dcsimg
RealTime IT News

The $50 Popcorn Point? WEBDEX Shows Values Per User Holding

When we created WEBDEX, the Web User Value Index, at the first of the year it showed Wall Street valuing Web site users at about $115 per pair of eyeballs. The hot-off-the-modem latest reveals the most popular sites now hold an average user value of $58, up 5% from a week ago.

The interesting twist is that while value per user has been cut in half on average, the market capitalization of the public firms shown is actually up more than 50% since January.

We speculate that the transitory nature of a "user" who may hit on a Web site for stock quotes or e-mail and then launch off that site into the vast galaxy out there has everything to do with the softening value per user dollar. However, given the "$50ish" price point for these visitors in the past few analyses we've done here, there seems to be a "stickiness" at about $50 for now.

Our latest number crunching:

WEBDEX

WEBDEX February March 11 March 18   March 11 March 18  
© 1998 Mecklermedia Unique Market cap Market cap Percent Value Value Percent
  Users or est. PMV * or est. PMV * change Per Per change
Web Property (millions) (millions) (millions)   User User  
Yahoo 31.3 $ 3,631 $ 3,719 2% $ 116.01 $ 118.82 2%
Netscape.com* 23.1 $ 650 $ 675 4% $ 28.14 $ 29.22 4%
Microsoft.com* 17.9 $ 1,100 $ 1,100 0% $ 61.45 $ 61.45 0%
Excite 16.5 $ 814 $ 810 -1% $ 49.35 $ 49.08 -1%
Infoseek 13.7 $ 504 $ 575 14% $ 36.76 $ 41.99 14%
AOL.com* 14.1 $ 1,100 $ 1,200 9% $ 78.01 $ 85.11 9%
GeoCities* 12.5 $ 250 $ 275 10% $ 20.00 $ 22.00 10%
MSN.com 8.3 $ 550 $ 575 5% $ 66.27 $ 69.28 5%
Lycos 10.2 $ 603 $ 639 6% $ 59.11 $ 62.61 6%
AltaVista* 7.6 $ 250 $ 275 10% $ 32.89 $ 36.18 10%
TOTAL $ 155 $ 9,452 $ 9,843 4% $ 548 $ 576 5%
AVERAGE $ 16 $ 945 $ 984 4% $ 55 $ 58 5%
Users: ReleVant Knowledge; Primary shares MarCap; *PMV=estimated private market value; WEBDEX is a creation of Mecklermedia

Deep in some embedded value metric that we must have inherited from Ben Graham, the legendary value investor, we suspect that users are probably worth about $25. Merchandise-buying users--we'd dub these "customers"--are worth far more.

How much more? How much have they spent? A CD buyer may spend $20 on the CDnow (NASDAQ:CDNW) music e-tail service.

We'd say that "customer" may be fairly valued at $200 on a average 10x revenue multiple (10x this particular customer's outlay for that month). If he or she buys $500 worth in a year then perhaps that customer's "intrinsic" value to investors ought to be $5,000 a year or $417 per month.

On the other hand, the nomad milking free services from the search services Yahoo!, Excite (NASDAQ:XCIT), Lycos (NASDAQ:LCOS), and Infoseek (NASDAQ:SEEK) may be fairly valued as a drag on the balance sheet, the equivalent of someone walking into a movie theater and watching the actual movie for free--as long as they watch the popcorn ads also.