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April 9, 2008

Meebo Can’t Get Their Price, Goes For Fundraising Instead Of Sale

Michael Arrington

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Web chat startup Meebo has been working with investment bank Montgomery & Co. for the last few months to either find a buyer or raise a big new round of financing. The rumor was they were looking for a $250 million valuation.

A couple of sources have told us that eBay, Fox/MySpace and AOL all took a long look at the company, but ultimately passed based on the price and the fact that the company has done aggregate revenues since launching of only $1 million or so.

So instead of selling, Meebo is closing a financing round valuing the company at $175 - $200 million. The company wants strategic investors as well as the inevitable private equity funds that would be willing to pay this kind of valuation (traditional VCs won’t touch a deal like this). The rumor is that Fox and/or AOL may be investing in the round.

Meebo’s big selling point is the success of Meebo Rooms, which essentially turns chat rooms into a web service. Also, Facebook just jumped into the chat space; other social networks can quickly add the feature via a partnership with Meebo.

The deal has not yet closed, according to our sources, although we hear Meebo has a big announcement scheduled for Thursday morning, Our guess is that it isn’t the financing, but we’ll see.

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This entry was posted on Wednesday, April 9th, 2008 at 6:44 pm and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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Comments

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  1. Michael B

    April 9th, 2008 at 6:47 pm

    I am interested to see how big Meebo will get.

    http://mikesmoneyclub.blogspot.com/

  2. Alex

    April 9th, 2008 at 6:53 pm

    $1M Revenue

    Acquisition Price Required: $250M

    Holy cow Batman. That’s funny!!!!

  3. Andrew

    April 9th, 2008 at 6:55 pm

    250 million for a chat app, these valuations are nuts that company is probably worth maybe 10% of that.

  4. Josh

    April 9th, 2008 at 6:57 pm

    Yahoo and AOL deal happening!

  5. lawrence

    April 9th, 2008 at 6:58 pm

    @2, 3 - lol, all these valuations seems crazy…

    but hey, these are ivy-league financial analysts computing these, so they must be very right

  6. Jon

    April 9th, 2008 at 6:58 pm

    Their valuation of themselves is laughable… this isn’t technology that a few programmers couldn’t pound out within a few weeks and launch for a fraction of the 250M they are looking for. I don’t get it… who are they trying to fool?

    Jon
    http://dreamclue.com …get the message!

  7. Chris

    April 9th, 2008 at 7:02 pm

    What was their previous funding amount? Why do they require 250+ million in order to sell?

    Pride? Greed?

  8. Robert Einspruch

    April 9th, 2008 at 7:12 pm

    Is anyone scratching their heads? A company with *cumulative* revenues of $1MM valued at nearly $200MM? So either it would cost Fox, AOL or eBay a lot of money to develop Meebo’s features and gain a user base of its size or something is really out of whack. Do they have revenue plans that aren’t apparent to us? What am I missing? Otherwise PE firms are going to do a DCF on the cash flows and come up with a valuation of $2.5MM!

  9. washwords

    April 9th, 2008 at 7:16 pm

    Interesting and wow that price seems high. as a mac_chick (and only wanna-be geek, really) I’ve been using and loving adium so far and pretty proud of myself for fudging some decent workarounds for my phone, but if Meebo’s where it’s at (it looks pretty!) I’ll definitely check it out. as a business reporter, umm yah, price seems…inflated but… like others have said, maybe I’m missing something.

    anyway, thanks for your blog too. You’re helping me talk the talk as I continue faking hipsterdom.

    washwords
    http://washwords.wordpress.com

  10. HeadScratching

    April 9th, 2008 at 7:23 pm

    On the positive side, Meebo is cool, has a user base. But there isn’t much of a technology or IP here. Almost all their use comes from people who couldn’t use traditional IM clients due to their workplace firewall limitations on IM clients. The moment they try to monetize that kind of use, it will evaporate - there are plenty of alternatives out there.

    On top of that, IM in general is not easy to monetize. This is after 10+ years, and 500+ million users, so if there were an IM oriented business model (other than as a loss leader for the big guys), you would think it would have been discovered.

    Online video (YouTube) at least had the newness factor when Google paid up the $1.6 billion, and the jury is out on that deal.

    Finally, Facebook Chat.

    Anyone paying $200 million valuation for this deserves what they are getting. The only way to justify it, ironically, is to use relative valuation argument “If Facebook is worth $15 billion …”

  11. damon

    April 9th, 2008 at 7:32 pm

    I read somewhere that the worse things a web 2.0 company can do is generate revenue…

    when revenue is $0, the sky is the limit

    when revenue is >$0, well, now there is something to extrapolate

  12. Robert Einspruch

    April 9th, 2008 at 7:37 pm

    Damon-

    I am living the nightmare you describe!

    Robert

  13. Irene Smith

    April 9th, 2008 at 8:31 pm

    This is crazy, they are trying to give a company that has a revenue of $1 million or so a value of $250 million. Looks like no one learned from the dot com blow up last time.

    You’d have people laughing in your face trying to do this in any other type of business.

    Irene
    http://www.dragonlasers.com

  14. vijay

    April 9th, 2008 at 8:53 pm

    Net traffic is the name of the game.
    Investors probably have their eyes on up coming features that Meebo guys are trying to sell. Google and Yahoo have huge traffic. Smaller guys are Facebook, Myspace, Bebo, etc.. I still don’t understand how Facebook is valued at $15 b while their revenues are like pocket change. What did Microsoft see in Facebook? Think about it.. Microsoft throws $300+ millions at FB for strategic reason, not for FB’s revenue. As a user I don’t see myself spent a lot of time on Facebook. Thus I will not be surprised to see smaller traffic player like Myspace investing in a bunch of sites like Meebo to increase their combined traffic. It also would be nice to see Meebo on Ebay so buyers and sellers can chat about the products being auctioned.

  15. whoopie

    April 9th, 2008 at 9:27 pm

    meebo is a decent idea and a fine technical demonstration but isn’t sellable.

    assume ebay bought them, its one thing for yahoo and microsoft to subsidize the IM architecture for a startup, but there is no way they are going to float that expense on behalf of a major competitor. its a short hop from there to a minor press kerfluffle in which meebo IPs are blocked.

    meebo really only has one option - grow it organically and try to be happy as a small company that makes a nice wage for its small staff and gets to chart its own course.

    as an aside, these class-of-2005 startups need to get a reality check on their valuations given current economic conditions. $250 million for meebo? come on, take a zero off the end and it is still a overvaluation. forget your larry/sergey fantasies kids, that ship has sailed.

  16. Ian Bell

    April 9th, 2008 at 9:49 pm

    It’s scary to see a product with so many visitors do so little in revenue. It sounds like its a hard company to pitch to advertisers.

    And it looks like the Meebo board knows that and is trying to get out now while they can.

  17. Todd

    April 9th, 2008 at 10:20 pm

    Traditional VCs won’t touch a deal like this? Gee, I wonder why.

    Companies like Meebo that think they will find preternaturally dumb money through the Pe channel are in for a rude surprise…

  18. zzzzz

    April 9th, 2008 at 10:42 pm

    Fail Faill Fail!

  19. Jimmy Dell

    April 9th, 2008 at 10:56 pm

    This is a mess. At these sorts of valuations, the common shareholders are effectively wiped out by the preferreds in any conceivable exit unless they somehow, some way, pull a You Tube, which is incredibly unlikely. This means that there is a good chance that the founders and employees will never see a dime for their equity or options. A seasoned CEO would force a down round at no more than a $75M pre and then do a reload for the team, but that would require standing up to the existing VC’s, which would be a bloodbath.

  20. Shafqat

    April 10th, 2008 at 12:21 am

    Meebo is worth whatever someone is willing to pay for them. Whether its 250K or 250M, it comes down to the market’s perception and demand. If the deal gets done at 250M, then they are worth 250M regardless if we think its a laughable sum or not (which I agree it is!)

  21. velioncho

    April 10th, 2008 at 12:29 am

    Please dont make new bubbles. It is okay technology, they should be happy that they are not out of business.I am going to short the stock that buys them for $250mil.

  22. Guk

    April 10th, 2008 at 2:14 am

    A big company can build meebo with less than $1m. Afterwards, they can spend $100 million in markeing the site. So, why spend 250mm when you can spend $101 million to create a similar product?

  23. Aadaam

    April 10th, 2008 at 3:11 am

    It’s a good question where does a free communication system, currently an IM-system like meebo has its ad- or revenue possibilities. I’ve worked on a such project in Hungary as a consultant, and it’s still a hard question

    Usually such an IM system needs an own community, and sometimes it seems meebo lacks one. Probably it would be preferred if they would become to an OFFICIAL IM-client of a social network - bebo, myspace, facebook are taken, what’s left? Where’s the community meebo could take its hands on?

    The wonderful technology of Meebo, what I admire, is the “platform” and hey, if some of you from the team read this, please join the API mailing list of XMPP Foundation, we would need your help :) Together, standardized, maybe Meebo’s platform could gather significant share… But if Facebook reveals an IM API, and Meebo would be still a lonely player, it would be a sad story.

    Besides, Meebo has a wonderful, young team behind that, and I’m always thrilled when I log in to see that they still enjoy what they’re doing :) And maybe it’s much-much more important than fundraising, even if not from Michael Arrington’s obvious and rational standpoint as an investor.

  24. web hosting

    April 10th, 2008 at 3:12 am

    @ Guk, people still prefer to give that much high price due to the large user base and the popularity of specific website, marketing & branding also cost money. I think meebo deserve $250 million valuation.

  25. Rushabh Choksi

    April 10th, 2008 at 3:40 am

    Meebo is certainly over valued. I dont think that it deserves $250 million.

  26. Nhim

    April 10th, 2008 at 3:50 am

    I think 200 million USDs be meetly, i love Meebo

  27. Tommy

    April 10th, 2008 at 4:23 am

    What everyone seems to miss is that Meebo doesn’t have it’s own IM-solution.
    Meebo does not stand on it’s own. For a user to be able to use Meebo you still have to register with MSN, AIM, ICQ, Yahoo!, GoogleTalk or Jabber for a chat-account. Then you have to come back to Meebo and log in to Meebo and start chatting through Meebo instead of using the MSN-client or ICQ-software. Meebo’s model relies heavily on the use of other companies IP and the user can walk away from Meebo extremely easily any time they choose.

    Furthermore, what Meebo have done can easily be copied by someone else at any time and investors tend to not favor those kind of business models that can be easily copied.

    On the upside, Meebo is trying to incorporate advertising in it’s UI in an innovative way. Compared to all the other chat-clients, Meebos big advantage with the advertisers is that they have the same screen-estate as the browser window. How much space does the ICQ- or MSN-client offer up for ads? Meebo seems to be geared towards promoting record-artists. If they can manage to get a couple of good deals with the music industry, they might be on their way of approaching a $250 million valuation, but as I see it, they are far from there yet…

  28. Meebo = Opensource

    April 10th, 2008 at 6:36 am

    Mike all I can see is :

    Open Source Meebo - http://www.soashable.com/

    Full client, fully open source. Any business could take this and “clone meebo” in an instance.

    For $250 mil - what a joke.

  29. Frederick

    April 10th, 2008 at 6:37 am

    http://www.soashable.com/

  30. chrisco

    April 10th, 2008 at 6:44 am

    If the big boys wanted something like Meebo, it seems eBuddy, over in Amsterdam, might be better. I mean if I’m a big USA player I would want the strongest competitor OUTSIDE the USA. Then I get that footprint + I have my USA distribution channels to blowout Mebo (with eBuddy) here in the USA. Cheers. -chrisco

    PS: What’s up JJ, did you get my email yesterday? Nice having dinner with you Friday night at Odeon. Ping me back.

  31. steve

    April 10th, 2008 at 6:52 am

    whooshhhh… thats the sound of capital being
    sucked away from venture capital into
    distressed bonds.

  32. vijay

    April 10th, 2008 at 9:22 am

    Some of you are confused between the company valuation and the actual $$ potential investors are willing to shell out.

  33. joshlazar

    April 10th, 2008 at 11:14 am

    Maybe we should think of meebo as a channel…Aren’t there 55million reg or uniques? (don’t remember which).

    That’s a good chunk of audience. We could all build our own YouTube in a weekend, but we still need the viewers. If I were a large media co that aggregation of eyeballs would be attractive

  34. LOL @ Silly People

    April 10th, 2008 at 4:07 pm

    There are three doors to choose from. One of them has a business model. The other two have the next Web 2.0 bomb. The VC reveals that one door (acquisition) was a bust.

    Basically, if you’re as big as Meebo is, this round of financing was to let the founders take some cash off the table. What’s Meebo going to do? Advertise it’s free service so that it can sell advertising on it? Please.

    The founders basically said, look VCs, we trusted you and rather than staying small and creating a nice lifestyle business, we went for the home run. The acquisition failed and the market for high cash burn companies is gone, give us some cash if you want us to stick with it. The VCs or PE firms or whomever wanted in, probably bought some of the founders’ equity.

  35. chrisco

    April 11th, 2008 at 12:51 am

    @34: Nice reference to that interesting NYT article from the other day: And Behind Door No. 1, a Fatal Flaw: http://twurl.nl/8vw5yw. For anyone who hasn’t read it yet, it’s worht a look, especially the interactive version: http://twurl.nl/qkyekq.

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