Wednesday, October 18, 2006

Right Media valuation

Totally back of the envelope here, but why not add to the speculation:

  • RMX Direct has grown over the past few months to 65m impressions per day
  • Assume growth in RMX direct over the next 12 months will be minimal wrt to entire number of impressions served across their complete publisher packag3
  • Figure they are doing around 10x the volume outside of RMX direct. Call it 650m impressions per day, or 230bn per year.
  • Assume average CPM of $0.75, and they take 10% of that. Call it $170m gross.
  • Give them a healthy 40% margin, $70m / year
  • So a valuation of $45m on 20%, or $225m all up puts them at 3X

This is obviously wildly sensitive to growth and the huge volume they do outside of RMX direct - which can be estimated elsewhere more accurately. But this multiple clearly is in the range of similar deals in the internet/auction/b2b infrastructure space.

Even so, this seems very cheap.

Update: I simply must quote my favourite blog de jour Long or Short Capital:

As noted above, these estimates are empirically proven using math and advanced probability techniques.

6 Comments:

Anonymous john demayo said...

"Figure they are doing around 10x the volume outside of RMX direct. Call it 650m impressions per day, or 230bn per year."

A lot higher then I would have guessed.

5:37 PM  
Blogger josh reich said...

You are in a much better place to guesstimate than I. Last time I was working in the ad serving space was a few years ago. Back then we were tracking around 15bn page-views per month across our network. I figured that in the past 3 years there has been growth in page views, but this is something I could have checked.

Where would you place their monthly impression rate?

7:17 PM  
Anonymous Pat McCarthy said...

RMX Direct is just our newest publisher product, which is actually up to 100 million impressions a day now.

But, the full Right Media Exchange is much larger in volume. Over 2 billion impressions per day.

9:24 AM  
Blogger josh reich said...

Interesting, so my volume estimate was off by a factor of 2. I guessed that RME was 10x RMX Direct. I think this means my CPM valuation is on the cheap side then. I don't suppose you want to share that with us, Pat?

12:49 PM  
Blogger John K said...

My guess would be that .75CPM is too generous, esp with the 2B imp number...

If they now do 2.1B / day, I'd guess average of 30cent CPM. Say they get 4cents so perhaps $80k /day take home...

$24 M /year. More like a 9X revenue valuation.

Otherwise, why would they take VC money at all!?

It's so little cash for Yahoo, it's just gotta be an interesting experiment from their point of view. I.e. "What to do with this RMS (sic) Network thing? - Should we throw some stuff their way?"

In other words, the Yahoo investment terms don't necessarily tell you a lot...

10:49 PM  
Blogger Johnny said...

Thanks for the shout out! Your sidebar is breaking your layout, it's that last ad that's the culprit methinks.

5:50 AM  

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