Comments on: Adonomics Facebook App Valuations Raise Eyebrows, Questions http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/ Mon, 14 Nov 2011 11:13:56 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: FaceReviews: Facebook News and Facebook Applications http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-34833 FaceReviews: Facebook News and Facebook Applications Thu, 24 Jan 2008 19:26:00 +0000 http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-34833 [...] it’s been well-established that Facebook Platform developers can make money off of their apps, little had been said about the apps that can make money for the user. Quite a few options exist, [...] [...] it’s been well-established that Facebook Platform developers can make money off of their apps, little had been said about the apps that can make money for the user. Quite a few options exist, [...]

]]> By: Jonathan Rose http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32726 Jonathan Rose Wed, 16 Jan 2008 07:28:03 +0000 http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32726 to understand the craze that is currently occurring with business that do not produce much revenue but have huge valuations, just look at Google's valuation of some $200Bn with a paltry $12Bn in revenue and $4Bn in profits (which is questionable by any accounting standards, meanwhile Microsoft is worth a similar figure with over $50Bn in revenue and over $12Bn in profit and Billions in the bank. It is hard to see that FaceBook will achieve any credible monetization in time to capitalize on its captive audience before they move on! I personally do not subscribe to the Advertising revenue model, it just doesnt generate enough money based on server farm costs and traffic, if you work the Breakevens for these companies they are not even close!!! to understand the craze that is currently occurring with business that do not produce much revenue but have huge valuations, just look at Google’s valuation of some $200Bn with a paltry $12Bn in revenue and $4Bn in profits (which is questionable by any accounting standards, meanwhile Microsoft is worth a similar figure with over $50Bn in revenue and over $12Bn in profit and Billions in the bank. It is hard to see that FaceBook will achieve any credible monetization in time to capitalize on its captive audience before they move on! I personally do not subscribe to the Advertising revenue model, it just doesnt generate enough money based on server farm costs and traffic, if you work the Breakevens for these companies they are not even close!!!

]]> By: Alex Kingston http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32509 Alex Kingston Tue, 15 Jan 2008 19:43:53 +0000 http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32509 I spy with my little eye an Adonomics advert on your front page. Shouldn't you disclose the fact that you have a business relationship with these guys in your article? I spy with my little eye an Adonomics advert on your front page. Shouldn’t you disclose the fact that you have a business relationship with these guys in your article?

]]> By: Lee Lorenzen http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32305 Lee Lorenzen Tue, 15 Jan 2008 00:56:19 +0000 http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32305 To Teresa, I appreciate the comment and time will tell whether I'm right or "drunk" WRT the valuation question of both apps and facebook. That being said, I do try to provide lots of supporting data as to why I believe what I believe. In addition, it is important to note that part of the goal of the Adonomics valuation is to aid app developers as they seek buyers because I was seeing too many deals being done early on for ridiculously low valuations (e.g., Favorite Peeps to Slide for only $60K). Even if a developer accepts less than their Adonomics valuation it certainly helps to have the Adonomics valuation as the starting point of negotiation. I'm also happy to help any facebook developer that wants to sell an app valued over $100K to find a buyer for a percentage of the fee. We have also purchased apps at or above their Adonomics valuations. So, in that very real sense we stand by our numbers. To Blake, As stated in our FAQ's we stand by these valuations and the methodology that we used to arrive at them (see http://blog.adonomics.com/2007/09/24/an-adonomics-valuation-is-the-key-to-not-undervaluing-your-app/). When we manage ads for 3rd party apps we see RPM rates from $0.25 to $3.50. The high end of this range is not bad and I know of 20 or 30 apps written and owned by teams of developers with fewer than 3 members that are pulling in ad revenue between $30K and $200K per month in ad revenue. An app with $200K per month in revenue will do $2.4 million in annual revenue and this certainly justifies a $2 to $6 million valuation (i.e., 1x to 3x annualized revenues). If you look at the full range of apps in our list, you will note that the top twenty recieve a premium because they are potential strategic assets that might be coveted by Google, Yahoo, IAC, MySpace and others that want to in a single step gain access to 15% to 50% of all Facebook users. This would allow these Facebook competitors to introduce these users to a competitive social network. We tend to value facebook installs at around $0.50 per install. This is what it will cost you at RockYou and Slide to buy users for you facebook app. In addition, $0.50 is low compared to the cost of acquiring a registered web user via paid search. I also believe that Facebook app users are more valuable to acquire than registered web site users because they are reachable by the app owner without an extra opt-in and their usage of the app is an advertisement via the newsfeeed to their friends. Because a facebook user is worth significantly more than a registered web user, acquiring a Facebook app is a quick way for a Web 1.0 company or major brand to obtain a daily connection with millions of users that have opted in to being contacted by the app owner and whose profile page boxes are online billboards telling their friends about the app owner. Lastly, while creating some of these apps might not be that difficult, it is non-trivial to support an app with 2 to 20 million installs and 100K to 3 million daily active users. The other reality is that creating a popular facebook app is REALLY HARD. With over 13,000 shipping apps from 169,000 developers who've looked at Facebook only 146 apps have managed to capture more than 1 million users. Thanks, Lee Lorenzen CEO, Altura Ventures -- the first Facebook-only VC cell: 831-595-7501 To Teresa,

I appreciate the comment and time will tell whether I’m right or “drunk” WRT the valuation question of both apps and facebook. That being said, I do try to provide lots of supporting data as to why I believe what I believe.

In addition, it is important to note that part of the goal of the Adonomics valuation is to aid app developers as they seek buyers because I was seeing too many deals being done early on for ridiculously low valuations (e.g., Favorite Peeps to Slide for only $60K). Even if a developer accepts less than their Adonomics valuation it certainly helps to have the Adonomics valuation as the starting point of negotiation.

I’m also happy to help any facebook developer that wants to sell an app valued over $100K to find a buyer for a percentage of the fee. We have also purchased apps at or above their Adonomics valuations. So, in that very real sense we stand by our numbers.

To Blake,

As stated in our FAQ’s we stand by these valuations and the methodology that we used to arrive at them (see http://blog.adonomics.com/2007/09/24/an-adonomics-valuation-is-the-key-to-not-undervaluing-your-app/).

When we manage ads for 3rd party apps we see RPM rates from $0.25 to $3.50. The high end of this range is not bad and I know of 20 or 30 apps written and owned by teams of developers with fewer than 3 members that are pulling in ad revenue between $30K and $200K per month in ad revenue. An app with $200K per month in revenue will do $2.4 million in annual revenue and this certainly justifies a $2 to $6 million valuation (i.e., 1x to 3x annualized revenues).

If you look at the full range of apps in our list, you will note that the top twenty recieve a premium because they are potential strategic assets that might be coveted by Google, Yahoo, IAC, MySpace and others that want to in a single step gain access to 15% to 50% of all Facebook users. This would allow these Facebook competitors to introduce these users to a competitive social network.

We tend to value facebook installs at around $0.50 per install. This is what it will cost you at RockYou and Slide to buy users for you facebook app. In addition, $0.50 is low compared to the cost of acquiring a registered web user via paid search. I also believe that Facebook app users are more valuable to acquire than registered web site users because they are reachable by the app owner without an extra opt-in and their usage of the app is an advertisement via the newsfeeed to their friends.

Because a facebook user is worth significantly more than a registered web user, acquiring a Facebook app is a quick way for a Web 1.0 company or major brand to obtain a daily connection with millions of users that have opted in to being contacted by the app owner and whose profile page boxes are online billboards telling their friends about the app owner.

Lastly, while creating some of these apps might not be that difficult, it is non-trivial to support an app with 2 to 20 million installs and 100K to 3 million daily active users. The other reality is that creating a popular facebook app is REALLY HARD. With over 13,000 shipping apps from 169,000 developers who’ve looked at Facebook only 146 apps have managed to capture more than 1 million users.

Thanks,
Lee Lorenzen
CEO, Altura Ventures — the first Facebook-only VC
cell: 831-595-7501

]]> By: Teresa Valdez Klein http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32284 Teresa Valdez Klein Mon, 14 Jan 2008 23:56:03 +0000 http://facereviews.com/2008/01/14/adonomics-facebook-app-valuations-raise-eyebrows-questions/#comment-32284 Does anyone see a parallel here between the valuations of Facebook apps offered by Adonomics and the valuation of Facebook ($100 billion) offered up by Lee Lorenzen, who bought Adonomics? Either they're consistently overvaluing both the applications and the platform, or they've got more foresight than the rest of us combined. Does anyone see a parallel here between the valuations of Facebook apps offered by Adonomics and the valuation of Facebook ($100 billion) offered up by Lee Lorenzen, who bought Adonomics? Either they’re consistently overvaluing both the applications and the platform, or they’ve got more foresight than the rest of us combined.

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