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hs1337

Member Since 05 Oct 2008
Offline Last Active Oct 10 2008 08:01 AM
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Topics I've Started

Flickr Vs Netflix

05 October 2008 - 12:06 PM

Ms. Shuen,

In reading your book, Web 2.0: A Strategy Guide, I came across a troubling bit of information on page 35. You are discussing the valuation of Flickr in comparison to that if Netflix. In doing so, you identify that Flickr essentially sold it's 2 million users to Yahoo for $40 million, making the value of each customer about $20. However, just below this, you identify that Netflix received $86 million dollars at its IPO with only 600,000. You state that, "the total enterprise value calculation suggests that 600,000 customers with a lifetime value of $20 should have been worth about $120 million." By my calculations, 600,000 customers worth $20 each should have been worth $12 million (600,000 * 20 = 12,000,000) not $120 million dollars. This completely changes the argument and in turn implies a different shape for figure 1-9, in which Web 1.0 cash flow out-performs, although it may not out-pace, that of Web 2.0.

I am not sure if I clearly understand the calculation, or the point being made here. I would greatly appreciate it if you could clear this up.

Thank you,
H. Strowd