That’s one big bonbon

Some laughed when Bob Pittman bought controlling interest in Daily Candy for $3.5 million. Now, says the Journal, it will sell for $100 million.

Without costs for printing or the need for much editorial product, Daily Candy boasts margins of nearly 60%, say people familiar with the matter. The hope for 2006 is that the business will produce revenue somewhere less than $20 million, with earnings before interest, taxes, depreciation and amortization in the low-teen millions, these people say.

There’s a syncopation at work here. Email is still hot with advertisers, who finally understand it, and so they value it and pay. They will understand and value the distributed web next.

  • Eh… not so much

    Daily Candy is pretty good. They send out fresh content every day. Some of it is fluff that doesn’t interest me, but some of it is funny and really helpful. For example, I saved big $$$ on a gift for my mother-in-law from Bliss Spa courtesy of one of their mailings. And Best Of All, It’s Free! I hope they keep up the quality, and, y’know, it being free.

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  • Jack Petravich

    Wow. All that for an email newsletter that produces one 150-200 word item a day. (I assume different editions in the 9 cities they cover so that’s like, what, 9 blog posts a day produced by a staff of 27?) I won’t bother to do the actual calculation but that means a blog network like Gawker Media should be worth somewhere around $10 billion. That’s a 50 ft chocolate bunny compared to Daily Candy’s bonbons. DC doesn’t even have a RSS feed, which is probably to their benefit. Obviously email addresses are worth more than the non-qualified distributed web.

  • Rachel

    But it’s stupid! It’s dumb and fluffy and totally publicist crap. Why not just send out the press releases?

  • ben

    I suppose they are buying their mailing lists as well, along with any marketing data they have gleaned along the way..

  • http://www.organizingla.com John Trosko

    I am a guy living in Los Angeles– Daily Candy keeps me in touch with the local scene, and what MAY be hot. True, it’s very gir’ly, but it does this with simple, quick reading. It’s a blogger’s dream. When I need something hot, or fun for friends or out of town visitors, I’ll visit my “archives” on the site and get down to funkytown.

    $100 million? Maybe too high…. but their content delivery is perfect.

  • http://velvet-sea.blogspot.com JMoney

    Ironically, Daily Candy seems like exactly the type of property AOL would buy.

  • http://0blog.com Toivo Lainevool

    It actually says: “Daily Candy could fetch more than $100 million”. That sounds like some spin from the current owners to try and set expectations of buyers.

  • http://deadnewspapers.blogspot.com Gutenberg

    Everyone’s jumping on this story as if it were true, but it doesn’t make sense and smells of a PR campaign to drive up the price.

    The Daily Candy list is about a half million names and a recent review of a bunch of their e-mails shows lukewarm advertising sponsorship (they’ve lost a number of advertisers in the past year due to response issues). Let’s say they mail to everyone every day and charge $50 per thousand (their ratecard is higher, but ratecards are mostly fiction). That only nets them $9.125 million in annual revenue, assuming everything was sold (and it’s not). There’s no advertising on the site to speak of (everything I saw was house ads). This is far short of the $20ish million that was mentioned.

    So, let’s look at the expense side of the equation. There’s not large volume of editorial being produced here. I’m guessing the entire operation is a dozen people (at $100K per pop with benefits, that’s $1.2 million per year). Throw in $15,000 per month for hosting and another $100,000 per month for everything else, that’s roughly $2.6 million in annual expenses. That’s actually a 71% margin, not 60% margin. Can’t see what else they’re spending money on.

    OK, maybe we accept their revenue “projections” and margins, then why would they sell at 5x revenue or 8x EBITDA? The multiples for businesses with this type of revenue and profit ($12 million per year, if they are to be believed) are much higher. Look at About.com, which has a mess of uniques due mainly to good SEO thanks to MS and less due to compelling content (most people hit their site from Google and split after a page or two — sorry, Jeff). NYT picked up About for $450 million on about $40 million in annual revenue. DailyCandy should go for more than $200 million, according to this rationale.

    Would love to see the black book on this sale. I suspect things aren’t as they appear.

  • jayson

    guten -

    i love your fiction-meets-math approach! I think the real thing about dailycandy is its completely useless to most people (i couldn’t cope with anymore emails about cheap shoes or eye waxing kits) and nobody believes them anyway cause you never know if the content has been paid for or not.

    but ya, it makes you wonder what flavorpill is worth. gawker could get cash too, although the quality of the gawker content is getting a bit sketchy. i smell AOL sniffing around too – maybe they’ll grab gawker and flavorpill too. ?!?!?!

  • Rechercher

    Gutenberg — I am doing research on DC for a major publication, would love to speak to you off the record; email above.

  • Rechercher
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  • jake

    Three things where the naysayers are saying incorrect info:

    1. There are 3 types of DC mailings. One is where they test a product and write about it. If they like it and they think their readers will like it, they’ll write about it. Totally non sponsored and high crediblilty. You can’t get women to read an email everyday for 5 years if it’ not credible. And DC don’t advertise themselves. Think about the trust it takes to have 1 million readers who volutarily signed up? All through word of mouth.

    2. When they do send a sponsored email, they tell you that it’s an advertisement. It says “dedicated email.”

    3. Then they have the banner ads, which obviously are ads.

  • Earnings Before Interest, Depreciation And Amortization

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