In the wake of Microsoft’s aborted courtship of Yahoo and Jerry “Oh, did you increase your offer?” Yang, there’s bound to be a lot of scrutiny about what’s next for Yahoo.
One asset that’s well known but perhaps not scrutinized from an investment perspective is Flickr, the world’s most popular photo-sharing site that Yahoo picked up for a song (estimated $40-million) in 2005. Today, Flickr attracts more than 44 million unique visitors a month, according to Comscore, while Compete.com reports Flickr had 30 million unique visitors and 70.2 million page views in the U.S. last month.
Despite Flickr’s popularity, it is arguably under-monetized. In terms of advertising, it’s minimal at best. Instead, Flickr makes most of its money by selling Flickr Pro memberships for $24.95/year and offers e-commerce services through partners such as photocards, posters, frames and calendars.
So, what’s Flickr worth, and, more important, what could it be worth if it was managed more aggressively?
Let’s do some back of the envelope calculations based on its current financial model. If you assume 10% of its 44 million unique visitors have Flickr Pro accounts, that’s about $110-million in revenue; if it’s only 5%, it’s $55-million. Then, add another $10-million in e-commerce commissions.
What you get is revenue of $65-million to $120-million. If we now take Henry Blodget’s 25X revenue formula (which he applied to Facebook), Flickr is worth $1.5-billion to $3-billion.
Scenario II: Flickr Monetized Better
With online advertising gaining so much traction, Flickr would be a very attractive target given its traffic and user demographics. For the sake of argument, let’s assume Flickr changed business tactics and introduced two high-profile advertising slots throughout the service. I choose two because it would be significant without pissing off most of Flickr users, who regard Flickr as their personal property and are resistant to change of any kind.
If Flickr could get $5/CPM, that would generate $10-million in advertising/year based on the assumption it’s getting about 100 million global pageviews/month. It’s not a lot of revenue given the conservative approach to how much advertising Flickr would present and how much it would charge but, nevertheless, it would give Flickr an additional $250-million based on Blodget’s formula.
Then, you’re looking at a company worth $1.75-billion to $3.25-billion. Add on a takeover or IPO premium of perhaps 25%, and you’re looking at a valuation of $2.2-billion to $4-billion.
More: For a story on Flickr’s growth and success, check out this story in USA Today. Here’s Blodget’s list of the 25 most-valuable privately-owned startups. As well, Mashable’s Adam Ostrow calling MySpace “the biggest steal in Internet history”
The graph below looks at the number of unique visitors last month for Facebook, Flickr and Photobucket, which was acquired by News Corp. last year for $300-million.