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Search - Tuesday, February 8, 2005

The Return of Fuzzy Valuation Math

Few outside of Bloglines and Ask Jeeves know the selling price for Bloglines, however, some speculate that the sticker carried a number of zeros - maybe $20M plus some nice incentives should Bloglines eventually bring in revenue for Ask. The a:c buys in to this story. We won't know for sure until Ask Jeeves files its next quarterly report in 3 months, although it could be 6 months if they delay reporting. What makes the valuation interesting is that Bloglines has zero revenues. So Ask Jeeves had to value the company on the bubble era model that multiplies x dollars by y users plus assets. As far as we know, this is the first search M&A deal since the bubble where valuation was pegged to users not revenues.

The logic for a non revenue-based valuation is that Bloglines CEO Mark Fletcher is a wealthy guy; he made some good jing off the sale of eGroups to Yahoo in the day. So he could afford to continue to pick-up the tab at his scrappy startup. He also had plenty of VC suitors to help to get the company to a revenue stage and even to profitability. So what revenue-based valuation could Ask possibly have offered to Fletcher that would be better than his other options? What would compel him to sell his assets for $6M or $7M when he surely could get a better valuation from VCs? Plus there were reported to be a number of search engines to bid the price up. If we are right, we will look back on this as a milestone in the formation of the second Internet bubble.
Read - It's Official - Bloglines Sold to Ask [Battelle's SearchBlog]