Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Altaba Inc. (formerly Yahoo) -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (2986)	11/19/1997 6:21:00 PM
From: Mama Bear	Respond to of 27307

Repost (2 of 2) concerning valuation from AOL Yahoo! board, with the kind permision of the author Frodar!. Submitted for analysis concerning Yahoo!'s (alleged) overvaluation. You be the judge. ----------------------------------------------------------------------- Subject: Valuation Metrics Date: Tue, Nov 18, 1997 18:53 EST From: Frodar Message-id: <19971118235301.SAA23425@ladder02.news.aol.com> I'm not sure what the better metric is for describing how overvalued Yahoo is, so I thought I would ask all my friends in Cyberspace to help me out. On the one hand, in a recent release, Yahoo said they have about twenty five million users. That translates into a market cap of about $100 per user. Of course that seems really high to me. People used to talk about Netscape having a market cap of $40 per user of their browser as outrageous, but at least the browser costs money. Dow Jones and Company has a market cap of around 4 billion dollars. I wonder how many "users" they have. By the way, their revenue was around $160 million last quarter, or 10X that of Yahoo.) On the other hand, "users" doesn't seem like the best measure because users don't generate revenue except for by viewing ads. Customers buying ad space, and paying Yahoo real money, is where the value creation is at. Yahoo says they have about 1,200 paying customers. That means their cap is around just over $2 million per customer. The average customer revenue last quarter was $14,000, a number which has been slowly decreasing quarter to quarter for over a year. Sure the bulls will point to the growth, but how much growth can be expected. If the number of customers double, would they be happy saying a customer is worth $1 million. If the customer based grows by an order of magnitude, is each customer worth even $200,000? How much is a visitor worth? Not $100. I don't think they're worth $10. How much would it cost Yahoo to service that many customers? What is the selling expense? When we have such high multiples and implicit profitability, it is important to look at how the costs will grow. Anyways, on a side note, I dropped by sanfrancisco.sidewalk.com. Now there is a web site. The information was so much better than Yahoo's, that I think you could make the case that Yahoo does a disservice to its "customers" by competing with it. Can Yahoo simultaneously be a content provider and guide people to the best content on the web? If they provide poor content, they will lose visitors as people figure that out. If they lead people to other sites, that only increases the ad space available from competitors. Just a thought. -Frodar<<<