Blogonomics: The Valuation of TechCrunch

Sam Gustin slaps down Henry Blodget today after Blodget suggested that TechCrunch might be worth $100 million. That's ridiculous, says Gustin: "I know CNET, and TechCrunch is no CNET."

The whole conversation was sparked by Doug McIntyre at 24/7 Wall St. The math is relatively simple: CNet is valued at $1.2 billion; maybe TechCrunch is worth a twelfth of that?

Certainly, by blog standards, TechCrunch's traffic numbers are impressive: at least 1.5 million unique visitors per month, over 4 million pageviews per month, along with some 575,000 RSS and email subscribers. More to the point, if you want to reach the most influential individuals in the technology community, those subscribers and uniques are exactly the people you're looking for.

TechCrunch seems to be doing pretty well in terms of selling ad inventory, but I'm sure it could do much better with a large and dedicated corporate ad-sales team dedicated to it. Meanwhile, CNet seems to be going absolutely nowhere, and needs a shot in the arm.

But CNet's numbers – it measures monthly pageviews in the billions, not millions – dwarf TechCrunch's. There's a good chance that a CNetted TechCrunch would go the way of a Googled Dodgeball: lost and forgotten as part of a much larger company. Frankly, I doubt that CNet has the structure or ability to get anything like $100 million of strategic value out of TechCrunch. And in any case, CNet is a consumer site: there aren't actually all that many synergies with TechCrunch in the first place, either on the reader side or on the advertiser side.

TechCrunch is a bit like Italian Vogue: hugely important and influential, but not necessarily the kind of property where you want to see much more growth. TechCrunch already reaches nearly everybody who matters, and the marginal extra unique visitor is not going to be particularly valuable to advertisers, compared with the readers who have been reading TechCrunch for ages.

But let's generously say that TechCrunch can achieve 100 million pageviews per year, from important and influential readers. And let's say that on each of those pages CNet would be able to sell on average four ad units at a $7 CPM. That would mean revenue of just under $3 million a year. By the time you've paid the writers and the salespeople and all the other expenses associated with the site, there's no way you can get a revenue stream which remotely justifies a $100 million valuation.

So I'm with Sam on this one. Blogs can be very valuable, and a blog network like Gawker Media, which got 162 million pageviews in August, would be worth a very large amount of money if there were anybody rich and foolhardy enough to want to buy it. But the idea that a single blog, even one of TechCrunch's standing, might be worth $100 million? That's pushing it.

Update: Doug McIntyre defends the $100 million valuation, saying that "Most analysis of the value of TechCrunch is based on what a financial model says it is worth. But, that is not an accurate way to make the evaluation. The real question is what someone would pay." Basically, he's saying that TechCrunch is a strategic asset, rather than a financial asset. But my point is that, really, it isn't, or at least that it isn't qua blog. It might however have much more value as a conference company than as a blog.