Big clicks, big bucks

The sale of the highly-regarded news site Huffington Post for $315 million to AOL yesterday has underlined again the sharp rise in asset prices for internet properties.

In Australia, many commentators were surprised that Yahoo!7 would stump up $40 million for group buying site, which has been around for just over a year.

But while the Huffington Post has been around for a lot longer – it was founded as a politics blog back in 2005 – the price tag will also raise plenty of eyebrows.

While the site enjoys 117 million unique visitors a month, it is believed to have generated just $30 million in revenue 2010, although it is tipped to double to $60 million 2011, when profit is expected to rise from next to nothing to about $10 million.

Basically, the business has been valued at about five times its 2011 revenue or 30 times 2010 profit. AOL will want to get a lot better at monetising those huge traffic numbers if it wants to get a good return on its investment.

Putting the financials to one side for the moment, it’s clear that investors and large corporates are very much on the hunt for internet properties they can bolt on to their existing businesses.

Big content-driven companies – mostly in the media, but as AOL shows, not always – are clearly driving part of this. In many cases, they haven’t built internet businesses as successfully as start-up entrepreneurs (what a shock!) but as growth returns to corporate agendas, they are finding it easier to buy a smaller internet rival than to try and start their own.

And while the prices were seeing being paid aren’t crazy, they are starting to climb. I recently spoke with internet entrepreneurs Simon Baker (read our full interview tomorrow) about rising valuations – he said he has seen the value of his investments rise four-fold in the last six to 12 months.

That’s impressive growth. Is another bubble building, or will everyone keep their heads?

Stay tuned.