex for $164M in cash. We like using this deal because Name Development has no brand or technology, rather it's a holding company for domain names that are misspellings of approximately 100K real domain names. So the company's primary value lies in its monthly visitor numbers.
By using the same valuation that Marchex found per monthly visitor - $9.64 - and multiplying that by what we believe to be Gawker's current monthly visitor number - 28.5M - we come to the sum of $274M.
Domain Name Development
17M monthly uniques
x
$9.64 per head
= $164M
Gawker Media
28.5M monthly uniques
x
$9.64 per head
= $274M
Data source: Gawker Media, although they don't provide data for their popular Fleshbot site.
About.com
21M monthly uniques
x
$19 per head
= $400M (Acquired by New York Times)
Marketwatch
7M monthly unique visitors
x
$74 per head
= $519M (acquired by Dow Jones)
Slate
5M monthly unique visitors
x
$2 per head
= $10M (acquired by Washington Post)
Does $274M sound like a rational going price for a collection of blogs, bootstrapped a couple of years ago, with no real corporate infrastructure, run without an office space and with a headcount of less than 20? These facts might scare off some potential suitors, but within the context of media acquisitions, we think Gawker would be an absolute bargain next to the sale of, say, the print rag Fast Company, for which Gruner + Jahr paid a reported $360M. Then again, people lost their jobs for that idiotic purchase, so perhaps it's not the best example.
Recent online media comparables are Marketwatch and About.com, which we doubt will lose traffic in the coming years, but surely they won't grow as fast as Gawker Media is expanding. A potential wrench in the works of our valuation model is the sale of Slate, which the Washington Post bought for a reported (and measly) $10M. But we suspect - and this isn't really going out on a limb - that Slate suffers from poor margins. Like its cousin Salon, Slate does not possess the mold-breaking publishing model we once thought it had. Content creation costs are too high and production/distribution costs, while much cheaper than print, are still substantial.
There could have been more bills in the envelope if Slate had been sold after the Marketwatch and About.com deals, but we actually don't think the Slate deal discredits our valuation method that badly. Is Gawker Media 28 times more valuable than Slate? Time will tell. We look forward to having our model praised/ripped apart by our readers.
Posted on March 17, 2005 09:35 PM | Posted to Media | Permalink
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