10 Comments »Rock You CEO Lance Tokuda has told the New York Times that in regards to his SuperWall application, “If you told me you were going to write me a check for $10 million, I’d say, ‘Forget it.’” If you valued applications based on adonomics, who values the application at close to $12 million, that may not sound like a bad idea. Unfortunately though, the risk exposure for SuperWall is insanely high. For an application which is not extremely complicated, this valuation might seem a little ridiculous.
Can we say “Facebook Bubble?” Facebook has slowly added some of the features of the SuperWall application and there is nothing stopping them from adding more. On the other hand, Facebook will have a few big enemies if they decide to screw over some of the most valuable application developers. Facebook has already integrated a few features that other applications have delivered but none of the changes have eliminated large applications yet.
Facebook may be forced into a position where they acquire applications or face a serious PR disaster. Right now, the SuperWall application could be generating millions of dollars annually but risk exposure is the primary factor that would reduce future projected cash flows (something that Henry Blodget likes to use when valuing companies).
If I was Lance, I’d sell the app for that price. Good luck finding an investor who will give you that much money though for this application. Would you sell the app?
Nick,
I think you are missing a key point.
Valuation is what a willing buyer and willing seller agree to.
You and I can talk for hours about how silly someone is to pay $57 million for a painting of Irises but that is the valuation because a sale occurred.
In like manner, you may think that Lance is stupid, crazy, naive or arrogant for not selling his app for $10 million but the fact that he is not a willing seller at that price means that the app's valuation is higher. I don't know if we have it right at Adonomics ($11,950,400), but I'm pleased that we didn't value it lower than a price to which he has already said “NO” to in a very public forum.
As I've been writing for some time at http://blog.adonomics.com, developers should not make the mistake of selling their app too early. Lance is smart enough to realize that he is sitting on a gold mine and he shouldn't sell it based on what he is making right now from putting billboards up on his real estate. The real value comes when someone wants to start mining the gold that is represented in 10 million connected users.
Any interactive app that builds enough connected users to represent a sizeable portion of facebook's social graph is going to be worth a lot. In the Adonomics Valuation we provide a premium for these types of apps. The reason is that if facebook's snapshot of the world's social graph (with 43 million users) is worth $10 billion, it just stands to reason that a single app (with 10 million users — 1/4 of all of facebook) is going to be worth alot — not 1/4th of $10 billion but certainly more than $10 million.
I hope that helps. The acid test of Adonomics' valautions will be when more apps start selling. Feel free to contact LeeL@altura.com if you are interested in selling your facebook app at a price that is at or near the Adonomics Valuation.
Thanks,
Lee Lorenzen
CEO, Altura Ventures — the first facebook-only VC
831-595-7501
Lee,
Stop copying and pasting! Nick is right, because Facebook can develop it's own versions of apps, who in their right mind would buy something that could be essentially worthless overnight?
Nick,
I think you are missing a key point.
Valuation is what a willing buyer and willing seller agree to.
You and I can talk for hours about how silly someone is to pay $57 million for a painting of Irises but that is the valuation because a sale occurred.
In like manner, you may think that Lance is stupid, crazy, naive or arrogant for not selling his app for $10 million but the fact that he is not a willing seller at that price means that the app’s valuation is higher. I don’t know if we have it right at Adonomics ($11,950,400), but I’m pleased that we didn’t value it lower than a price to which he has already said “NO” to in a very public forum.
As I’ve been writing for some time at http://blog.adonomics.com, developers should not make the mistake of selling their app too early. Lance is smart enough to realize that he is sitting on a gold mine and he shouldn’t sell it based on what he is making right now from putting billboards up on his real estate. The real value comes when someone wants to start mining the gold that is represented in 10 million connected users.
Any interactive app that builds enough connected users to represent a sizeable portion of facebook’s social graph is going to be worth a lot. In the Adonomics Valuation we provide a premium for these types of apps. The reason is that if facebook’s snapshot of the world’s social graph (with 43 million users) is worth $10 billion, it just stands to reason that a single app (with 10 million users — 1/4 of all of facebook) is going to be worth alot — not 1/4th of $10 billion but certainly more than $10 million.
I hope that helps. The acid test of Adonomics’ valautions will be when more apps start selling. Feel free to contact LeeL@altura.com if you are interested in selling your facebook app at a price that is at or near the Adonomics Valuation.
Thanks,
Lee Lorenzen
CEO, Altura Ventures — the first facebook-only VC
831-595-7501
Lee,
Stop copying and pasting! Nick is right, because Facebook can develop it’s own versions of apps, who in their right mind would buy something that could be essentially worthless overnight?
I totally can appreciate where Nick is coming from, but I think there is another point being missed. He is a CEO talking to the New York Times, it is his job to make his company look like they are worth a ton.
But to that point, top apps like his are making a decent amount of money from advertising. Into the high 10Ks a month - so far. Doesn't seem like much now, but scale that app to across APIs as they open up, cross promote that app with other apps (and vise versa) and add other ways of monetizing, and he could be right. If it were my app, I wouldn't sell it now for 10MM either - because I wouldn't sell just one app, I'd sell my company for over $100MM or even more down the road. Timing is everything
I totally can appreciate where Nick is coming from, but I think there is another point being missed. He is a CEO talking to the New York Times, it is his job to make his company look like they are worth a ton.
But to that point, top apps like his are making a decent amount of money from advertising. Into the high 10Ks a month - so far. Doesn’t seem like much now, but scale that app to across APIs as they open up, cross promote that app with other apps (and vise versa) and add other ways of monetizing, and he could be right. If it were my app, I wouldn’t sell it now for 10MM either - because I wouldn’t sell just one app, I’d sell my company for over $100MM or even more down the road. Timing is everything
[...] yesterday I wrote about RockYou CEO, Lance Tokuda’s statement that he would turn down a $10 million offer for the [...]
[...] of application valuations than I’ve been Rick Rolled in the past week. It is safe to say that much of the discussion around the value of apps is because app analytics company, Adonomics, publicly shows what they feel [...]
I wish I never even installed this application on Facebook. I removed it and I am still getting emails saying someones posted on my Super Wall. Does anyone know how to stop this?
I wish I never even installed this application on Facebook. I removed it and I am still getting emails saying someones posted on my Super Wall. Does anyone know how to stop this?