Estimating Value of Huffington Post, et al

A reader asked how we arrived at our estimated value of $60 million for New York new media company Huffington Post (see “Move Over Sulzbergers…There’s a New Media Dynasty in Town.”)

This was a ballpark estimate based upon the following reported information:

–43 employees
–Expects to be profitable next year
–3.5 million unique users / mo
–Raised $10 million from sophisticated investors

Taking the current employee count of 43, we assume about that Huffington Post will average about 50 employees in 2008 at about $60,000 per person ($3 million total).  We add another $1 million of expense for rent, legal, marketing, tech, T&E, tech, etc., for a total estimated cost base of $4 million.  Taking the “profitable in 2008” expectation as feasible, this suggests Huffington Post will have $4+ million of revenue in 2008.  Considering the company’s strong momentum, sophisticated backers, strong cash position, and the estimated financial performance above, a multiple of 10x-20x 2008E revenue seems reasonable ($40-$80 million).  Thus the ballpark estimate of $60 million.