Matt Marshall dissects the GooTube deal from a user and page-metrics perspective this morning. It’s useful but feels convoluted to me. The valuation of young dotcoms, even huge ones, are often based on a multiple of revenues with large allowances made for the rate of growth. YouTube’s current revenue is guesstimated to be between $4MM to $8MM — in month 8 or 9 of the company’s official existence. Taking the middle of the range ($6MM), they were acquired for 275 times monthly revenue, aka 23 times their annualized runrate. This is expensive relative to GOOG’s valuation of 16 times trailing revenue — but it’s not an off-the-charts premium, particularly as YouTube’s growth far outpaces that of both Google Video and Google.com overall.
The second public-stock benchmark for me is RNWK, aka Real Networks. It’s one of the few stocks that works as a “pure play” in online digital video [ed. note: I sold my RNWK today for a pretty good gain]. RNWK’s market capitalization at the time of the acquisition was about 10% higher than the price Google is paying for YouTube. RNWK’s revenues are just under $30M per month and barely growing at all. From an Internet video and traffic growth perspective, which would you rather own?
The comparison is more illustrative than fair, given RNWK’s player downloads and music businesses, but the trend is clear, per Rafat’s post last month. If the public market values RNWK at $1.85B, then YouTube was worth $1.65B.