Posted on | January 4, 2013 | 30 Comments
There has been a lot of noise in the wake of the sale of Current TV to Qatar-based Al Jazeera, and Ed Driscoll linked damn near all of it today, so there’s no point me re-hashing it here. What intrigues me is the valuation of the product. Was it worth $500 million to essentially buy a slot from major American cable TV providers?
According to the news reports, Al Jazeera does not intend to keep much, if any, of Current TV’s programming. That means it is willing to pay $500 million simply to be carried by the large cable providers. That implies that these providers have extraordinary market power. This should be raising lots of questions at the Federal Communications Commission.
Well, screw that regulatory nonsense, I’m talking raw market value. If a dismally unsuccessful news outfit is worth $500 million just to get their slot on cable TV, how does that extrapolate in terms of assessing the value of other media entities? When the Huffington Post was sold to AOL in February 2011, I thought the reported $315 million sale price was absurdly high for an outfit that, whatever its ranking or market share, had never made a profit. But now comes this startling estimate:
BuzzFeed, the six-year-old website that blends coverage of corgis and Congress in irresistible listicles, took another round of financing yesterday, and the Wall Street Journal’s Tom Gara now pegs the company’s valuation at around $200 million. I hear the same number from a source close to BuzzFeed’s investors.
That’s a heady valuation, though it’s only five times BuzzFeed’s expected revenue of $40 million in 2013, according to Gara. . . .
BuzzFeed has now raised about $46 million from investors, which puts it atop a list of media startups, backed by venture capital, that have emerged since the founding of the Huffington Post in 2005.
Forty-six million dollars of investment capital? For a Web site? An estimated value of $200 million? Excuse my extreme incredulity, but if they are so gosh-darn successful — “expected” revenue and all that — why did they need to raise another $19 million from investors, eh?
Does the phrase “dot-com bubble” ring a bell?
How about “pump and dump”?
Look, I kinda understood when a desperate sinkhole like AOL was willing to fork over $315 million for HuffPo. Even if it didn’t make a lick of sense as an investment, this is AOL we’re talking about — a company that hasn’t really made sense in a long, long time, and whose executives were therefore willing to pay a premium for buzz and market share, without any genuine likelihood of turning a profit. So . . .
What sucker does BuzzFeed have in mind? Where is the obsolete and desperate-to-seem-relevant circa-1994 online enterprise that will pay $200 million dollars for a site that has already (evidently) burned through its first $27 million of capital? Maybe . . . Yahoo?
If a bunch of rich Arabs can buy an entire cable TV network for $500 million — even a useless turd like Current TV — does it really make sense for anyone to pay $200 million for a mere Web site?
Color me skeptical. But hey . . .
@instapundit I don’t know about you, but if Qatar is buying, I’m selling.
— Robert Stacy McCain (@rsmccain) January 5, 2013
Make me an offer, rich Arabs.
UPDATE: Linked by Ed Driscoll with a bit of wordplay on a line from A Clockwork Orange, a movie I’ve only watched all the way through once, when I was in college. I never was much of a Kubrick fan — a bit too ostentatiously artistic and cerebral for my taste in movies — but Alex does have some memorable dialogue.