The news yesterday evening had a merger/acquisition rumor of Google paying $200 million for Plaxo. Plaxo has been in the news a lot with possible acquisitions or even people just commenting that they hired an investment firm to manage a possible purchase. The issue that I see in the Tech Crunch article is that Plaxo’s price seems very high. Let me compare apples to oranges and look at the Digg sale rumors. I have written previously that I felt Digg is a very good purchase for a traditional media company at $300 million. We have all heard about the Facebook valuation of $15 billion as well. On the revenue side, Plaxo made $10-12 million in 2007 and forecasts $20-25 million in 2008. Facebook had revenue of $150 million in 2007 and forecasts $300-350 in 2008. Thankfully, most of the web seems to agree that the Facebook valuation was ridiculous, and not meant as a valuation. Digg revenue numbers are very difficult to find, so let’s use the estimates made at BlogProfit.net of about $10 million per year.
Now, if we look at the traffic numbers for these sites, we might be able to make sense of all this. Here we have a pretty graph from the nice people at compete.com.
As you can see, Plaxo barely registers on this graph. Plaxo had 775K visitors in January at a growth rate of 17.5% over the past year. Even looking at the graph, you can see their growth is fairly flat in internet terms. Digg had almost 19.7M visitors in January with growth of 119% over the past year. Finally, Facebook had just over 31M visitors with growth of 130% in the same span. Obviously, we can see why Facebook is still the hot topic. Given that social networks and social media are not seen in the same revenue generating light, our comparison is very loose at best.
Even if the potential revenue from a social network is higher (assuming they have some subscription model) a $200 million price tag for Plaxo places a $2580 price tag on a user. Assuming a $300 million price on Digg, it has a user price of $15. Just to continue the absurdity, assuming a $15 billion price for Facebook, they have a user price of $483. Just by leveling the field, I think we can see that the Plaxo price is utterly ridiculous. The Facebook price is not really that bad, however it is still overpriced. Digg seems positively reasonable at $300 million. So, Time Warner and the New York Times, if you want to play on the internet, go buy Digg while you still can. Also, can someone tell Plaxo to get some users first before floating a $200 million rumor.