Ages ago, I wrote “What is Plaxo’s Revenue Potential” - as usual, it was a long analysis breaking down the potential revenue Plaxo could generate. The number was staggering, but hypothetical.
According to my math, based on some of Plaxo’s internal numbers, the “king of spam” could generate $162M per year:
Bear in mind it is reported that Facebook does $150M. So for the record, I don’t think Plaxo makes anywhere near this amount, I just think with the right sales strategy they can… In fact, according to Tech Crunch, Plaxo’s revenues are far smaller:
Plaxo reportedly did around $5 million in 2006 revenue, doubling that to $10-$12 million in 2007. 2008 projections are $20-$25 million.
If they did anything near my numbers, its history would not be so bloody and tumultuous. But, despite what some of the haters are saying, demand for digital assets are greater than ever. In other words, it’s not unbelievable to think that someone would eventually buy Plaxo (or LinkedIn, etc.), but who?
Venture Beat is now reporting that Facebook is mulling (their words are “100% certain”) a bid for Plaxo.
While I doubt it, it is certainly plausible, too.
NO DEAL?
Venture Beat itself notes that Facebook’s backers (Sean Parker, Peter Thiel) dislike Plaxo’s main investors (Sequoia’s Mike Moritz). In a nutshell: Moritz kicked out Parker from Plaxo, and he encouraged Thiel to merge his Confinity.com with X.com to form Paypal. Yes, the result was a smashing success, but at a dilution cost that Thiel regrets, according to Valleywag.
But rumor-mongering aside, and more importantly, the deal does not make sense because Plaxo is looking to fetch upwards of $100M, maybe $200M. The problem is Facebook has raised $340M to date… in a cash deal, would Facebook really part with 33-66% of that on Plaxo?
No. But what about a stock deal? Facebook got a valuation of $15B in its latest funding, in a stock deal, would Plaxo really be happy with 0.6% to 1.3% of Facebook ($100M or $200 divided by $15B)?
No.
Moreover, the main reason why Plaxo would not really be a fit is because Facebook and Plaxo have a lot of mindshare in the Valley. But Facebook has more mindshare than anyone else… so if Facebook makes a move in an M&A, it would be for a more mainstream play… why double down on Silicon Valley fanboys?
DEAL?
Of course, this isn’t about 0.6% or 1.3%, for Plaxo’s management team probably has no say in the matter and the founding team is all but gone.
In other words, “size does not matter” as this is perhaps the only way Mike Moritz and Sequoia would get to ride the Facebook express. Moritz has backed Yahoo!, Google and YouTube, adding Facebook to the list of companies he’s backed - even if in a post-dated manner - would be a crowning achievement, for sure.
And call me crazy, but I think Peter Thiel and Sean Parker might be all for this deal. Nothing spells revenge like their holdings towering over Moritz’ in Silicon Valley’s most sought after privately held company.
But more importantly, email is the killer app in social networking, and since:
- Plaxo is all about email and contact list management,
- managed to sync emails from various platforms,
Then conceptually they are one step ahead of the “how can we mesh numerous social networks” problem. In this context, I think Facebook fears that Plaxo would fall in the hands of Google or Yahoo! - so when the dust settles, this might be more of a marriage of convenience than an actual case of love at first sight.
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WatchMojo NewsletterA number of seemingly random and independent tidbits of news today, that I think are all rather related.
Storyline #1: Zagat On the Auction Block
Zagat has hired Goldman Sachs in an effort to sell the popular restaurant guide. The company has become synonymous with dining out with travelers, but the Zagat family has had relatively little success migrating that to other verticals (hotels, for example) and mainly, digital.
Just a few years ago, in 2000, the Zagats sold 33% of their company in a deal that valued their company at $100M.
Eight years later, have they doubled the value? That is the question. No doubt, Zagat will find a buyer. At what price, I don’t know. Surely Goldman Sachs will line up buyers and the Zagat brand will bring out buyers.
But, this raises a good question: the landscape for Zagat is considerably different than it was seven years ago. I’m not suggesting the company is in any trouble… but its inability to bolster its digital and interactive operations has probably made it lose a lot of time and enabled competitors to creep up from the woodwork.
Between 2000 and 2008 is only 8 years, but a lot happens in 8 years.
Storyline #2: Wikipedia Turns 7
I just got an email informing me that Wikipedia today turns 7.
In less than a decade, Jimbo Wales and Larry Sanger had the vision and execution to turn their idea into what I would call the single greatest accomplishment thus far on the world wide web. Quite a feat, indeed. I put Wikipedia amongst one of of the 13 most explosive startups ever.
Storyline #3: Prof to Students: Lay off Google, Wikipedia
Wikipedia - and what it represents - has become such a force that professors are actually warning students of its influential and excessive reliance and use.
Storyline #4: Encarta Took Wrong Path
The key with storyline #3 is not Wikipedia (and Google) itself, but what they represent. Google brings the entire world to your fingertips, and Wikipedia has an article seemingly on everything imaginable.
But notice the professor did not warn about online encyclopedia or search engines, but rather, specifically Wikipedia and Google.
Time is money… and in 7 years, Wikipedia has become the de facto encyclopedia to millions of people. Wikipedia, it’s worth noting, in many ways has totally surpassed its DVD Encyclopedia competitor Encarta (66,000 articles). Encarta belongs to MSFT and sells for $45. It’s worth noting that despite Encarta’s success, for Microsoft to make it a paid product is odd because MSFT generates nearly $60B a year in total revenues and is desperately trying to become more and more relevant online. Call me crazy here, but would making Encarta not fully free not help MSFT more than charging $45 a pop?
Just asking.
But, I am not writing this to pick on Encarta, MSFT, Wikipedia or Zagat… I want to connect some dots. Wikipedia’s offline competitor is Britannica, of course. Britannica totally missed the boat by not focusing either on digital (DVD) formats or interactive (Web-based) medium.
Storyline #5: The Britannica Totally Missed the Boat
The Britannica is the oldest English-language encyclopaedia still in print. It was first published between 1768. That is 340 years old, so slightly older than Wikipedia. To my younger brother’s generation, The Britannica means little (I grew up reading World Book Encyclopedia).
Connecting the dots (humor me), I see Zagat a bit like The Britannica: a wonderful brand that previous generations love and respect, but desperately searching for an identity in the 21st century. Will Zagat find a new home? Sure thing. I’d love to be able to buy it myself and position it online… but at $200M? I’d rather start a new business… less baggage to carry over to the Web, just ask The Britannica.
Conclusions
#1 - Memo to MSFT: you might want to make Encarta free, by the way.
# 2 - Interestingly, in that earlier financing round that valued Zagat at $100M, Allen & Co. investment banker Nancy Peretsman was an investor… so I am surprised to see Zagat go with Goldman and not Allen & Co., who is probably the top M&A bank by cachet and prestige… but what do I know.
# 3 - And if you really like M&A, check out our Top Web M&A Deals of All Time and Our Biggest Mergers and Acquisitions, Ever.
Here’s the press release on Wikipedia, by the way, and more on Wikipedia’s birthday:
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Wikipedia celebrates its seventh birthday
San Francisco, CA - January 15 - Wikipedia, the free online encyclopedia anyone can edit, celebrates its seventh birthday today. Founded on January 15, 2001, Wikipedia has become of the world’s ten most visited websites, and the fastest growing, most current, and largest encyclopedia ever created. Currently, the website has nine million articles in over two hundred and fifty languages. It is collaboratively written by volunteers from around the world.
“In a relatively short time, Wikipedia has become one of the world’s most successful collaboratively written websites. We have struck a chord with tens of thousands of volunteers worldwide, all of whom share our dream of empowering citizens worldwide to share in the sum of all human knowledge. Now with a strong international volunteer base, we would like to focus more energy on improving the quality of Wikipedia and its sister projects. The next five years are going to bring many never-seen-before web based initiatives geared towards this goal,” stated Florence Devouard, Chair of the Wikimedia Foundation Board of Trustees.
The Wikipedia experiment has repeatedly been acclaimed as a resounding success. Most recently a 2007 study from the Hewlett Packard Information Dynamics Laboratory found that Wikipedia’s best quality articles are those that have been edited often and by many different people. The report also validated Wikipedia as a “successful collaborative effort”.
Wikipedia and its sister projects have become a virtual library that spans all languages and continents, attracts millions of visitors, and collects information from all corners of the world. The Wikimedia Foundation, the non-profit behind the project, has begun developing programs and tools that will extend learning and knowledge gathering in the developing world and disadvantaged communities. In Fall 2007 the Foundation held several Wikipedia Academies in South Africa, with the goal of increasing the number of Wikipedias in African languages.
The Wikimedia Foundation has chapters throughout the world, responsible for promoting the projects locally. Currently, chapters are present in Argentina, France, Israel, Germany, Italy, The Netherlands, Poland, Sweden, Switzerland, Taiwan, and the United Kingdom.
The content on Wikipedia and its sister projects are under a free license. Content can be modified rapidly and repeatedly, and individuals can build on the material submitted by other editors. As a result, this ensures that the content will never be lost to humankind, and that information remains free and accessible to all.
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About Wikipedia
The goal of the Wikipedia project is to create free encyclopedias in all languages of the world. Anyone with Internet access is free to contribute by writing new articles and editing existing articles.
Wikipedia started in January 2001, and currently offers more than eight million articles in 250 languages. The largest Wikipedia is in English, with more than two million articles; it’s followed by the German and French editions, each of which contain more than half a million articles. Nine other language editions contain 100,000+ articles, and more than 100 other languages contain 1,000+ articles. Every month, new language editions launch.
Wikipedia is entirely created and maintained by a community of active volunteers. In 2004, Wikipedia won the Webby Award for “Community” and the Prix Ars Electronica’s Golden Nica for “Digital Communities.” Since the start of the project, more than 100,000 registered users have made at least ten edits each, and more than 3.4 million people have created accounts on the English Wikipedia alone.
About the Wikimedia Foundation
The Wikimedia Foundation Inc. is a nonprofit charitable organization dedicated to encouraging the growth, development and distribution of free, multilingual content, and to providing the full content of these wiki-based projects to the public free of charge. It operates some of the largest collaboratively-edited reference projects in the world, including Wikipedia, one of the world’s 10 most-visited websites. The Foundation was created in 2003 by Jimmy Wales, the founder of Wikipedia.
Today, the Wikimedia Foundation operates the following projects:
Wikipedia, a project to build free encyclopedias in all languages of the world. Wiktionary, a project to create free content dictionaries and thesauri in every language. Wikiquote, a repository of quotations taken from famous people, books, speeches, films or any intellectually interesting materials. Wikibooks, which aims to build a collection of free e-book resources, including textbooks, language courses, manuals, and annotated public domain books. Wikisource, a collection of classic books, laws, and other free works. Wikispecies , a central, extensive species database for taxonomy. Wikinews, with the mission to report the news on a wide variety of subjects. Wikiversity, a project dedicated to learning materials and learning communities. Wikimedia Commons, a central repository for free video, images, music, spoken texts, and other free media that can be easily reused by all Wikimedia projects.
All projects of the Wikimedia Foundation are collaboratively developed by volunteers using the MediaWiki software. All contributions are licensed under the GNU Free Documentation License (except in Wikinews, which is licensed under Creative Commons Attribution 2.5). This means their content may be freely used, freely edited, freely copied and freely redistributed subject to the restrictions of that license.
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There you have it, the world really is round, cause everything comes full circle.
PLAY
