The state of B2C valuations

We follow 59 publicly traded consumer tech companies (B2C) in industries like social media, marketplaces, subscription, and ecommerce. Given the diversity of industries, the multiples vary (enterprise value/revenue). Below is the data along with a few observations.

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Social media’s slide has paused. The median revenue multiple is now 7.8x, up from 6.5x in December. While the revenue multiple is still strong, it’s down from a high of 14.7x in November 2017. Snapchat has also taken a major dive falling from 40x in Q4 2016 to 9.6x today. Note that by revenue, Facebook is 17x to 50x larger than it’s peers Snapchat and Twitter.

Marketplaces. The revenue multiple for marketplaces fell to 2.4x. The 14 companies in this data set are diverse, but on median generate $849mm in revenue with 14% YOY growth and positive EBITDA ($91mm) and cash flow ($79mm). Note the multiple is on net revenue, not GMV. Also, the latest addition, EventBrite, trades at 7.2x while the super premiums of the group Etsy and Grubhub, trade at 11.3x and 8.4x respectively.

Ad Based. There are only 3 public ad based businesses in our data set, and 1 of them (Pandora) is trying very hard to become a subscription business. This space trades at 2.5x revenue but the range is broad, from 1.5x to 4.8x. Ad spend is the first to go when companies fear a recession, but Google trades at 4.8x revenue and has a much healthier profile than Yelp and Pandora.

Subscription. Subscription has been humbled from earlier in the year, and now trades at 6.1x revenue. Netflix and Match’s revenue multiple continue to be the outperformers at 9.9x and 10.1x respectively, because their customers are so sticky. We also recently added Sirius/XM to the data set which trades at 6.1x. Spotify is trading at a healthy 3.4x. Overall the space is growing nicely at 33% YOY.

Gaming isnt’ growing. With all the hype around esports, the big public gaming companies are not growing, with median YOY growth of only 3%. Their median revenue multiple of 4.8x is strong. It’s a bit perplexing to us as the sector’s YOY growth is only 3%, although median revenue is material at $3.5bln and EBITDA is very strong at $847mm.

Ecommerce is soft. The sector is the least attractive to investors, with a median revenue multiple of 1.5x. There is a big difference between what we would call premium ecommerce like Alibaba and Amazon (9.0x and 3.4x), versus soft ecommerce like Blue Apron (0.5x revenue). Median revenue of the space is $1.5bln with 17% YOY growth.

Payments. We only have two companies to look at in payments so we try not to draw generalizations about the space. We are glad to hear Stripe is considering an IPO so we’ll have another data point shortly.

Hardware is consistent. ­Hardware is steady at 2.8x. Roku is the standout of the group (8.4x) followed by Garmin (3.7x). Apple has been punished as of late (down to 3.2x from a high of 4.2x) The space isn’t growing and EBITDA margins are razor thin: revenue is $1.3bln on median with only $53mm of EBITDA. Sonos, the newest addition to the space is actually trading at a lower revenue multiple than the group at only 0.8x.

Visit us at blossomstreetventures.com.

co-founder at Blossom Street Ventures

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