You may recall that late last year 24/7 Wall St estimated TechCrunch’s revenues at $7.5 Million on an audience of 4 Million Uniques. This delivered a monthly ARPU of 15.6 cents. TechCrunch has 25 full-time employees so that pegs the monthly ARPE at around $33K.
However a recent article published by Inc. Magazine now pegs TechCrunch’s revenue at $10 million while TechCrunch’s ad page claims 9.2 million uniques and 30 million page views. These new figures suggest we need to revise TechCrunch’s monthly ARPU downwards to about 9 cents.
Put another way it would take Techcrunch about 3.5 years to achieve the ARPU that Starbucks makes each time it serves up a Latte Grande (i.e. $3.57 per serve).
Interestingly enough these new figures suggest the performance of the market leader is poorer than its immediate competition. In the previous study the average Monthly ARPU of the Top 7 Tech Blogs was estimated at 12.9 cents (See the Business of Blogging).
We know from previous analysis that Facebook’s monthly ARPU is estimated at 25 cents. This suggests that the Social Networks are capable of generating 2 to 3 times the revenues of the Social Media sites (i.e. Blogs). However, as I have explained before, TechCrunch’s revenues – like most of the mega tech blogs – are a mix of advertising and events. Facebook’s revenues are primarily advertising based so we need to establish what portion of TechCrunch’s revenues are just advertising.
This is of course very difficult. So if we simply assume a 50:50 split of the TechCrunch revenues between advertising and events then the monthly advertising ARPU generated by the market leading tech blog equals around 4.5 to 5 cents. This in turn suggests that Facebook revenue generating potential may be as much as 5 times higher than TechCrunch.
Where does all this take us? Well the sale of TechCrunch to AOL would provide the market with a benchmark metric for establishing the future value of an audience to any potential buyers of social media.
For example, if we apply the 2.5 to 5 times metric as a bench mark for calculating the future value of a monthly unique to any social media web property then we have a method of calculating a prospective valuation for Facebook.
The chart below set out how the benchmark price established by the prospective sale of TechCrunch to AOL would reflect on the market value of Facebook at the time of that sale.
| Price paid per Monthly Audience Unique | Final AOL Bid Price for TechCrunch | Facebook Valuation @ 2.5 Times potential | Facebook Valuation @ 5 Times potential |
| $1 | $9.2 Million | $1.25 Billion | $2.5 Billion |
| $2 | $18.4 Million | $2.5 Billion | $5 Billion |
| $3 | $27.6 Million | $3.75 Billion | $7.5 Billion |
| $4 | $36.8 Million | $5 Billion | $10 Billion |
| $5 | $46 Million | $6.25 Billion | $12.5 Billion |
| $6 | $55.2Million | $7.5 Billion | $15 Billion |
| $12 | $110.4Million | $15 Billion | $30 Billion |
As you can see by this chart AOL would have to pay in excess of $110 Million for TechCrunch to substantiate the $33 Billion second market valuation for Facebook based – at least on these metrics – and at that price it would take over 10 years for AOL to achieve ROI based on the ARPU being generated by TechCrunch today.
Having said that it should be noted that Matt Shanahan estimates it takes a Monthly ARPU of around 80 cents for the average online newspaper to break even. So, assuming AOL have the management expertise and market reach to bring the ARPU into line with news industry standards, AOL should be able to achieve ROI in a significantly shorter time frame.
[Update 28-9-2010] paidcontent, mashable and GigaOm have all reported that AOL has acquired TechCrunch . Details of the acquisition price have not been disclosed but Business Insider has reported that sources within CBNC suggest the price was $40 Million while sources at AOL suggest the price was closer to $25 Million.
Obviously – based on the metrics calcuated above -this range of $25-40 Million suggests that Facebook is currently overvalued.
Further Reading:
- The new Plan A for online media: Get bought by AOL
- Measuring the performance of TechCrunch as a conversational platform
- How did Michael Arrington make Millions while I’ve make Zip?
- Who makes more money? Bloggers or Developers?
- What If: Journalism is the real reason Newspapers are dying?
- More proof that traffic doesn’t translate into customers
- Would you like WiFi with that?
- Debunking the Myths About Facebook’s Stock Split – GigaOm
Posted on September 29, 2010
0