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Brian Alt

eGroups' Acquisition: Some Perspective
By Brian Alt

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For those of you who keep up on the email list industry, you've probably already heard the news of Yahoo!'s intention to buy eGroups. Over the last 24 hours or so, I've heard all sorts of feedback, from "This means the end of the world for my ezine" to "Wow, that's awesome for eGroups."

I would simply like to examine the deal and perhaps offer some industry insight. It's quite fascinating, actually ;-)

First of all, the price: eGroups is receiving approximately 3.42 million shars of Yahoo! per the acquisition, valued at about $432 million. eGroups had planned a $75 million IPO, but cancelled it either because of poor market conditions or an "offer they couldn't refuse" from Yahoo!.

For those of you unfamiliar with US currency, trust me when I say that $432 million is a lot of money ;-)

eGroups has approximately 17 million unique members. If you would value the company on its membership alone, you'd come up with $25+ per member to justify Yahoo!'s price.

For the six months ending Jan. 31, 2000, eGroups reported sales of $3.46 million. On yearly sales of $7 million, Yahoo! paid a price that would take them more than 60 years to recoup their cost. Based on sales alone, eGroups had an extremely high valuation, even in the Internet industry.

eGroups also has about 150 employees all holding stock options. eGroups CEO Michael Klein says his employees' options will now vest as Yahoo! stock. Not too shabby for those involved, I would think.

So why did eGroups make out so well?

1. Email is where it's at! :) Email publishing, advertising, and marketing are predicted to increase by leaps and bounds over the next few years. For email newsletter publishers, eGroups' valuation and sale to the giant that is Yahoo! should be seen as an encouraging sign to email publishers investing large amounts of their time and money in their email business.

2. eGroups was the clear leader in its niche, its size close to ten times that of its nearest competitor. Much of what Yahoo! is paying for is the uniqueness of eGroups' value and its leadership in its service area. For individual email publishers, the same holds true: If you can be the best publication in your niche and leave your competition in the dust, your financial success should increase exponentially. I'll elaborate on this more in upcoming Ezine-Tips issues.

To read more about the acquisition, check out yesterday's List-News article.

Ezine-Tips for June 29, 2000

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