Adonomics™ Facebook Analytics and Developer Services

The Adonomics 100™ Top App Companies Chart

The recent investment of $50 million in Slide at a post-money valuation of $550 million has proven that Mr. Market (see Warren Buffett’s description of him) is highly valuing at least one Social Networking App Developer. The long term correctness of this implied company valuation of over half a billion dollars will be most dependent upon Max and his team’s execution. My bet, based on their former PayPal win, is that it will turn out to be low.

That being said, this valuation for Slide ($550 million) is much higher than the sum of each of Slide’s app’s Adonomics valuations ($60 million). Part of this gap can be closed by realizing that one half of Slide’s value comes from their MySpace widgets and one sixth from web site widgets. However, if we say Slide’s Facebook Apps are worth one third of the total of Slide’s value that still implies a very high number ($180 million). So, Slide’s Facebook App business enjoys a 3x Valuation Premium.

Why Should Slide Enjoy a 3x Valuation Premium?

I believe that the primary reason for Slide’s 3x Valuation Premium is that our Adonomics valuation formulae didn’t factor in the potential market power and other benefits of owning/controlling a suite of apps that collectively touch such a large percentage of all of Facebook’s users. It is easy to understand that if one company controls a suite of apps with 80 million installs, 40 million unique facebook users and 6 million daily active users, then that one company can exercize certain Multi-App Marketing Techniques that would be impossible for a smaller app company to accomplish.

Multi-App Marketing Techniques

Some examples of such techniques might be tab chaining to promote your other apps, e-mailing users of one app about your other apps, integrating cross-app features to better lock-in users, communicating to users who have removed one of your apps using the other app’s e-mail list, obtaining better advertising revenue share rates from the ad networks, creating your own ad network, developing your own points system, connecting users from one social networking platform to other, building an app-centric social network, etc.

Company Valuations vs. App Valuations

Ever since the Adonomics site began calculating App Valuations and displaying them for developers and their potential investors/acquirors to notice, we have heard a consistent message that our app valuations seem too high. We didn’t mind this too much because we felt like we were always acting in the best interests of developers who could use their apps’ Adonomics valuations (even if they didn’t fully believe in them) as a starting point to obtain better terms from VC’s, Angels and potential acquirors.

The Adonomics Valuation was Not Too High but Too Low!!!

In fact, in numerous blogs, folks have singled out Top Friends which is Slide’s most successful app as an asset that couldn’t possibly be worth $23 million (its valuation at the time). So, isn’t it ironic that it turns out that although the Adonomics combined valuation for Slide’s suite of Facebook apps was not to high but too low! In fact, we were 1/3 of what Mr. Market tells us Slide is actually worth today. The investors at T. Rowe Price and Fidelity are not unsophisticated players who are investing in Slide because they like SuperPoking each other. They are investing for a better than market-rate return. So, in reality Mr. Market is telling us that these investors believe Slide will, within a few years, be worth two or three times the valuation at which they invested.

Correcting the Problem

The solution to this is to begin to track the Top Multi-App Companies on Facebook and apply an appropriate Valuation Premium to those that control/own apps which touch a significant percentage of the Facebook install base. In order to do this, the first step is to link each Facebook app to the entity that controls/owns the app. This would be easy if App’s on facebook told us this information but since many apps list only their developers and some apps list fictitious company names and some apps don’t show up in the directory, our challenge is a bit harder. That being said, we have been able to do the research to compile The Adonomics 100™ Top App Companies table (see home page) and roll-up the suite of apps that each company owns/controls.

Making The Adonomics 100™ Top App Companies

After assigning all the facebook apps to their correct corporate entities, the next step was to rank them from #1 to #100 based on Total Installs of their app suites. We then sum up their Adonomics App Valuations and mulitply this total by a Combination Premium that varies based on where in the list each App Company falls. Obviously, the #1, #2 and #3 ranked companies deserve a higher Combination Premium than the #98, #99 and #100. All of this is taken into account to compute a Company Valuation for each of the Adonomics 100™ Top App Companies.

Congratulations to Everyone in The Adonomics 100™ 

I want to let everyone know that it is extremely impressive to be a one or two person deverloper shop and be able to own/control a suite of apps that have been installed 4, 8, 12, 16 or 20 million times. Never in the history of software have so many users been touched by so few developers in so short a time. As the friend of the developer, our goal at Adonomics is to ensure that you are recognized both publicly and financially for your achievements.

Thanks,

Lee Lorenzen
CEO, Altura Ventures — the First Facebook-only VC

P.S. If we missed any of you or if we are underestimating your number of installs because of the lack of granularity in Facebook’s stats, please contact bugs@adonomics.com and we will do our best to correct the oversight.

(c) 2008 Altura Ventures LLC