Ancestry.com Has High Expectations for Upcoming IPO

Ancestry.com (ACOM), a subscription-based online community for researching family histories, is expected to go public this week. According to the New York Times: "The genealogy Web site hopes investors will provide $100 million in an initial public offering, valuing the whole thing at $572 million. That seems too high for Ancestry to cement a happy legacy with investors."

[Update: ACOM on Thursday priced midrange at $13.50.]

Business Overview (from prospectus)

Ancestry.com is the world’s largest online resource for family history, with more than one million paying subscribers around the world as of September 30, 2009. We have been a leader in the family history market for over 20 years and have helped pioneer the market for online family history research. We believe that most people have a fundamental desire to understand who they are and from where they came, and that anyone interested in discovering, preserving and sharing their family history is a potential user of Ancestry.com. We strive to make our service valuable to individuals ranging from the most committed family historians to those taking their first steps towards satisfying their curiosity about their family stories.

Offering: 7.4 million shares at $13-$15 per share. Net proceeds of approximately $48.4 million will be used to repay debt, for working capital and general corporate purposes.

Lead Underwriters: Morgan Stanley (MS), BofA Merrill Lynch (BAC), Jefferies (JEF)

Financial Highlights:

The increase in our subscription revenues of $18.9 million [from $133,616,000 to $152,506, 000] in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily the result of an increase in the number of total subscribers and to some extent an increase in higher monthly revenue per subscriber... The increase in our cost of subscription revenues of $2.1 million [from $27,699,000 to $29,755,000] in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily due to a $1.0 million increase in our web hosting costs, an increase in amortization of content costs of $0.6 million and an increase in equipment maintenance related costs of $0.4 million... The increase in our cost of product revenues of $0.9 million [from $3,292,000 to $4,213,000] in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 was primarily due to a $0.4 million increase as a result of the introduction of our vital records products in the United Kingdom and a $0.4 million increase in shipping costs.

Competition:

We face competition in our business from a variety of online and offline organizations, some of which provide genealogical records free of charge. We expect competition to increase in the future. We generally compete on the basis of content, price, ease of use, technology, brand recognition, breadth of products, service and support, and the number of network members with whom other subscribers can collaborate. We believe that we compete favorably with respect to these factors, and that none of our competitors offers as broad an array of products and services or as compelling a value proposition to consumers interested in online family history research.

Ancestry.com and our similar international websites face competition from:

• FamilySearch, and its website FamilySearch.org, a genealogy organization that is part of The Church of Jesus Christ of Latter-day Saints. The Church of Jesus Christ of Latter-day Saints has, for over 100 years, actively gathered, preserved and shared genealogical records worldwide. FamilySearch has an extensive collection of paper and microfilm records (more than 2.3 million rolls of microfilm and 180,000 sets of microfiche), which it maintains in a central storage facility in Utah. FamilySearch has digitized a large quantity of these records and has published them online at FamilySearch.org, where it makes them available to the public for free and through over 4,500 family history centers located throughout the world. FamilySearch is a well funded organization and has stated its intention to undertake a massive digitization project to bring most of its collection online over the next few years.

• Commercial entities, including online genealogical research services, library content distributors, search engines and portals, retailers of books and software related to genealogical research and family tree creation and family history oriented social networking websites.
• Other non-profit entities and organizations, genealogical societies, governments and agencies that may make vital statistics or other records available to the public for free.

Additional Resources:

• Company website
• TechCrunch: 'Finding Family Is Big Business: Ancestry.com Files For $75 Million IPO'
• Tom Taulli: 'Ancestry.com's IPO Likely to Hit Markets in Q4'
• Renaissance Capital: 'Six New IPOs This Week'
• The Business Insider: 'Ancestry.com IPO Shows How Starved Banks Are For Fees'
• NYT: 'A High Price for Ancestry.com'

Comments

[bottoms-up:]

Good luck on this IPO...

With the economy the way it is, people worried about keeping their jobs and families together, etc, I would think the biggest concern is where we are going, not where we came from.

Nov 04 02:54 PM

[mdsamx:]

and you just dont get it do you ,I'm sure you ancestors dont care either.let me guess who you voted for?????????????/

On Nov 04 02:54 PM bottoms-up wrote:

> Good luck on this IPO...
>
> With the economy the way it is, people worried about keeping their
> jobs and families together, etc, I would think the biggest concern
> is where we are going, not where we came from.

Nov 05 03:14 AM

[User 433379:]

This isn't a service for everyone, but it is a valid niche offering. After all, they've been in business for several years and have revenues, don't they?

I want to see them do well, because I think it's a good thing to know where you came from. However, my biggest holdback in investing is discussed in the article under "Competitors". Big warning flag in there if you read it: the LDS church has got to have the best collection of geneological records on the planet (just a guess, although I don't know for sure), and they will undertake a massive effort to digitize it and make it available for free online as well as in thousands of family history centers (already in place) around the world.

Now, if that doesn't cause you concern for a business that will rely on subscription revenue, what does? Ancestry.com will have to continue to add value to their service by making it easier, more enjoyable, more manageable, more social, etc. If they can't offer anything on that front, they don't have long-term potential.


On Nov 04 02:54 PM bottoms-up wrote:

> Good luck on this IPO...
>
> With the economy the way it is, people worried about keeping their
> jobs and families together, etc, I would think the biggest concern
> is where we are going, not where we came from.

Nov 05 10:59 AM

[oldrelic:]

Having contributed freely of my family tree to such places as ACOM, I do believe the governments have ruined our chances regarding the benefit of freedom of information by selling such things as the census to organizations for profit.

Nov 05 11:32 PM

[ancestry com:]

great comment - I would think the biggest concern is where we are going, not where we came from.

Nov 21 01:48 PM