web 2.0 expo: show me the money (by jeremy liew)

8/15/2019 Web 2.0 Expo: Show Me The Money (by Jeremy Liew)

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Its cheaper than ever to start an internet company

COST TO BUILD WEBSITE

200

7060

48

20

Wesabe Maya's Mom Mobissimo DropSend Freshbooks

$ 000s

Source: Carsonified.com/SXSW Presentation


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and cheaper than ever to run an internet company

Rent, Legal, etc$0.2mOther Costs

$1.4mTOTAL

$15k/month$0.2mInfrastructure Costs

8 employees$120k fully loaded

$1.0mStaff Costs

AssumptionsAnnual Fixed Costs

SAMPLE EXPENSE BUDGET


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As a result, getting to breakeven isnt too hard

0%-0%-EBITDA

3%2007%200Other Costs

3%2007%200

Infrastructure

Costs

14%1,00036%1,000Staff Costs

10%7000%-Marketing

70%4,90050%*1,400Cost of Goods

100%7,000100%2,800Revenue

%$ '000s%$ '000s

E-CommerceMedia

* Assumes ad sales by an ad network or ad rep firm


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but you still need to be big to be public

1.5x3.8x

12.2x

Low Median High

$333M

$131M

$41M

High Median Low

$833M

$277M$87M

High Median Low

MEDIA

E-COMMERCE

PUBLIC COMPANY 07 REV MULTIPLES REVENUE NEEDED FOR $500M EV

0.6x1.8x

5.7x

Low Median High

* Assumed minimum public company scale to sustain meaningful trading volume and analyst coverage

Source: Goldman Sachs Research, March 25, 2007, Lightspeed Analysis


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Significant variation in revenue targeted for internetcompanies to breakeven versus to be public

$277M$7.0M

$131M$2.8MMEDIA

E-COMMERCE

BREAKEVEN PUBLIC, $500M EV*

* Based on median multiples


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Media Companies


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Advertising RPMs* depend on your ability to deliver atargeted audience

Advertisng RPMs

Endemic

Advertising

Demographic

Broad Reach

600M

126B

524B

Annual

US PVs

$41.6750M$25M**Fandango

$1.0312B$150M**Facebook

$0.5244B$271MMyspace

RPM

March

US PVs2007RevenueExample

$10-40

$1-5

$0.50 - 2

** Facebook revenue estimate well over $100m, Fandango revenue estimated to be around $50m with half fromadvertising and half from ticketing

Source: Myspace, Merrill Lynch; Facebook, MSNBC; Fandango, Techcrunch; Traffic, Comscore; Lightspeed Analysis

* RPM = Revenue per thousand pageviews, taking into account multiple ad units and all forms of advertising: CPM, CPC and lead g


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To reach breakeven, US traffic requirements canbecome quite meaningful, depending on RPMs

$20

$5

$1

Endemic

Demo

Broad

12M

47M

233M

RPMPV/Mth to reach$2.8M in revenue

Sites with comparablUS Traffic

eHarmony 239MReal 237MWhitepages 230M

Tagged 229M

NFL.com 49MNextag 48MWashton Post 47MHeavy 45M

Technorati 12MWinAmp 12MUFC.com 12MDigg 11M

Source: Comscore, Lightspeed Analysis

Notnecessarily

Notnecessarily


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1

US traffic requirements are even higher to reach publiccompany levels

$20

$5

$1

Endemic

Demo

Broad

546M

2183M

10,917

M

RPMPV/Mth to reach$131M in revenue

MSN 13,672MGoogle 12,476MFacebook 12,179M

AOL 10,609M

Live.com 2,819MYoutube 2,539MGo.com 1,559MPogo 1,544M

MSNBC 592MExpedia 522MPaypal 495MWeather.com 488M

Source: Comscore, Lightspeed Analysis

Sites with comparableUS Traffic

Notnecessarily

Notnecessarily


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E-Commerce Companies


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1

Many e-commerce niches are large enough to support$7M in revenue, our illustrative breakeven level

Allheart.com nursing apparel

Figleaves.com lingerie

Hats.com hats

Ridegear.com motorcycle gear

Source: Internet Retailer Top 500 Guide, 2006 Edition


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1

There are three ways to get to over $271M in e-commerce revenues, public company type levels

One online store with >$271M in revenue

5-10 online stores, each with $25-50M in revenue

100+ online stores, each with up to $3M in average revenue


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1

Relatively few pure play e-commerce companies haveachieved over $271M in annual sales so far

$8,490M

$1,300M

$804M$688M

$399M

$345M

Below $271M in2005 butprojected over$271M in 2007

Amazon

Newegg

OverstockNetflix

Drugstore

Buy.com

Bluenile

Peapod

VistaPrint

2005 RevenueCompanyAmazon.com

Newegg.com

Source: Internet Retailer Top 500 Guide, 2006 Edition, Goldman Sachs


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1

In 2005, there were at least 227 companies with e-commercerevenues over $25M, but none with multiple websites in thisrange

Supplements

PC hardware

Auto partsShoes

Kitchen goods

Plumbing and

LightingBlinds

Womens clothing

Beauty Products

Products

$46M

$45M

$45M$44M

$40M

$39M

$38M

$34M

$32M

Bodybuilding.com

Computer Geeks

Parts TrainShoemall

Cooking.com

Decorative Product

SourceBlinds.com

Shopbop

Gloss.com

2005 RevenueCompany

Source: Internet Retailer Top 500 Guide, 2006 Edition


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1

A number of companies have taken a portfolioapproach, building large numbers of stores

bicycletrailers.com, highchairs.com,sparebed.com, suuntowatches.com,tric clekids.com

Niche Retail

Aquariumsdirect.com, croquet.com,daybeds.com, hammocks.com, justglobes.com,potracksgalore.com

Netshops

Pilates-exercise-direct.com,Rowingmachines.com, sofabed-store.com, tennis-ball-machine-guide.com

Mercantila

homeclick.com, absolutehome.com,barbeques.com, knobsandthings.com,poolclick.com

Home DcorProducts

adirondack-furniture-direct.com, allairbeds.com,bedrooms.com, csnbunkbeds.com, everysafe.com

CSN Stores

Sample Websites (not exhaustive)Company

Source: Internet Retailer Top 500 Guide, 2006 Edition, Company websites


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1

Conclusion

Easier than ever to start a consumer internet company

Not too hard to get to cash flow breakeven

For long term value creation, plan A cant be get bought

by Google Need to have a roadmap to be an independent public

company

Requires real scale

Revenue sometimes lags costs when you are growing May need venture capital to bridge the gap

web 2.0 expo: show me the money (by jeremy liew)

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