Verticals are all the rage in social networking these days. Last week alone, there were two high-profile acquisitions. Amazon.com acquired Shelfari, the Facebook for bookworms, reportedly for slightly less than $10m. And Lifetime Entertainment Services acquired the parenting social networking portal ParentsClick, with seven employees and decidedly less than $5m in revenue, for an estimated $10m. Both deals sprang from previous partnerships. Shelfari was incubated by Amazon with an initial investment of $1m. According to sources, ParentsClick and Lifetime have had a longstanding technology and Web development relationship. After fielding offers from the usual suspects, ParentsClick saw value in a marriage with Lifetime.
This comes on the heels of other vertical social networking M&A. We believe this uptick in acquisitions, despite growing disinterest in traditional social networks, is a sign of a shift in focus to niche verticals. Venture capitalists have recognized this as well, and from what we hear a large shift in funding, especially among early-stage investors, is taking place. So what other vertical social networking sites are ripe for the picking?
LinkedIn, arguably the most successful among the verticals, springs to mind. The social networking site for professionals has been profitable for two years and is on track to make $100m this year from advertising and subscriptions. Founder Reid Hoffman has indicated to us in the past that he is open to offers if the price is right. Having recently attained the $1bn valuation we alluded to in the past, however, the site is now too expensive for most. And Hoffman seems content to wait for the struggling public markets to recover.
This is the exception to the rule, however; most other sites will be acquired. One such example is Flixster, a Shelfari-like social networking site for movie buffs. NewsCorp and Amazon could want to either eliminate an obvious and growing competitive threat or supplement their own Rotten Tomatoes and IMDB portals. With more than 40 million users, we estimate that Flixster could fetch more than $100m.
Select vertical social networking deals in 2008
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Source: The 451 M&A KnowledgeBase *Official 451 Group estimate
Plazes was a $30m deal? You must be smoking something. Why don’t you check your calculations. Oh and go look at Nokia’s SEC filings. If the deal was that big – it’ll be in there.
Ok Dirk, why don’t you enlighten me?
The number is good, confirmed with several sources including one directly involved in the deal. For comparable, look at the Zyb takeout a month earlier, and the astronomical valuations of Loopt, Palego etc. I’m not saying it’s a fair price, but it is what it is.
Thanks for reading. (You can read another piece I wrote on Plazes here: http://the451group.com/report_view/report_view.php?entity_id=53989)