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Show me the money Web 2.0 Expo April 18 th , 2007

Show me the money Web 2.0 Expo April 18 th , 2007. Jeremy Liew Partner, Lightspeed Venture Partners www.Lightspeedvp.com Lsvp.wordpress.com. Its cheaper than ever to start an internet company…. $ ‘000s. Source: Carsonified.com/SXSW Presentation.

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Show me the money Web 2.0 Expo April 18 th , 2007

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  1. Show me the money Web 2.0 Expo April 18th, 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

  3. … and cheaper than ever to run an internet company SAMPLE EXPENSE BUDGET

  4. As a result, getting to breakeven isn’t too hard… Illustrative * Assumes ad sales by an ad network or ad rep firm

  5. …but you still need to be big to be public REVENUE NEEDED FOR $500M EV* PUBLIC COMPANY ’07 REV MULTIPLES MEDIA E-COMMERCE * 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 BREAKEVEN PUBLIC, $500M EV* MEDIA E-COMMERCE * Based on median multiples

  7. Media Companies

  8. Advertising RPMs* depend on your ability to deliver a targeted audience $0.50 - 2 $1-5 $10-40 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 ** Facebook revenue estimate “well over $100m”, Fandango revenue estimated to be “around $50m with half from advertising and half from ticketing”

  9. To reach breakeven, US traffic requirements can become quite meaningful, depending on RPMs PV/Mth to reach $2.8M in revenue Sites with comparable US Traffic RPM • eHarmony 239M • Real 237M • Whitepages 230M • Tagged 229M • NFL.com 49M • Nextag 48M • Wash’ton Post 47M • Heavy 45M Not necessarily demographically targeted • Technorati 12M • WinAmp 12M • UFC.com 12M • Digg 11M Not necessarily endemically targeted Source: Comscore, Lightspeed Analysis

  10. US traffic requirements are even higher to reach public company levels PV/Mth to reach $131M in revenue Sites with comparable US Traffic RPM • MSN 13,672M • Google 12,476M • Facebook 12,179M • AOL 10,609M • Live.com 2,819M • Youtube 2,539M • Go.com 1,559M • Pogo 1,544M Not necessarily demographically targeted • MSNBC 592M • Expedia 522M • Paypal 495M • Weather.com 488M Not necessarily endemically targeted Source: Comscore, Lightspeed Analysis

  11. E-Commerce Companies

  12. Many e-commerce niches are large enough to support $7M in revenue, our illustrative breakeven level Hats.com – hats Allheart.com – nursing apparel Ridegear.com – motorcycle gear Figleaves.com – lingerie Source: Internet Retailer Top 500 Guide, 2006 Edition

  13. There are three ways to get to over $271M in e-commerce revenues, public company type levels • One online store with >$271M in revenue • 5-10 online stores, each with $25-50M in revenue • 100+ online stores, each with up to $3M in average revenue

  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

  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

  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

  17. Conclusion • Easier than ever to start a consumer internet company • Not too hard to get to cash flow breakeven • For long term value creation, plan A can’t be “get bought by Google” • Need to have a roadmap to be an independent public company • Requires real scale • Revenue sometimes lags costs when you are growing • May need venture capital to bridge the gap

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