[useflyer]

There are a two major faults with the author's analysis which lead me to believe this post should not be relied on.

1. Advertising rates are far below the author's $10-20 CPM estimate for dashboard advertising; $10-20 is for legitimately premium advertising such as high-end audiences, wrapping a website, etc. Dashboard / banner ads will fetch $0.5-3 CPM the way Tumblr is running them.

2. The "valuation" formula of 10x trailing ("or"?) forward revenue is misplaced. Revenue multiples in acquisitions are often reserved for companies which are mature and predictable, not in early stages of their revenue plan. Corporate acquirers will often times use the expectations of the revenue created for the acquirer, which has little to do with the target in the status quo. Yahoo's expectations of revenue creation could be anything, and they have their own internal formula which we can't glimpse.

[pkmehta]

Exactly. What makes it worse is that Tumblr has lots of soft core porn and other unsavory content which brand advertisers don't want to touch with a 10 foot pole.

Plus, the P/S of 10x looks pulled out of ye' olde arse. Google's trailing P/S is 5.6x and Yahoo's is similar. AOL is 1.31x. What media company that might be a "comp" trades for 10x.

[dmor]

HuffPo, and I said it was steep not what people should expect to get.

Huffington Post, a media company, was purchased by AOL for $315M @ $30M rev. That's 10x. Stop trolling.

[neya]

Not a very professional way to respond, Danielle. Especially being the author of the article in question. Stop accusing people as trolls just because you disagree with them.

[pkmehta]

You could goto Bloomberg.com or Yahoo Finance and get real P/S ratios but you used the uncontested paragon of financial data - HuffPo.

And you said it's high but still used it in your headline cuz you thought would have a higher chance of getting to the top of HN.

I guess pursuit of provocative > properly researched.

[pg]

Will you both please stop?

[ryanmerket]

Did the flame war algo catch this one? If so, well done.

[jcampbell1]

> 1. Advertising rates are far below the author's $10-20 CPM

I agree with your analysis, but don't confuse CPM with RPM. Publishers can run 1-20 ad units, so the price you pay as an advertiser (CPM) can be an order of magnitude different from what the publisher receives (RPM).

At any rate, I can't fault the author too much. It is an extremely well researched piece that I am glad I read. It would have been slightly better if he started with the $15M revenue run rate, and then backed into the business model.

[stanleydrew]

Danielle Morrill is a she not a he.

[aresant]

That CPM struck me as crazy high too and tumblr content is much closer to "social" than it is to premium media which would put the CPM a lot closer to $0.50 - 1.00 at scale.

Recent break out of CPM by country for FB :

http://www.rudibedy.com/blog/facebook-advertising-cpc-cpm-pe...

[dmor]

I should probably point out I am talking about Revenue per Impression, what the publisher earns. The advertiser may pay $.50 - $1 CPM to be shown on the impression, but it is possible for the publisher to show multiple ad units on the same impression. This analysis touches on the actual value of the dashboard today, but is ultimately focused on the expected value and potential revenue opportunity long term.

I thought I had caveated/explained that in the post but I can clarify it there too.

[aresant]

Fair point but 3 - 5x ad units @ $0.50 - 1 still don't add up to $10 - 20 . . .