In the period from April 2009 to June 2009, ad-supported consumer digital media companies managed to squeak out a increase in valuation. As a perennial optimist, I will say that it is time to start breaking out the champagne. This is the time when the storm has passed, the damage is being assessed and the rebuilding begins. I would also state that recent lay-offs at MySpace and maybe one or two other digital media companies are the final aftershocks that, in my opinion, have less to do with the economy than factors specifically related to those media companies.
As seen in the chart below, average valuation multiples of ad supported digital media companies increased from 2.5x Revenue in April 2009 to 2.7x Revenue in June 2009 and EBITDA multiples increase from 10.9x EBITDA in April 2009 to 12.3x in June 2009. While this is not significant growth, it does signify a bottom and that valuations are heading in the right direction – up! To use a jogging analogy, I would compare this to turning the corner and heading back home. (For some reason it’s always easier to head back than it is going out.) This also indicates that sanity has returned back to the market with people holding onto their shares while new buyers enter the market at the institutional level. Institutional money managers with new capital coming in from pension funds have to put the money somewhere and they are finding equities cheap or oversold.
Is it time to break out the champagne? The answer is an emphatic “Yes!” But don’t buy too expensive a bottle because the slope of the valuation trajectory is fairly low!
June 2009 Ad Supported and Search Comps
Tags: digital media, Economy, New Media, Valuation
