The interesting thing with these "freemium" companies is that there's generally a long conversion time. For many, it will take a year or more before free users

The interesting thing with these "freemium" companies is that there's generally a long conversion time. For many, it will take a year or more before free users covert. Each is a bit different, but last time I saw, Evernote fit that profile. So a good way of projecting future performance here is looking at how many free users they have, and what the conversion rate has been in the past (as well as average time to convert). If they've recently picked up a lot of new free users, we should expect a significant bump in paid accounts in about a year (or whatever their average time to convert is). The freemium businesses just have a significantly different business model, and looking at the current paid accounts is often a poor indicator of future profitability. I don't know that their valuation is justified (personally, I think most valuations are high right now), but the fact that they're only "barely" profitable now probably isn't a good indicator of future profitability.