The Universal/NBC/GE mega-company bought iVillage (IVIL) for $600 million a few days ago. In 2005, iVillage has revenues of $91 million, and net income of $8.7 million. In January, the iVillage Network had 14.5 million unique visitors, so it is a fairly large set of websites, but not anywhere near the top 25.
I would make the argument that the iVillage visitors, who are mostly women, are a fairly average group of web users. The content of the sites would not seem to draw anyone unique, beyond the high concentration of females over 18 years of age. They do have some good health properties, and I would expect they get a slightly higher cost-per-thousand that the rest of the sites because the audience is more targeted. It would not, however, be as targeted, or as valuable as visitors to sites like MarketWatch (www.marketwatch.com).
Based on all of this, I would say the iVillage board got a very good price for the company.
This should indicated that some of the larger and more targeted web properties might be undervalued now. Take a look at CNET (CNET). The company did $353 million last year. Operating profits before depreciation, amortization, and asset impairment went from 23% in Q4 2004 to 30% in Q4 2005. Operating income calculated on the same basis hit $32.3 million in Q4, up 57% year-over-year. Not bad.
Perhaps an even better sign of the strength of the company is that in Q4 their network of internet sites had an average of 116 million unique visitors a month and average daily page views of over 103 million. Its photosharing site, Webshots (www.webshots.com) has 330 million photo uploads.
Next year, the company says they will do about $400 million in revenue. I think they are playing possum.
The kind of audience that CNET has tends to be highly targeted towards management, tech types and online gamers. This is the kind of distinct audience you want to have if you own web properties.
CNET has a market cap under $2 billion. If the online ad market and software download business grows has it has the last year, I could see CNET doing $425 million to $450 million. I would also not rule out more acquisitions which allow them to take over related business, keep revenue and cut overhead costs.
With the stock just above $13, it has a lot of room to surprise on the upside.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited site in the world, according to MediaMetrix. He has also been chief executive of On2 Technologies, Inc. He holds no position in the securities of this company.