Slide valued at $500M+, half a billion dollars

slide

From Today’s NYTimes:

Slide, the maker of applications for social networks, has raised another round of funding - $50 million from the private equity funds at Fidelity and T-Rowe Price, two major Wall Street investment houses. The firms have taken a 9 percent stake in the three-year-old, 64-employee Slide, valuing it at $550 million.

Most interestingly, the investors are Fidelity and T. Rowe Price.

I guess one could argue that Slide is not a widget company but an ad network.

Here is what Max Levchin said in his interview a few months ago:

Think of Slide as a giant media network for people to transmit information. The content that’s in there now has been provided by users — it’s whatever they want it to be.

But my issue with that argument is that the slide is not hosted voluntarily by MySpace and FaceBook - users put it there. It is unlikely that MySpace will let Slide monetize their presence on their pages and Facebook looks kind of dicey too. The point is that Slide is not in control of their visitor count - they rely on other networks to get the audience.

How much is a Facebook application worth? Face book is valued at $15B which equates to $250 per user. There are some, who argue that an application on Facebook is worth $250 times the number of users. That is just wrong!

Facebook applications are like little antenna balls for the car. Don’t tell me that the goofy antenna ball is worth as much as the car. Some have argued that each install of an application is worth $3 to $0.30 for each install, which is high but at least in the ball park. Again, the number is per install, not per application view.

Slide is not saying that they have 150M registered users or 150M installs - just 150M visitors. They might have 25M to 35M install base. With $550M valuation, they are valuing it at $20 per install. Also, the widgets have a short lifespan; they come and go, so active install base might be smaller.

And then there is the Facebook "tax" (rev-share that Facebook will demand), which further reduces the value.

Some may argue that the basic fallacy in this valuation calculation is that you are looking at current numbers - extrapolate to 2011 and then calculate the valuation. Its the growth potential that demands a much higher premium. I don’t fully agree with it but the argument has a certain conceptual merit. One should calculate these numbers by examining the forward flow and not the current numbers. Not sure if I can stretch my imagination to 2011, but if Fidelity with deep pockets can see farther than I can, more power to them.

This sort of reminds me of the BlueMountain network, it was valued at $780M when @Home acquired Excite for $6.7B (at $400 per user) during the period of last exuberance.

But I am glad that deals are happening, and the developers are creating more applications. And if widgets are being valued highly in the marketplace, I am giddy, incredulous but giddy nonetheless.


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