Rent.com knocked down at Ebay for $415m

[Rubber Duck]

Another instance where "content is king".

You may be right but seeing as Ebay will now be providing the new content, why should they pay a premium for the old stuff!

Dave Wrixon

 

[Anthony Ng]

companies get bought out for anything from less than 1x annual revenues to 100x++ annual revenues, depending on all the thousands of parameters attached to its unique business situation, such as the industry it is in, the relative and absolute size of the company, its profitability etc. etc.

Good points here.

 

[Rubber Duck]

........from less than 1x annual revenues to 100x++ annual revenues, depending on all the thousands of parameters attached to its unique business situation......

Provide me with a single example of a company of any size being sold for 100x++ annual revenues (by which I assume you mean gross turnover), then I'll buy your argument, until then frankly its hot air!

Dave Wrixon

 

[Edwin]

Provide me with a single example of a company of any size being sold for 100x++ annual revenues (by which I assume you mean gross turnover), then I'll buy your argument, until then frankly its hot air!

Am I the only one to remember the bubble days of 2000-2001?

http://netscape.fool.com/Specials/2001/sp010719.htm
Blue Mountain Arts. $0 revenue (near enough), sold for $650 million in cash and cash-like financial instruments, plus a stack of now essentially worthless Excite stock.

There are hundreds more examples, but that is perhaps the most striking one.

Here are a few more...

Kana Communications, a Redwood City company that helps firms manage their e- mail, unveiled plans yesterday to spend $4.2 billion for Silknet Software... [snipped] ...To land Silknet, Kana paid 55 percent more than market value of the New Hampshire firm, based on closing prices of the two companies on Friday. In other words, the purchase price works out to about $16.8 million per worker, or 150 times annual revenue.

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2000/02/08/BU47213.DTL

From an article about valuing businesses for sale...

Myth II: Businesses in my industry always sell for two times annual revenue (the revenue multiple). So why should I pay someone to value my business?
...The median value indicates that half of the revenue multiples are below the median value and half are above. Thus, the median value is just a convenient midpoint and does not represent the revenue multiple for any actual transaction. Unless the firm that is being valued is truly a median firm, then using the industry rule of thumb for this purpose is clearly wrong.

For example, according to a well- known source for business transaction data, Pratt's Stats, recent revenue multiples for firms in the auto parts industry ranged from a low of .98 to a high of 83 with a median of 2.9.

http://www.score.org/article_business_valuation_101.html

Transaction multiples of 15 to 18 times annual revenue are
commonplace. The $43.4 billion of Internet-related deals done in
first-half 1999 underscores the frenetic consolidation activity.

http://www.mediabankers.com/reports/ma_report_2000.pdf [page 6]

It's not only sales that reached such rarefied heights...

But with some NASDAQ high-flyers trading at 100 times annual revenue and 1,000 times per-share earnings, it appears likely that buyers at these levels are banking heavily on the "greater fool" theory, and are betting against the likelihood of "regression to the mean."

http://www.stewonthis.com/stew/index.cfm?show=123

I never said 100+ is "typical" but it has happened many times and doubtless will again if the specific circumstances allow.

 

[Rubber Duck]

Am I the only one to remember the bubble days of 2000-2001?

http://netscape.fool.com/Specials/2001/sp010719.htm
Blue Mountain Arts. $0 revenue (near enough), sold for $650 million in cash and cash-like financial instruments, plus a stack of now essentially worthless Excite stock.

There are hundreds more examples, but that is perhaps the most striking one.

It's not only sales that reached such rarefied heights...


http://www.stewonthis.com/stew/index.cfm?show=123

I never said 100+ is "typical" but it has happened many times and doubtless will again if the specific circumstances allow.

I think perversely you have just proven my point!

Regards
Dave Wrixon

 

[Edwin]

Interesting. I just gave you an example based on hard facts, and you just pretend it didn't even happen.

 

[Rubber Duck]

Interesting. I just gave you an example based on hard facts, and you just pretend it didn't even happen.

I am not familiar with the transaction, but they obviously didn't pay that for shell company, and the company was obviously not trading, so it was clearly a speculation of some sort. Because your a domainer, I assume it was some form of domain speculation! Am I correct, and if so how does that contradict anything I have said?

Regards
Dave Wrixon

 

[Edwin]

I've no idea which transaction you mean.

If you're referring to Blue Mountain Arts, they were the largest egreeting card site in the world, and were bought at the time that traffic (alone i.e. divorced of the question of whether it is monetizable traffic or junk traffic) was seen as hugely valuable. So it was a going concern, with tens of millions of visitors and I believe around a billion monthly pageviews - they just weren't (succeeding in) making money.

All the sales I posted about were "real" at the time they were transacted - I haven't even bothered to see if the sites are still live now, as that's irrelevant to the current discussion.

 

[Rubber Duck]

I've no idea which transaction you mean.

If you're referring to Blue Mountain Arts, they were the largest egreeting card site in the world, and were bought at the time that traffic (alone i.e. divorced of the question of whether it is monetizable traffic or junk traffic) was seen as hugely valuable. So it was a going concern, with tens of millions of visitors and I believe around a billion monthly pageviews - they just weren't (succeeding in) making money.

All the sales I posted about were "real" at the time they were transacted - I haven't even bothered to see if the sites are still live now, as that's irrelevant to the current discussion.

This purchase was it would seem pure speculation on domains and domain traffic. When I was talking about normal business valuations this was clearly specifically excluded as I was trying to determine to what degree the price on offer was buying the domain Rent.com itself. In accounting terms revenue means turnover, not earnings or profit. Zero profit does not equate with zero revenue. It can be quite logical to buy unprofitable turnover, if you feel that in adequate management is not optimising profitability. Very difficult though to conjure financial turnover out of thin air.

In terms of an internet bubble, yes clear there must have been one in financial terms as it popped. Personally, I don't think that much of the speculation was as poorly founded as many led us to believe. The speculators obviously got too far ahead of the establishment power brokers, who had one foot and in many instance both feet in the past. That does not mean that the speculators were actually wrong. We are now moving into a phase where many of the high water marks of the internet bubble have actually been surpassed, but we are not now in a bubble economy, largely because things have moved on and attitudes have adjusted.

Coming back to Rent.com. My personal belief is that if the whole business had been sold except the rights to the domain then Ebay wouldn't have paid anywhere near $415M dollars. May be wrong of course, but then as you have proved buyers don't always know what they are letting themselves in for!

Regards
Dave Wrixon

 

[clemzonguy]

When will ebay be considered a monopoly?
No one else can really compete with them.

 

[phrone]

When will ebay be considered a monopoly?
No one else can really compete with them.

I think we could consider them one about now, couldn't we?

 

[Edwin]

Coming back to Rent.com. My personal belief is that if the whole business had been sold except the rights to the domain then Ebay wouldn't have paid anywhere near $415M dollars. May be wrong of course, but then as you have proved buyers don't always know what they are letting themselves in for!

They are an ONLINE business. That's like saying "Amazon sold without Amazon.com would be worth less than it would with the domain." Of course it would, since the tens of millions of daily visitors are coming because of the pre-existing domain/site and all the incoming links to it, search engine listings etc. Separating one from the other at sale time would be ridiculous.

But that doesn't make Amazon.com (domain) inherently valuable, it just makes it an essential part of the overall business. Amazon.com (domain) had it NEVER been developed might be worth 15-30K on the aftermarket.

 

[dtobias]

If amazon.com never existed as an actual active site up to now, the domain would probably be seen as a possible address for a site related to feminism (because of the association with female warriors) or rain forests (because of the river and its surrounding region), but probably wouldn't be considered an extremely high-value name.

google.com and yahoo.com would have even less perceived value in the absence of their actual current histories.

 

[Rubber Duck]

They are an ONLINE business. That's like saying "Amazon sold without Amazon.com would be worth less than it would with the domain." Of course it would, since the tens of millions of daily visitors are coming because of the pre-existing domain/site and all the incoming links to it, search engine listings etc. Separating one from the other at sale time would be ridiculous.

But that doesn't make Amazon.com (domain) inherently valuable, it just makes it an essential part of the overall business. Amazon.com (domain) had it NEVER been developed might be worth 15-30K on the aftermarket.

Rent.com is an very exceptional generic domain name. Amazon.com is just a successful brand!

Regards
Dave Wrixon