The wake of Microsoft’s terminated courtship of Yahoo and Jerry “Oh, did you increase your offer?” Yang, there’s sure to be tons of scrutiny about what’s next for Yahoo.
Flickr, the world’s hottest photo-sharing website that Yahoo selected for a song (estimated $40-million) in 2005, is one asset that’s documented but might not have reviewed from an investment perspective. Today, Flickr attracts quite 44 million unique visitors a month, consistent with Comscore, while Compete.com reports Flickr had 30 million unique visitors and 70.2 million page views within the U.S. last month.
Despite Flickr’s popularity, it’s 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 like photo cards, posters, frames, and calendars.
So, what’s Flickr worth, and, more importantly, what could it’s worth if it had been managed more aggressively?
Let’s do some back of the envelope calculations supporting 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 consider Henry Blodget’s 25X revenue formula, Flickr’s worth is $1.5-billion to $3-billion.
Scenario II: Flickr Monetized Better
With online advertising gaining so much traction, Flickr would be a really attractive target given its traffic and user demographics. For instance, we will consider, Flickr has changed business tactics and establish two high-profile advertising slots throughout the service. I select two because it might be significant without pissing off most of Flickr users, who regard Flickr as their personal estate and are immune to change of any kind.
If Flickr could get $5/CPM, that might generate $10-million in advertising/year supported the idea it’s getting about 100 million global pageviews/month. It’s not tons of revenue given the conservative approach to what proportion advertising Flickr would present and the way much it might charge but, nevertheless, it might give Flickr a further $250-million supported Blodget’s formula.
Then, you’re watching a corporation worth $1.75-billion to $3.25-billion. Add on a takeover or IPO premium of perhaps 25%, and you’re watching a valuation of $2.2-billion to $4-billion.