(via caro)
RE: Huffpo’s valuation: When that $200 million figure was first being floated, someone asked me whether I thought it was a fair number and how they would conceivably have arrived at it. I said I thought it was ludicrous but I can imagine how they got to it.
Herewith, the HuffPo Valuation Method:
1. Lick finger.
2. Stick finger in air.
3. Think of number at which you could conceivably exit your investment and still get a decent ROI, at least vis-a-vis the rest of your asset class. (Do not worry if this number is some ridiculously insane multiple of revenue. Intrinsic valuation would put you at 3-4x revenue and relevant comparables are, best case, 15-20x—but why not shoot for 100? Or if Simon Dumenco is right about revenue, 200? New York Times reporters won’t know the difference!)
4. Tell people that’s your new valuation.
ADDENDUM:
All of the investor types I know who have been eyeing HuffPo are/were doing so mostly because they’d like to buy traffic. I’m totally ambivalent about the quality of the site content, but if I were an investor, I wouldn’t like it as a stand-alone media property for a a couple of reasons:
It’s very difficult to sell advertising against partisan political content, or anything perceived as such. HuffPo insists that half their traffic actually goes to non-political content, but I find that very hard to believe. Their non-political content is abysmal and not at all unique. And everytime they’ve tried to bulk it up, their efforts have been eclipsed by the need to keep Arianna-The-Brand front-and-center. And Arianna-the-Brand is inherently political.
And speaking of, there is the tiny problem of succession. Arianna isn’t Chad Hurley or David Karp or Ricky Van Veen. She’s 58. It seems a little morbid to think about it, but if something happens to her, would you still call it the Huffington Post? Does the brand stick? And who’s going to celebrity-wrangle all the free high-profile bloggers? Will they be interested in blogging when the site chief is no longer their buddy and favorite cocktail party host? I get the impression that Arianna isn’t that involved in the biz-side mechanics (that’s mostly Kenny Lerer) but editorial is entirely built around her. If you take her out of the equation, what’s left?
Then again, none of the founders are stupid, so maybe the whole point was that they think of it (and always have) as a 2-5 year enterprise, which explains the smell of desperation around the attempts to sell, not-strictly-neccessary additional fundraising and these crazy valuation numbers that are clearly coming from inside of the building.
