Posted January 3, 2008 10:31 pm by with 10 comments

Tweet about this on TwitterShare on LinkedInShare on Google+Share on FacebookBuffer this page

Rumors seem like more than just rumors when they’re printed by the New York Times, don’t they? Well here’s one that you can judge for yourself: Plaxo is for sale. The news comes from people who were “briefed on the [upcoming] auction.”

The company has yet to turn a profit, but seems to think it’s worth $100 million. With 15 million registered users, the company may be being a bit modest with its valuation. Facebook, after all, thinks it’s worth $10B (and that’s on the low side). With just under four times the registered members, a price tag of $2.5B would at least not be the most outlandish thing we’ve ever heard.

Or, to use another measure, two years ago when Rupert Murdoch acquired MySpace, they paid $580 for about 30 sites, including MySpace (allegedly $327M of which was directly for MySpace, which had 22 million members at the time). So on the conservative side, they could be asking about $220M.

But they’re not. And why not? Two reasons: they’re not growing like either of those companies (and may not ever). They’ve been around since 2001 and have yet to see the hypergrowth period—and headlines—that larger social networking sites. This is probably due, at least in part, to the fact that they’ve never aspired (until recently) to be anything more than an online Rolodex.

The second reason: they’ve never turned a profit. Facebook, even before Project Beacon, stood to bring in some $150 million last year. Plaxo, not so much.

So what would you pay for a potential, up-and-coming social network—and what would you do to make it profitable?

  • You should really feel more than confident about yourself and the business model you have in mind in order to pay $100m for a company which has yet to turn a profit, even with 15 million registered users.

    Alan Johnson

  • I don’t have 15 million registered users, but my business does turn a profit. Anyone want to make me an offer? I’ll even settle for $20 million. Ahh…retirement.

  • And it seems, that online business does not cost so much …

  • An online business can cost you as much as you’re willing to pay 🙂

    If you meant that the costs of starting such a venture can be low compared to brick&mortar businesses then yes, that is definitely the case, at least most of the times.

    Alan Johnson

  • Agree, the laws of business nobody cancelled. And the expenses are absolutely not commensurable with offline business. With it also involves Internet :). But it seems that having enclosed this money in offline business in far prospect the profit will be more stable and more

  • $100m could be a bargain. With 15 million registered users i don’t understand how they haven’t made a profit. In the right hands a business like that should easily be able to turn a profit, and i’m sure it would if it was bought by a company with a more agressive marketing philoshophy.

  • Question in that, how much from these 15 millions “dead souls”?
    And I speak about long-term prospect …

  • Indeed, if only a small percentage of these users are actually active then such a website is definitely not attractive, even with a much lower price tag.

    Alan Johnson

  • But in any case, former owners have made quite good bargain 🙂

  • $100m for an ‘online Rolodex’ who have never turned a profit. Nothing ventured, nothing gained I suppose, but how wise would it be to plunge that kind of money into a business like this with none of the fanfare of similar sites – Myspace, Facebook et al. The brand recognition is zero – not one non-techy person I know has heard of it.