Measuring Gannett, Google, and Yahoo By Their Eyeballs

The Stalwart submits: In pure contrarian fashion, we're about to measure a company in its Market Cap / Internet Eyeballs, probably one of the most ridiculed valuation methods there is. Will we measure Google? (NSDQ:GOOG) Not yet, that'd be too normal. The target company is newspaper owner Gannett (NYSE:GCI). We pulled the following from their recent 3Q06 earnings release:

In September, Gannett's consolidated domestic Internet audience share was approximately 24 million unique visitors reaching over 15 percent of the Internet audience according to Nielsen//NetRatings. Newsquest is also an Internet leader in the UK where its network of Web sites attracted more than 51 million monthly page impressions from approximately 3.6 million unique users.

So here we go, try not to wince. If you take Gannett's $13,320m market cap and then divide it by the 27.6m unique online users per month... you come to $483 per monthly online viewer, and of course get the whole "long established print newspaper" nonsense for free in addition. So how does that compare with other online companies?

In August, MySpace had 55.7 million unique visitors, nearly four times the size of the 14.7 million Facebook visitors, according to figures from ComScore Media Matrix. Microsoft Corp.’s Windows Live Spaces follows with 9.7 million users, Xanga.com has 8 million and Flikr.com, a photo site Yahoo bought last year for an undisclosed amount, has 5.5 million users.

Analyst Tim Boyd thinks Yahoo is willing to spend $1 billion for Facebook—a site originally for university and high school students but now open to anyone—because it will help the company better compete for advertising dollars.

OK, so Gannett still has a ways to go. Facebook at 14.7m unique users only goes for $1Bn perhaps. Then at similar valuation method, Gannett's 27.3m online users are just under $2bn. And of course Facebook users are probably more valuable. So let's say GCI's visitors are worth half. Then we could shoot from the hip and say GCI's online exposure alone could be worth around $1Bn based on its current viewers. No compelling argument there then.

But what about the traffic valuations for Google and Yahoo (NSDQ:YHOO)? We found some traffic statistics on LightReading:

By combining Google with YouTube, the two sites would have had 101 million visitors in August, according to Nielsen/NetRatings . Yahoo Inc. (Nasdaq: YHOO) sites had 106.7 million and Microsoft Corp.'s (Nasdaq: MSFT) MSN Internet division had 98.5 million.

If we do the same Mkt Cap / Traffic math we come to Yahoo being valued at $314 per unique visitors and a whopping $1,285 per visitor. Upon seeing these valuations, if we value GCI's internet presence a just $100 per visitor, 1/3 of Yahoo, we're at $2.76Bn for the internet exposure. A little better than before, but still not mind-blowing. A lot of their internet users are indeed lost print readers, so can't quite just add it to the print business's value.

Still, we'd like to point out that the newspaper industry as a whole grew its unique online visitors by 31% YoY in 1H06. Thus perhaps this space will get more exciting in the future.

Stark difference between Google and Yahoo. Perhaps some good has indeed come out of this endeavor. The the above calculation shows how starkly different the valuations are for Yahoo and Google's respective audiences. ($314 vs. $1285). We understand that many dynamics are at play and that our calculus is a bit simple. But doesn't this valuation gap seem a bit wide? Its almost 4 times. Can Google pull that many more dollars out of each visitor for this difference to be rational? Is Google growing its audience sufficiently faster than Yahoo for this difference? Food for though at the very least. It's true that Google's massive valuation allows it to gobble up companies such as YouTube much more easily.

[Disclosure: the author is long shares of GCI]

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