This is not the Berkshire model at all. Berkshire buys businesses that have high cash flow models where money can compound over and over, usually in well established businesses that have operational issues that can be optimized for cash flow.
> Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue, $30 million annually.
That napkin math doesn't take into consideration:
- hosting costs
- software maintenance cost
- sales & marketing required to drive $30M/year
- Decrease in traffic due to ads
> What kind of business, let alone web business, sells for 1/10th annual revenue?
Retail does...retail. Hate to break it to you, but businesses aren't bought and sold on revenue (despite what TC tells you). It's usually on a multiple of earnings or discounted free cash flow. Note - it's important to remember that DCF can get real fuzzy and hence why its much easier for media to just revert to "revenue".
> Reddit does 6x the page views, but is valued at $3 billion.
And Tumblr's valuation was once $1.1B and they couldn't monetize it. How is that comparable a valuable reference point?
Compared to revenue, hosting cost is next to nothing for sites like Tumblr that serve text/image content. A similar video site would need to spend a ton of money on bandwidth, streaming CDNs, encoding servers, etc.
If you get 2.5 million hits a month, it is certainly possible to cover the said selling price of $3m in ads alone in a month.
How do you figure? That would be over $1 per hit.
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It is non-yukky and does not affect your content/users