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 : Internet Analysis - Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (212)	2/23/1999 9:15:00 PM
From: MaryinRed	Respond to of 419

Okay...how do you evaluate the value of the revenue stream of broadcast advertisers, of newspapers, of Wal*Mart... because...it is the same thing here...except for one thing.. AOL is all three.... an advertiser, a subscribed content provider and a retailer... and more... take 38MM subscribers (30% of US) and project it to 50/70% take the AVERAGE time online now...was 30 min, then 40 minutes, then 44 minutes, now over 50 minutes....and estimate the ad revenues from that. it is the same model...do an Excel spreadsheed...we have shown you an "value of eyeballs" subscriber revenue model, and Harmon...has a host of "estimating value" measures... And if....none of this...makes sense to you...look at the Delphi Method of reiterative estimations....and apply it to the "public stock market" valuation. You are STUCK...and I simply can't bail you out...it is like showing someone a sign in Japanese...and asking them to read it....the language of this type of valuation...is NOT YOUR language set...."present value of future cash flows". Just do a standard business analysis, lay out the revenue stream (adjusting it as I have advised you...not just relying on subscriber revenue)...lay out the cost stream...do the projections...of cash flow...then grab your Hewlett Packard RPN calculator...and discount the cash flows to present value... can't help you beyond that! smile...Mary

To: Chuzzlewit who wrote (212)	3/10/1999 4:12:00 PM
From: dpk	Read Replies (3) \| Respond to of 419

Chuzz: I have been a lurker on this thread as well as on the Dell thread, and have always appreciated your sane,logical and cash-flow based analysis. While I do not have the definitive answer as to how to value Internet-based stocks, it is clear to me that whatever measures various "analysts" use, they have to ultimately be translatable to the NPV of a future stream of free cash flow. And unlike companies in mature industries with somewhat predictable FCFs, the FCFs of Internet-based companies are extremely difficult to model, given the very early stage of the internet phenomenon itself; the early stages of the business models for revenue generation through fees(subscription, membership, and usage), advertising, and other (heretofore unknown)means; and the impact of the increasing returns phenomenon on the profitability of internet-based businesses. I have found the book "Net Gain - Expanding Markets Through Virtual Communities" by John Hagel and Arthur Armstrong to be very useful in developing my understanding of the Internet phenomenon. It was published a couple of years ago by HBS press, so it may not be the latest and greatest. But the authors (current/former McKinsey consultants) do a good job of tying valuation down to FCF. I hope it is still in print, if not I am sure a public library worth its salt ought to have it. Let me know what you think. Regards dpk