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:

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.