The Gong Show

Ebay’s potential acquisition of StumbleUpon is fun to play with.

The Value of a StumbleUpon User:

2.1mm users for $45mm dollars = ~$21/user. Now, that might sound like a lot of money, but one should look at comparable acquisitions to understand what a user is worth.

• Flickr had about 270,000 users one month before being acquired by Yahoo, and the price was rumored to be $35mm… lets round up the users to 300k to make up for the month gap, which come out to ~$117/user. Some of Flickr’s members pay for their service (unlike StumbleUpon) so it makes sense that a Flick user would be worth more than a StumbleUpon user
• At the time of the acquisition, Skype had 52mm users and the purchase price was $2.6B, which results in $50/user. 2mm of the Skype users were paying users, so again, it makes sense that Skype users are worth more than StumbleUpon users.
• MySpace had about 22mm users when it was acquired for $580mm. Therefore, a MySpace user was worth ~$26/user back in 2005. I think the reason that MySpace users are considered to be worth more than StumbleUpon users is because of the massive number of users that MySpace had (10x the number of users on StumbleUpon at the time of acquisition).

So, one can see how StumbleUpon fits into this landscape of user values.

The Value of a StumbleUpon Unique Monthly Visitor:

Let’s try the same exercise with Unique Monthly Visitors instead of Total Users…

According to comScore, StumbleUpon has 900k Unique Monthly Visitors. Fred Destin created a universe of comps for Uniques a few months ago based on market caps, biz dev deals, and rumors:

The Value of a Unique Monthly Visitor by site around Q2-Q3 2006:

• YouTube $23
• CNET $16
• MySpace as valued by the Google ad deal: $11.25
• Facebook at 1bn: $67
• Google: $272 !
• Yahoo $48

At StumbleUpon a Unique is worth $50 (which is $45mm / 900k Uniques ). That looks about right compared to Fred Destin’s universe of comps (right in between Yahoo and Facebook).

Strategically, I think Om’s on the money. Popular client-side software can be a Trojan Horse for other, more-profitable services. Try installing any Google or Yahoo software (Earth, Picasa, Y! Messenger, etc) and see how aggressively they push their browser toolbar along with it. So, Ebay owning more real-estate on the users’ browser toolbars is a valuable position to be in. They could partner with the search engine of their choice (for the right price), roll their own engine, or find other ways to monetize the space… whatever maximizes $/pixel of toolbar space.

Note: in this playful analysis, these are piss poor universes of comparables for StumbleUpon. I really should be using companies in the same sector (search, discovery, bookmarking, etc). But, there’s a significant lack of public data when it comes to total user numbers and even acquisition prices, so I had to make due with what’s available. Also, this analysis doesn’t take into account the future value creation at StumbleUpon or any of the comparables, which is unrealistic, but at least it’s an apples to apples comparison with respect to that inaccuracy.