While skimming through the Web 2.0 coverage I’d missed over the last month and a half, the HT Media - DesiMartini deal caught my attention. Simply put, I was astonished by the jaw-dropping < $10 million acquisition price - a sentiment echoed through the Indian blogosphere.
Why was HT Media shopping for a social networking site ?
Recently, HT Media has been very aggressive in the Internet space. Spun off their Internet properties under Firefly eventures, launched the online edition of Mint, their business paper, revamped the HindustanTimes website, ventured into online classifieds etc. Did the social networking fad catch the fancy of a HT Media exec or did they feel threatened by the aggressive push for BigAdda by Reliance ADAG ? Or do they just have an extra pile of cash lying around ? We wont know for sure what prompted HT Media to foray into the social networking scene.
Why DesiMartini ?
Assuming that HT Media was looking to acquire a social networking site, what options were out there in the market ? Yaari, DesiMartini, MingleBox, Fropper, BigAdda and IndyaRocks. BigAdda and Fropper are ruled out, considering that they are owned by ‘competitors’ (Reliance ADAG and People Interactive Pvt Ltd). Yaari appears way beyond defunct to me. Minglebox valuation would be way higher considering that they got a $7 mill Sequoia funding. So, the only options that remain are DesiMartini and IndyaRocks. While it is unknown if HT Media approached IndyaRocks, the price tag for IndyaRocks would definitely be higher than DesiMartini, considering that the former gets ~10 million pageviews as opposed to the latter’s ~2.5 million. That leaves DesiMartini as the only cheap, viable option out there (this is what I think - differing opinions welcome).
The acquisition price
While the price was quoted as a vague “less than $10 million” in most of the media, Vivek Pahwa, DesiMartini founder, clarified that the acquisition price was “significantly less” than $10 million. Considering that Vivek is now doing seed investments of less than $200K in other Internet startups, I’m taking the liberty to assume that probably the acquisition price was in the $2.5 million range (just a hunch).
With a user base of 250,000, this puts the valuation at $10 per user (a higher acquisition price and this valuation would jump even more). Compare this to $21 per user that Fox paid to acquire Myspace (27 million unique visitors at time of deal). Digg, with a user base of 18 million, would make $16.30 per user if acquired for $300 million.
That makes you wonder (and evokes the jaw dropping reaction) — is the HT Media - DesiMartini deal for real ? DesiMartini is a shabby, half-ass, semi-defunct rip-off. Does it make sense to even cough up $1 million for it ? Wouldnt it be a better idea (and way cheaper) to build your own social networking site ? And leverage your existing channels (print, web, radio) to market it ? The argument of getting a direct entry by acquiring an existing player doesnt fit too well with me either. HT Media wasnt in a Microsoft-like deparate scenario, where they were so late to the game that they had to cough up a premium to gain entry.
All in all, either Vivek is a really smart entrepreneur and/or someone was asleep/clueless at the helm over at HT Media.
So, what does this deal mean for the Indian Web 2.0 scene ?
Whether this acquisition sets off a trend among other media houses (ABP, MidDay, IndiaTimes etc.) remains to be seen. If it happens, it would definitely be good for the other Indian social networking sites out there - who, otherwise lack a viable exit strategy. This in turn could garner some mainstream attention for the Web 2.0 scene in India.
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