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Glam’s $1.3B Valuation Explains Why Start-Ups Chase the “Build Now, Add Revenue Later” Model



On Tuesday, I explained why chasing the "free" start-up model was killing many business ideas. How can you build a company when your business model consists of "get acquired, before we run out of funding?"

Today, we see exactly why the "get acquired" model is so attractive to start-ups. According to VentureBeat, Glam, an online publisher aimed at women, turned down an acquisition offer worth, wait for it, $1.3 billion!

I heard today that Glam received an acquisition offer of $1.3 billion in the past few days, but is unlikely to take the offer, according a source close to the company. Glam’s investors are unlikely to do so because they see a bigger opportunity for Glam to build a large business for high-end display advertising, the source said.

Here’s the kicker, just this February Glam raised $85 million in capital, bringing its total funding to over $100 million. Glam has yet to make a profit!!!

Sure, it’s selling ads, building optimized sites, and as of today, planning a new video ad network, but it’s reportedly yet to make a profit.

Is it any wonder that start-ups–and VC firms–are enamored with the build it first, find a business model later never strategy?

  • http://www.greatpriceshere.com Nicole

    This beats everything that one learns in business schools. Reminds me somehow of pyramid schemes!

  • http://www.fairmarketvaluations.com Scott

    I would be absolutely floored if Glam walked about from $1.3B. That is obviously more than MySpace received when it was top dog! Valuations will start to fall in this space unless these businesses can rapidly scale profitability and various monetization models.

    Social Networks and/or Social Sites appear to be going about their revenue models in a very simplistic manner. Banner ads just seem such the path of least resistance; I still question the eyeballs and click through rates. We as content consumers still have banner blindness and the whole dynamic of social media allowing for more pull than push marketing is not being optimized with the banner model.

    A great discussion is going on here about “The fork in the road for social media” — regarding their monetization models: http://www.readwriteweb.com/archives/the_fork_in_the_road_for_social_media.php.

    It is my belief that if many of these networks can get their arms around a hybrid affiliate marketing, revenue share, product/service/experience review model allowing their members to monetize their own reach/content with their personal audience, it could be a success. For such a model to succeed, practices of honesty, transparency and disclosure would need to be implemented. While very controversial and disruptive, PayPerPost, PayU2Blog, ReviewMe, etc may be on to a successful model which could be parlayed and tweaked for other social networks.

    Beacon was a failure; but a great example of this initiative is RadicalBuy over at Facebook.

    Any thoughts?

  • http://www.marketingpilgrim.com Andy Beal

    @Scott – first thought, would you like to broker the $1.3B deal for Glam? ;-)

    Second thought, revenue sharing with those that create your content for you, is an interesting but underutilized model right now.

  • http://www.srery.com RIchard Srery

    Andy,

    You so hit hte mark on this one. There are constantly new inventoment models being tried out every day and this one, by far is one I am following with a great deal of interest.

  • http://www.mbwebdesign.co.uk MB Web Design

    On the face of it, turning down 1.3B having not turned a profit and spent 100M might seem foolhardy but if you think about it… No, I’m struggling to find sense out of that decision. It’s brave but a choice that might prove foolish in the long run, I fear. Though it’s a “model” that turns business school tuition on it’s head, that does not necessarily mean it’s a bad decision. The question it, do the investors see the offer rejection as a poor decision?