San Francisco based HotOrNot, founded by James Hong and Jim Young in October 2000, has been acquired, we’ve heard from multiple sources.
The buyers are investors connected with Avid Life Media, and paid somewhere around $20 million for the site. Hong and and Young have been taking money out of the very profitable business all along the way - which we reported was another $20 million or in May 2007. HotOrNot never raised outside funding.
The investors are creating a new company, called HotOrNot Media (new site coming soon), and they may be acquiring more properties as well.
I spoke with Hong a few moments ago, who confirmed the acquisition, which closed on Friday, but not the price. He says he and Jim will not be affiliated with the business on a day to day basis going forward. “We’ve been working on HotOrNot for seven years now,” said Hong, adding “It’s time to break up with this girlfriend.”
HotOrNot makes money from advertising, virtual flowers and a premium fee when users want to connect. They experimented briefly with a free model, but abandoned it last September in the face of overwhelming spam. Their annual revenue is estimated to be around $5 million, with $2 million in profit. According to Comscore, the site has around 5 million monthly unique visitors and 200 million page views.
Nothing sells like S E X. or the hint of it. Great payday for these guys. Congrats
Kinda Sad. They could have done some much with the company. I think in the end they just sat on their ass. Seems to me likes these guys just got likely with the site and enjoyed the ride while it lasted. Sadly i don’t see anything new coming from these guys … ever. In any case i wish them luck.
“It’s time to break up with this girlfriend.”
Misogynist to the end…
I’m guessing whomever rebrands it will realize the domain name is the most valuable asset. The site has needed a channel-change for years now, so best to cut its history off at the ankles and start fresh with a new business model. Hong will have an enjoyable summer practicing how to wrap his M5 around a telephone pole.
Seems that $20 million is actually not that much from the rumored income these guys were marking when it was just the two of them alone. It looks like they got funding - built the window dressing to look like a legitimate company and then sold out. Looking at Hot or Not’s traffic over the past couple of years, customers finally got bored of voting and looking at pictures all the time. Good time to cash out.
Only $20 Million for a popular and profitable venture?
Thought it would be worth more than that.
Congrats to the guys. Its one of those ventures where if you thought about it you displace it because you can’t see the potential in it. But then when someone makes it work in such obvious ways you kick yourself because you did not try it .
Damn
$20M? Something does not connect. May be involves some share too in parent company?
WOW!
$20M+ in profits over the past 7 years + another $20M to sell the “website”. Now, that’s what I call ROI.
10x earnings? Seems low, unless they feel they are peaking out.
The business hasn’t shown a ton of earnings growth over the last few years, so the multiple will be lower.
“Only $20 Million for a popular and profitable venture?”
Huh, think maybe Alexa’s numbers are less than accurate?
Sounds like a GREAT deal for the buyer.
Sahar Sarid
Assista.com
either it helps you get laid or get paid or else there’s no point
Man, they could have used some of that 5 mill a year and hired a graphic designer for their simple layout.
Interesting how much they have been doing on facebook, not sure they found the best link between their facebook app and their website
Growth on facebook seems detrimental to the website, which is where they make their money from. Seems like they were happy to take some great money and run, think with some advisors they could have got a lot more or turned it into a strong competitor in this space
Jeff
Check out http://www.yupnup.com How do you rate?
I think they did good . NO NEED TO GET GREEDY !!
Anytime you can start a business and sell it for millions you have done good . Especially if you get to keep most of the money .
They can retire now …if they wish ..
Congrats! Hong’s a great guy!
I agree with #15. $20M for 2 guys is nothing to sneeze at. If you think that’s a weak exit, your sense of wealth is a bit warped.
agree. 20M is a lot of money. how many actually physical business gets acquired that much?
I could use 20MM myself. Any takers?
Sounds like a good move for all parties involved.
Whats the scoop on Avid Life Media? I’m a Torontonian and have never heard of them.
oh my bubble…
Pretty sad that a valuable and profitable business like this gets sold only for $20M because they had no connections with VCs in the valley, and hyped doomed 2.0 craps like Twitter and Digg get 10x valuations of this.
@23 - Im pretty sure they had VC. They didnt want it because they made enough on their own. You dont take VC when you dont need it. You should avoid VC cash like the plague if you can.
That way u can sell or 20 mill and not worry about equity and all that stupid crap.
They could have VC, i mean… my bad
@24 -
I know that they were offered a round by Sequoia back in 2004-5. They did not take it, as it would have killed their site most likely. Their decision was 100% rational.
Problem is this micro crony capitalism in the valley: companies that get hyped (reddit, or i forgot the name…, del.icio.us?) get bought for much more than they are worth, buyers eventually (in 2-3 years) take the loss, but the founders who managed to hype it, get off with loads of cash. Apparently this happened much more in 1999, but I was not here to witness it.
http://siteanalytics.compete.com/hotornot.com/
Rank: 1,88764 in Alexa.
Over 1.5 Million visitors a month.
yeah.. it’s worth somewhere around $20M - 30M maybe alittle more, depends on revenue model..
There’s no way they’ll end up with $10m in cash each after this, but even if they end up with a couple of million.. man, that’s a great exit and a way to get back onto the ladder doing something more interesting. After several years of working on the same project it can become dull, and a few million in the bank is definitely going to make moving on to something more exciting a lot easier (it’ll buy you a house to live in for the rest of your days, at least!)
i hate to say this but guy kawasaki will have a clone of this in 2 weeks
sorry couldn’t resist
You say it in jest, but its true. Guy has no real accomplishment of note besides maybe being the original software evangelist which really means he is a professional fanboy.
The art of start. Pfffff. Failing MOST of the time only works in baseball.
Cashing out is cashing out. If somebody made money, the outcome is good. Nice that they’re cut loose to do other things.
20M isn’t that good of a multipul.. But when you sell to an adult dating network they don’t pay much.
Avidlifemedia is a front for ashleymadison.com ie A dating site for married people that want to cheat.
Facebook makes less profit (if any) and is worth $15B. Hot/Not sold for about 10x ebitda? Guess they didn’t have very good lawyers
it’s a good deal, and good time to sell for the founding duo.
they did good.
LOL@32: Nice datapoint!
All good points though, I’m sure the HoN peeps are fine to GTFO for the cash just to be able to stop telling people at parties they own a famous site that everybody USED to visit. “Oh really? Yeah I remember you guys!” Kind of like being the President of Friendster in 2005.
The buyers are a group of young Internet dealmakers from Toronto (Glenn Graff from Kaboose, a few of his cronies as well). The idea is to purchase a portfolio of niche media sites/communities and milk them for all they’re worth. What can I say? Blame Canada.
and still got a nice purchase price…… note to all the web2.0 css loving, ajax overloading developers there…relax with the eye candy…make it functional, make it interesting.
But lets be honest…It looks like crap !
@37 is right. The team includes Kaboose/HomeStores/JumpTV’s Glenn Graff and Noel Biderman as well as Ted Steube backing and acquired very young startup Fivelimes along with the 25 year old founder, Raja Bhatia. They have raised several tens of millions to acquire non performing online properties in a roll up play.
They had a great run, and without any innovation, it was time to sell. It will be interesting to see how the next generation of social rating community sites fare, especially ones with mobile applications like snapplink.com.
good shit james….
Correct me if I’m wrong, but from all the reading I’ve been doing about VC funding, the typical scenario has the original founders ending up with about 8% of the company after all is said and done.
That makes this sale without VC for 20 mil equivalent to them selling with VC for 250 mil doesn’t it?
Sounds damn good to me…
It’s always incredible how dumb most people commenting on this blog are. 10x cash is not bad for a site that won’t even have traffic in 5 years. Wake up. Not everything is valued like Facebook.
Oh my ghost! 20mil is huge for HOTorNOT. Still wonder if HoN deserves it??
@43
i think ppl just try to blow the bubble so their trash gets sold as well.
ppl don’t realizez how much 20Mil is worth and what other business can give them that much return.
I have definitely lost brain cells reading these comments. I’ve never seen so many horrendously bad viewpoints.
Assuming the deal is around $20m, Rev/employee and company value/employee are identical to GOOG. Avid gets $2m in earnings on $5m in revs and a good property for $20m…not bad.
How many times must we reiterate that “lousy” site design is frequently a key driver of success (ex: hotornot, Craigslist, ebay, myspace, etc).
Congrats to James & Jim! They’ve shown us that a simple idea could become very profitable.
It was the right time for them to bail out, HotOrNot is SO Web 1.0
Good traffic for the buyer though
Congrats fellas. Hopefully you got an earnout or some other form of upside.
time will tell us how profitable it will be.