3 ms·

I'm genuinely confused about valuations. Craigslist is making $80 million in revenues, and of course less in profits. Say someone buys the company/organization

I'm genuinely confused about valuations. Craigslist is making $80 million in revenues, and of course less in profits. Say someone buys the company/organization for $5 billion. Won't it take a good many years to recover the price paid via the site's profits? In general, when companies acquire other companies, they should want to make back their purchase cost quickly and hopefully make a lot more in the near future right? Even if the acquirer thinks they can hack the business model, add more advertisements, or charge for more things, isn't it a huge gamble to pay so much over the current profits? I'm missing something but don't know what.

halo 19y ago
The current $80m in revenue is an extremely misleading figure to base a valuation upon. Craigslist exploit the absolute minimum of their assets and any company taking control could make considerably more with little additional expense without even considering the potential of international expansion or using its ability to expand other brands or services. While I think the article is more than a hyperbolic with its projected revenues and valuation, I certainly think a valuation of a few billion would be fair, especially when you consider Skype was bought for €1.9b, YouTube was bought for $1.65b and Bebo was bought for $850m.