It's easier to build a website and reach breakeven, but tougher to become public. Interesting statistics present the financial landscape of today's web business, in both e-commerce and media websites.
By Jeremy Liew
Corporate Profile 47Billion Information Technology
Web 2.0 Expo: Show Me The Money
1. Show me the money Web 2.0 Expo April 18 th , 2007 Jeremy Liew Partner, Lightspeed Venture Partners www.Lightspeedvp.com Lsvp.wordpress.com
2. Its cheaper than ever to start an internet company… $ ‘000s Source: Carsonified.com/SXSW Presentation
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4. As a result, getting to breakeven isn’t too hard… * Assumes ad sales by an ad network or ad rep firm Illustrative 0% - 0% - EBITDA 3% 200 7% 200 Other Costs 3% 200 7% 200 Infrastructure Costs 14% 1,000 36% 1,000 Staff Costs 10% 700 0% - Marketing 70% 4,900 50%* 1,400 Cost of Goods 100% 7,000 100% 2,800 Revenue % $ '000s % $ '000s E-Commerce Media
5. …but you still need to be big to be public MEDIA E-COMMERCE PUBLIC COMPANY ’07 REV MULTIPLES REVENUE NEEDED FOR $500M EV* * Assumed minimum public company scale to sustain meaningful trading volume and analyst coverage Source: Goldman Sachs Research, March 25, 2007, Lightspeed Analysis
6. Significant variation in revenue targeted for internet companies to breakeven versus to be public MEDIA E-COMMERCE BREAKEVEN PUBLIC, $500M EV* * Based on median multiples $277M $7.0M $131M $2.8M
8. Advertising RPMs* depend on your ability to deliver a targeted audience $10-40 $1-5 $0.50 - 2 ** Facebook revenue estimate “well over $100m”, Fandango revenue estimated to be “around $50m with half from advertising and half from ticketing” Source: Myspace, Merrill Lynch; Facebook, MSNBC; Fandango, Techcrunch; Traffic, Comscore; Lightspeed Analysis * RPM = Revenue per thousand pageviews, taking into account multiple ad units and all forms of advertising: CPM, CPC and lead gen 600M 126B 524B Annual US PVs $41.67 50M $25M** Fandango $1.03 12B $150M** Facebook $0.52 44B $271M Myspace RPM March US PVs 2007 Revenue Example
12. Many e-commerce niches are large enough to support $7M in revenue, our illustrative breakeven level Allheart.com – nursing apparel Figleaves.com – lingerie Hats.com – hats Ridegear.com – motorcycle gear Source: Internet Retailer Top 500 Guide, 2006 Edition
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14. Relatively few pure play e-commerce companies have achieved over $271M in annual sales so far Amazon.com Newegg.com Source: Internet Retailer Top 500 Guide, 2006 Edition, Goldman Sachs $8,490M $1,300M $804M $688M $399M $345M Below $271M in 2005 but projected over $271M in 2007 Amazon Newegg Overstock Netflix Drugstore Buy.com Bluenile Peapod VistaPrint Zappos 2005 Revenue Company
15. In 2005, there were at least 227 companies with e-commerce revenues over $25M, but none with multiple websites in this range Source: Internet Retailer Top 500 Guide, 2006 Edition Supplements PC hardware Auto parts Shoes Kitchen goods Plumbing and Lighting Blinds Women’s clothing Beauty Products Sheet Music Products $46M $45M $45M $44M $40M $39M $38M $34M $32M $27M Bodybuilding.com Computer Geeks Parts Train Shoemall Cooking.com Decorative Product Source Blinds.com Shopbop Gloss.com Sheet Music Plus 2005 Revenue Company
16. A number of companies have taken a portfolio approach, building large numbers of stores Source: Internet Retailer Top 500 Guide, 2006 Edition, Company websites bicycletrailers.com, highchairs.com, sparebed.com, suuntowatches.com, tricyclekids.com Niche Retail Aquariumsdirect.com, croquet.com, daybeds.com, hammocks.com, justglobes.com, potracksgalore.com Netshops Pilates-exercise-direct.com, Rowingmachines.com, sofabed-store.com, tennis-ball-machine-guide.com Mercantila homeclick.com, absolutehome.com, barbeques.com, knobsandthings.com, poolclick.com Home Décor Products adirondack-furniture-direct.com, allairbeds.com, bedrooms.com, csnbunkbeds.com, everysafe.com CSN Stores Sample Websites (not exhaustive) Company