It’s audit season, so lately I’ve been doing a bunch of the blocking and tackling side of the VC world. Updating our records on our companies, determining fair value for our portfolio companies often using a comps-based analysis, and then running hypothetical liquidations to determine the value of our various classes of stock in each company. If this sounds interesting, I could write a post dedicated to the process (don’t all raise your hands at once!).
But, that setup is just the backstory to explain that I’ve been looking at the revenue and EBITDA multiples of both public companies and recent M&A activity. In the process, I stumbled on an interesting difference I thought merited a blog post about ad network revenue multiples.
There are two publically traded ad networks that one can use when trying to determine the value of an ad network: ValueClick and InterCLICK. ValueClick is trading at a 1.34x revenue multiple and InterCLICK is trading at 2.1x multiple (both based on a trailing four quarters of revenue). I consider ValueClick and InterCLICK to be a minimum baseline for a mature, low-growth ad network… they both largely play in remnant (though InterCLICK supplements their inventory with data from BlueKai) where the economics have been driven down by a race to the bottom amongst the competition. But, it’s a nice baseline to consider nonetheless.
Using data from publicized sale prices and a research report on mobile ad network revenue from IDC, in November ‘09 Google bought AdMob at a 24x revenue multiple and Apple bought Quattro Wireless 13.5x revenue multiple. By comparison to the more generic ad networks above, these two company sale prices are really remarkable.
The takeaway: the large difference in revenue multiples between these two groups of companies shows the value of A) being in a hot market — mobile advertising B) having significant strategic value to multiple bidding acquirers C) having a healthy growth trajectory.
FWIW, I’d like to see a post on how to determine the value of companies based on analysis.
