TechCrunch, a company made up of tech blogs somewhat like this one as well as classified advertising and some events, announced its sale last week to the new-old AOL for a price widely, broadly, and deeply rumored to be $30 million. Nobody will officially confirm this price but I have no reason to believe $30 million is wrong. It is way too high, but it probably isn’t wrong. The better question is why would AOL pay TechCrunch four times what it is actually worth?
I think I know why.
Since I am not known as an equity analyst, you might wonder what makes me believe that TechCrunch is worth only a quarter of the rumored sale price? Well last year, in a moment of personal financial angst, I nearly sold a minority interest in this rag to Mark Cuban. And part of that experience involved valuing my product, which if you squint hard looks kind of like a little TechCrunch. That company was one of my comps. And based on the price Cuban was willing to pay and the relative traffic stats of our two enterprises, I’d say TechCrunch in the current market is worth about $7.5 million.
Getting the other obvious question out of the way: Cuban let the four (4!) contracts we’d negotiated with his legal team sit on his desk unread for two months until I finally walked away in disgust. The guy was trying to buy the Chicago Cubs then, which I understand was a complex (and ultimately unfruitful) venture, but it left me with nothing but a $15,000 legal bill. My only joy in this is, I suppose, that one of the contracts said I couldn’t blog about Cuban and I’m glad not to be bound by that.
Back to TechCrunch, AOL paid so much because they had to. TechCrunch is cool and AOL is not. AOL wanted to be cool so they had to pay more for the honor. And thinking of it that way a convergence number of $30 million actually feels about right.
That explains why TechCrunch would require at least $30 million from AOL, but doesn’t come close to answering the question of why AOL would need $30 million worth of TechCrunch? What is driving this economically-unsound acquisition?
Simple: AOL is making itself into the very media machine it expects Google will eventually want to buy and that media machine would have to include a lot more authoritative technology coverage than AOL currently provides.
Keep this idea in mind. Every move AOL makes from here on is done solely with Google in mind.
AOL CEO Tim Armstrong came from Google and knows that company as well as anyone. I am told he is convinced that Google will eventually have to give up its idea of not paying for content and will buy a big journalistic organization with some of the $30 billion in Google cash that’s lying around Mountain View.
In Armstrong’s view Google could buy Time-Warner, repeating the whole AOL Time-Warner debacle; it could buy Yahoo; or it could buy AOL. No other content providers are big enough to satisfy Google’s expected hunger. I’m told that Armstrong quite rightly sees a stigma on Time-Warner, that Yahoo isn’t a pure enough play and risks anti-trust problems in the search space, while AOL is just right.
All of this is hearsay of course, but it makes sense to me. And if it is true we should then expect AOL to go on a crazy acquisition spree making sub-$100 million buys of online firms in the tech and financial markets that command high ad rates.
I happen to believe that Armstrong is right about Google’s eventual intentions, even if Google doesn’t yet know it themselves. But that belief combined with the fact that I have pretty good idea what I, Cringely is worth in the current market does not mean any transactions are looming here.
We are no longer seeking investors, thanks.
So we can’t send you money to get NerdTV Season 2 out the door…?
Cringely routinely leaves out the detail that he is an investor in certain companies. As I understand it, Cringely owns some Google stock.
Not true. I don’t own, nor have I ever owned, shares in Google. For that matter I don’t own shares in ANY tech companies. I AM, however, a principal in a fund that is investing in a few of the Startup Tour companies. and when I write about those companies, which I haven’t done yet, I will be clear to put that fact right up front.
Well I hope I’m wrong. However, I’ve been reading your column for at least a decade. As I recall back around Google’s IPO, when there was discussion of Google building datacenters in parking lots, you had mentioned buying some stock. Like I said, though, I hope I’m wrong.
But nothing like flying off half-cocked to attack someone’s integrity over a vaguely-remembered column from 10 years ago, eh Patrick?
Cringely routinely leaves out the detail that he is an investor in certain companies. As I understand it, Cringely owns some Google stock. Sometimes, specifically when he mentions Google, Bob’s tone borders on pandering.
How in the world is this article pandering to Google? He’s saying that sooner or later Google’s going to have start doing exactly what it does not want to do.
It’s angst, not anxt 🙂
Evidently not at my house, but I’ll make the change anyway, thanks.
Bob, comparing your blog to TechCrunch is like comparing my nice neighborhood cafe with, well, McDonalds. I come here for the bigger insights, the more intelligently reasoned perspective, the historical analysis.. I come here to get away from the fast-techfood fix of TechCrunch. TC seems to have monetized *increasing* the S/N ratio of the blogosphere. Add my $0.02 to your valuation.
Oops. That should have been “TC seems to have monetized *decreasing* the S/N ratio of the blogosphere.” I will never admit to having an engineering degree.
Never the less Keshet, I love your “Signal To Noise Ratio” quote. So true!
With Bob we get Signal and very little noise 🙂
Except from the comments!
shush.
I get your point and am flattered. Certainly I follow a different drummer than those guys. But comps is comps and I’ve been told by VCs from time to time that my numbers are thrown out for that purpose, though generally it is to get a LOWER valuation since many of these outfits use 20+ people to generate my kind of numbers.
If Google is going to acquire a content provider, why is it limited to a small set of Internet companies (Yahoo, AOL and T-W)? Couldn’t they buy a more traditional media company like, say, AP?
The AP is a member-owned coop, and therefore almost impossible to buy.
Comparing this blog to techcrunch is a bit like saying that your basically the new York times just a bit smaller. Rule one of valuations is that you can’t base a valuation on scaling back from a dominant company and TC owns their space.
And yet it happens all the time. Yes, the TechCrunch audience is about six times bigger than I, Cringely, but anything within an order of magnitude gets used in this market. To say that is ill-advised doesn’t mean it isn’t common. Just look at drunk driving.
[…] an interesting post on I, Cringely, proposing the idea that Tim Armstrong is setting AOL up for the eventual acquisition by Google. […]
In my experience, anybody who goes on the record voluntarily indicating they are ‘not for sale’, are in fact advertising they are for sale….it just means they are now looking for higher offers than previously assumed.
That’s not the case here. Besides, who would want it? Then they’d have to manage ME, which any number of folks can tell you isn’t fun.
Which means that they might have to go to the expense of hiring your bride as a management / transition consultant…
You’re an idiot dude…. TechCrunch is going to sell for LESS THAN 1x REVENUES??? Due to your shitty wannabe banker comp model?
Revenue multiples are meaningless. Profit is what counts and the multiples there are nowhere near what you think.
Bob, it’s typical that a TechCrunch supporter doesn’t value profit. None of the companies they champion will ever make a profit.
Profits are for other people, not for TechCrunch. That says it all about the bubble mentality.
All of my girl friends in the past and my wife (definitely in the present) came along when I was “not actively looking”. Is that the sound of Murdock sneaking up behind you?
Yeah, right. I’ve stumbled onto a good gig with the Startup Tour and associated TV show. This feels like the right thing for me to be doing for the next 3-5 years, after which I expect to RETIRE, not sell out. With me out to pasture, there’d be nothing to sell.
I think that you really cannot compare yourself to Techcrunch. From investor viewpoint you are one man show. Based on Alexa it looks they have much more than 6x of your traffic.
They may have more than 6x the traffic, but I’m pretty sure they have way more than 6x the staff. That makes this site worth more on a per hit basis – more bang for the buck.
Yeah, what he said.
Well Bob after reading about you for my first time, age(53) yikes!! I have always dreamt that universal dream that occasionally plaques us all from time to time. In your case you are excempt from my dream catagory. Wishing the life of a millionare. Dreaming of all the needs I could provide in this little mountain community. But after reading about you, I was left feeling a little tired on your behalf. Wow maybe my money issues are not so bad. Helping people is who I am. So I always thought LORD if lottery winner prayer becomes true help me know who really needs help. Do other people have millionareitis? Well after reading your life consisting of much money. I say to myself glad it is you and not I. Your world is tech. mine is that of a married,homemaker and grandma
Clearly spam, but the question is, what does the spammer gain from such rants?
Actually, with the last line about being a grandmother, it may not be spam. Just an old lady who has trouble stringing together thoughts as a coherent paragraph, which is remarkably common even discounting age and the likelihood that she’s been on the intarwebs for only a couple years.
Over the next decade the influx of geriatric web surfers is going to be *enormous*.
Note that the spammer’s name is a web link which will forever be associated with Cringely.com on Google search. That’s what they gain until Bob’s forum mods delete it. The words are there to fool the mods into ignoring it.
Except that the link address is “yahoo”, which doesn’t exactly go anywhere.
living a “Normal” life in CA. I do not wonder about all my “Stuff” It must be tough trusting people? Always wondering if their kindness is genuine or money bound? This is where I started realizing “Tag” Bobby you are it. May you use your money for good and not “EVIL” Your life is way to complicated for me to desire alot of money. Thanks for showing me “My Light”. I bet no one else read it the same way I have. Or has someelse had that “Light Bulb” moment also?
WTF? Sound like that light bulb’s blown…!
Hey Bob
You too would be in a good position to parley the Cringely brand into a large web operation with conferences, multiple posts a day, people on staff, etc. That’s what Arrington has done.
People like you – your brand is Apple to Arrington’s Microsoft.
If you wanted to of course but not everyone wants to go maximum.
You have a modest website, irregular posts and do it on your own. For many people keeping things small is a better way of life.
Cringely could easily be bigger than Techcrunch – you simply appear to have chosen not to be.
as
I agree. He likely could. However, there is more to life then money and the pursuit of it. By “going to the next level”, it would likely result in the end of his marriage, his kids growing up with a dad who no longer works from home (or if he does, being mostly emotionally absent), etc…
I get the distinct feeling from several of Bob’s posts that he’s purposed himself to stay at the “one man show” level for some very specific family-oriented reasons.
And I deeply respect that.
Thanks. After leaving PBS I considered an offer from Om Malik, but I’m just too cranky to write all those little posts designed to build traffic numbers. Frankly I’m unmanageable (just ask Stewart Alsop) and this works well for me.
Why don’t you sell your book and video from the blog?
Beats me. Great idea! But I’ll probably wait until spring when my new book comes out.
I’m not sure the idea of Google buying content stacks up. They would have massive headaches from competitive content providers whining every time a Google search showed Google’s content before theirs, so they’d have to be scrupulously fair. Which would prevent them leveraging their investment in any way.
In my estimation, Google only enters new spheres when it thinks it can do them smarter than they are currently being done. Search, Advertising, Gmail, Google Apps, Android, Appengine… all used innovative technology to change the game, not simply join the game.
So I consider Google buying a traditional content company unlikely. Now if you successfully started up (say) Wikinews to provide crowd-sourced general news and opinion pieces, Google might be interested. (And if you DO, and they ARE, please consider sending me 0.1% for the idea!)
“Google only enters new spheres when it thinks it can do them smarter than they are currently being done. Search, Advertising, Gmail, Google Apps, Android, Appengine… all used innovative technology to change the game, not simply join the game.”
Maybe Google plans to add local news to the list. It’s something that certainly can be done better.
I’d go a bit further and say that a lot of what Google has done ISN’T better. they tend to throw a lot of beta services against the wall and see what sticks. The previous commenter seemed to think Google actually cared what users think, but if you’ll look at their coverage here and a lot of other places that’s not really the case. Google Sites, for example, was a terrible letdown after JotSpot, and my experience of Google as a user who actually communicated with them about these issues was that they saw it as MY problem, being as I am a bozo.
This column sheds light on AOL’s massive expansion of its Patch local news websites. It’s planning to have 500 Patch sites running by the end of the year (not sure that’s going to happen, but maybe). The effort is notable because they’re hiring experienced journalists to cover smallish communities, and paying them well to do it. The going rate at the moment seems to be market rate plus at least 10%. To give you an idea, one local daily newspaper was hiring a full-time reporter for $18K per year. Patch starts at $35K.
There’s lots of discussion in local journalism circles about how Patch plans to pay for all of these people. It’s highly unlikely they’ll break even paying full-time journalists to run websites that attract a few thousand readers (if that) a week. But if AOL is trying to build a massive news operation for Google, well, that makes a lot of sense.
If successful, a Patch network could start to challenge local newspapers, the AP and other national media outlets in the local news game. Newspaper companies are terrible slow at adapting to technology, and AOL (or Google) may run right past them.
[…] I, Cringely » Blog Archive » Crunch Time at AOL – Cringely on … […]
Google is too content agnostic to be a viable buyer. Yahoo (which has always fashioned itself more as a content/media company) is a much more likely buyer. Or we could once again see a traditional media company try to “buy-in” like Time Warner did with AOL once, or News Corp did with MySpace. Or someone like NYTimes or Washington Post or Bloomberg could make a national play to leverage Patch and provide the national and international content to complement the local coverage on Patch sites. Heck even Disney/ABC might make a play here, to get access to local sports coverage for ESPN, of course! The possibilities are endless!
Yahoo is, shall we say, not ascendant. they’re a sorta-content site led around by Bing search at this point.
AOL is definitely not ascendant. pick your reason, they’re all good.
if Google decides they have to purchase a content generator or three of their own, I’m thinking in these perilous economic times, they get to name their own price. and if anybody thinks they’re too big for that stuff, they will eventually start parting themselves out, and Google will end up with a bargain.
[…] has money to spare in order to buy the Microsoft-funded Arrington with his rag while at the very same time AOL betrays a vast community of existing users at Propeller (good […]
TechCrunch is not cool.
[Off Topic]
Please fix your RSS feed… I was wondering why my podcast client was stuck on “Where’s the Beef”!
Some of us don’t use iTunes!!!
Thanks,
–Tom
Did your valuation take into account their conferences? As I understand it those conferences make more than the web publication. Simple math at $2k a visitor minus relatively cheap operating expenses indicate the conferences must bring in $2 -$4m per year profit. If that’s the case then $30m valuation is only a 10x multiple on earnings which seems small.
Afaik Cringely does not have conferences … thus that could account for the difference in value.
It’s not broken. That was the last one posted. Check out the Cringely blogs since then. They agree with the non-iTunes RSS feed xml file.
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Techcruch sucks. I stopped reading them for such a long time and switched to your blog 😉
[…] posted here: I, Cringely » Blog Archive » Crunch Time at AOL – Cringely on … Tags: aol, ascendant-pick, definitely-not, desire-alot, life, light, light-bulb, point, reason, […]
[…] That story hit the press this week but it’s a ruse to motivate Google exactly as I explained a few days ago. AOL has neither the money nor the motivation to buy Yahoo, which is analogous to a bus company […]
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I happen to believe that Armstrong is right about Google’s eventual intentions, even if Google doesn’t yet know it themselves. But that belief combined with the fact that I have pretty good idea what I, Cringely is worth in the current market does not mean any transactions are looming here.
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