Bad news for Rupert Murdoch: Goldman Sachs figures his Internet business is worth perhaps $3 billion — about half the value he was trying to get for it earlier this year. The good news: Goldman didn’t generate its numbers by placing a value on the eyeballs that MySpace and the rest of Fox Interactive Media have attracted, or even the revenue they’re generating. Instead, Goldman derived its estimate based on FIM’s earnings. That is: MySpace and the rest of Murdoch’s Web properties are now a real business, making real money.
That’s worth remembering as we enter the late stages of the Web 2.0 boom, where buyers and sellers are still scrambling to place a value on revenue-light, or revenue-free, startups like Digg or Twitter. Murdoch and company have been dinged — fairly — for failing to deliver on aggressive revenue and earnings targets the company set out a year ago. And they’re still struggling to convince advertisers to pay up for the billions of page views they generate.
But even if it’s not what Murdoch had hoped for/promised, there is real money there: Analyst Mark Wienkes figures FIM (mostly MySpace, but also Photobucket, IGN, etc) is going to generate $155 million in EBITDA in (calendar year) 2008. At a 15x multiple, that’s $2.3 billion. At 20x, $3.1 billion. That’s about 2x what he spent acquiring the properties in the last few years. And Mark sees MySpace’s top and bottom lines marching steadily upward (note that the chart below is for News Corp.’s fiscal year, which turns over every July).
The disappointment for Murdoch are those year-over-year growth numbers — cable guys, not go-go Web companies, are the ones that are supposed to be delivering 12% growth. But it’s been clear for some time that MySpace’s US audience has peaked, and that it’s going to be fighting very hard against Facebook and other competitors for international eyeballs.
But take a look at the first chart again: Those 2011 numbers, where FIM is merely posting a 12% revenue gain? Those are numbers Goldman thinks FIM can achieve after its current $900 million, three-year contract with Google has expired. That is, they’re based on real advertisers paying market prices for a mature site. Those aren’t blow-your-socks off numbers. But in a couple of years, after an ad recession and a reckoning about what various hot-shot Internet properties are really worth, a company with real revenue, and real profits, might be something to brag about.