What would you pay for a fast-growing private internet company with hundreds of millions of active users and revenues of more than $500m?
If the name on the door is Facebook the answer, apparently, is: $6.5bn. That’s the valuation implied by the recent offer to Facebook employees from Digital Sky Technologies (the Russian investment firm also bought a chunk of preferred stock from Facebook that the company claimed valued it at $10bn, but that sounded like hype given that the benefits attached to those shares were not disclosed.)
So the $3.1bn $2.75bn valuation that has just been slapped on Skype sounds respectable – and is certainly more reasonable than the laughably low offers of $2bn or so that eBay was being encouraged to entertain earlier this year (curiously, eBay will not explain the difference between the $3.1bn value implied by its deal and the headline figure of $2.75bn that it claims for Skype).
The really big question, of course, is one that has been around alsmost since the birth of the internet: what is an online communications company worth?
Those with long memories will remember the great hopes for AOL’s instant messaging system at the time of its deal with Time Warner. According to the theory at the time, this network would morph into a powerful media distribution system, as AIM’s users shared links with their contacts of things they found interesting.
Needless to say, it didn’t happen like that. Not only did AIM not become a media business, it couldn’t even find a way to monetise its communications potential.
Skype and Facebook, each in their own way, offer the same tantalising promise. Each has made a better job than AIM ever did of finding a way to make money – Skype from communications, Facebookfrom advertising – though both are valued mainly on their future potential.
A few weeks ago, as he was just launching his new venture capital fund, Marc Andreessen brushed off the great disappointment of AIM. The only lesson from that failure, he suggested, was that companies like the former AOL Time Warner would not be the ones to unlock the full value in the internet’s next big consumer franchises.
Mr Andreessen has now put his money where his mouth is. Andreessen Horowitz, we hear, has contributed around $50m to the Skype deal, a big slice of the $300m it has just raised. It’s a highly unusual deal for a venture capital firm, and one that will do much to shape the perception of Mr Andreessen’s abilities as a financier.
