Yahoo has acquired MyBlogLog reportedly for $10 million. Does anyone stop to do the math on these things? MyBlogLog started business in July...just 6 months ago, and they have 5 employees. They reportedly serve 45,000 blogs, have 33,000 registered users, and zero revenue.
Valuing startups is an inexact science for sure, but there are some guidelines. Here are a few "back of the napkin" approaches without the benefit of any due diligence or facts.
Employee multiple - Cisco popularized this metric back in the 90's. They used $1 million per engineer as one metric for valuing a startup. I'm not sure of the math assumptions behind this, if any, but taken together with other metrics it kind of holds together. Using this metric MyBlogLog would be worth $5M.
Build vs. Buy - You can usually estimate how many "man-months" it would take to build something internally and apply a fully burdened cost of say $240K per year or $20K per man month. MyBlogLog has 5 people and has been in business for 6 months. Lets be generous and assume they spent another 6 months in stealth building the service. So, 5 man years of effort at $240K would make it worth $1.2 million.
Value per subscriber - You can build a revenue model based on the number of subscribers, multiplied by some estimate of revenue per user per month. MyBlogLog reportedly has 33,000 subscribers in their first 6 months. Lets say they triple that in the next 6 months to say, 100,000 subscribers. Lets say they can monetize these users at $1 per user per month, or $12 per year. So, 100,000 users times $12 per year makes it worth $1.2 million.
My guess - Based on absolutely no information, other than what I have read, I would guess MyWebLog to be worth somewhere between $2.5M and $5M. The $5M number would assume some strong synergy with some existing services. It is very possible that Yahoo has a grand strategy for all these acquisitions that will someday make MyBlogLog look like a bargain at $10M. From afar it is hard to see.
Bradley Horowitz is VP of product strategy at Yahoo. I have known Bradley for almost 10 years and have a lot of respect for him. We worked together on video search when I was at AltaVista and Bradley was at Virage. He has assembled lots of interesting pieces at Yahoo but I haven't seen any clues as to how he expects to knit them together into a synergistic whole that produces leverage or revenue. Can you gives us some clues Bradley?