Encouraging Stupidity: Analysts Up in Arms Over 'Outrageous' MySpace Valuation

Lots of people are understandably up in arms about RBC analyst Jordan Rohan's absurdly oversized estimate of News Corp. (NWS) owned MySpace's value. In doing so, however, they are missing the point, and meanwhile encouraging more of this sort of silliness.

Like Henry Blodget during the bubble did with Amazon (AMZN), and other analysts did later with Qualcomm (QCOM), etc., putting up oversized estimates of a company's value is mostly a marketing move for a financial analyst, not an exercise in company valuation. The number doesn't matter; it is simply a piece of red meat to attact the media pack, like me saying, Tim Draper-style, that one of my portfolio companies is worth a billion dollars (which it is, of course). Come talk to me!

Pretending otherwise and writing rationally (or intemperately) about "look at me" numbers using logic, critical thinking, and financial sense is silly, like dancing about architecture. Like Mark Twain said when explaining why he doesn't vote, "It just encourages them."

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[Mr WaveTheory:]

Forever Geek has a great post on how MySpace is really hyping its 100 million user number to the press. It's a great study. The study checked out 303 profiles and found that 50% of users don't even show up in a month. That's a very high attrition rate! I wonder what happened to those 50 million users?

Here's what I think are possible explanations:

* MySpace users have 2 accounts. Like free email accounts (think Hotmail and Yahoo), many people own more than one account - one for personal email and one for spam. So, if indeed, the average MySpace user has 2 accounts, then it makes sense that 50% of them won't show up after a month.

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2006 Sep 28 10:18 PM

[Michael Eis...:]

Paul - Directly in line with your comments, You can also check out Henry Blodget's own post on MySpace's valuation and his comments on Rohan's analysis. Post is on Blodget's blog here: www.internetoutsider.c...

2006 Sep 30 04:31 PM