Comments on: Constant Contact Today … Exact Target Tomorrow http://joeism.com/2007/10/04/escalating-valuations-of-email-marketing-companies/ Unofficial Thoughts on Bronto Software and Online Marketing Mon, 02 May 2011 18:51:40 +0000 hourly 1 http://wordpress.org/?v=3.3 By: sandrar http://joeism.com/2007/10/04/escalating-valuations-of-email-marketing-companies/comment-page-1/#comment-361 sandrar Thu, 10 Sep 2009 17:32:03 +0000 http://joeism.com/wordpress/2007/10/04/escalating-valuations-of-email-marketing-companies/#comment-361 Hi! I was surfing and found your blog post... nice! I love your blog. :) Cheers! Sandra. R. Hi! I was surfing and found your blog post… nice! I love your blog. :) Cheers! Sandra. R.

]]> By: Greg Smith http://joeism.com/2007/10/04/escalating-valuations-of-email-marketing-companies/comment-page-1/#comment-177 Greg Smith Fri, 05 Oct 2007 12:37:22 +0000 http://joeism.com/wordpress/2007/10/04/escalating-valuations-of-email-marketing-companies/#comment-177 I take a different view of the impact of Constant Contact's IPO on valuations. I think the "success" of the IPO is negative for other companies in the space. The problem with the market valuing CTCT at 20x revs is that this type of thinking inevitably leads to disappointment and a sentiment shift against the industry. Yes, CTCT is the dominate player, yes they have growth, but they are not profitable and investors will end up disappointed when the rug is pulled out from under them. ***** Great point Greg. I see your point in the long term. However, in the short term, I'm not sure that's the case. Prior to founding Bronto, I was with Red Hat and joined them before they went public and stayed with until about a year after their IPO. Their IPO soared for a company that made only $10mm the prior year and had a valuation that topped close to $20b five months later. Insane, but it opened up the IPO window for other lesser quality issues like VA Linux -- which had an amazing run up and an even more amazing fall. The fact is that the VA Linux IPO should have never happened but did because of the opportunistic window created by the Red Hat IPO. This irrational environment does provide opportunities in the short-term. If Red Hat hadn't gone public in a frothy environment and had a secondary offering in an even frothier environment, it wouldn't be around today. Raising that much cash opens up doors. I expect companies like ET to be opportunistic and try to IPO in this window while the access to the public markets is open. If they wait too long, then yes .. the CC stock will most definitely go down and it make their future fund raising attempts more challenging. In business school, one of my professors used to add on to the classic economics truism "there are no profits in the long run" with " but you can make a lot of money in the short-term." I think that applies here. Cheers, Joe I take a different view of the impact of Constant Contact’s IPO on valuations. I think the “success” of the IPO is negative for other companies in the space. The problem with the market valuing CTCT at 20x revs is that this type of thinking inevitably leads to disappointment and a sentiment shift against the industry. Yes, CTCT is the dominate player, yes they have growth, but they are not profitable and investors will end up disappointed when the rug is pulled out from under them.

*****

Great point Greg. I see your point in the long term. However, in the short term, I’m not sure that’s the case. Prior to founding Bronto, I was with Red Hat and joined them before they went public and stayed with until about a year after their IPO. Their IPO soared for a company that made only $10mm the prior year and had a valuation that topped close to $20b five months later. Insane, but it opened up the IPO window for other lesser quality issues like VA Linux — which had an amazing run up and an even more amazing fall. The fact is that the VA Linux IPO should have never happened but did because of the opportunistic window created by the Red Hat IPO. This irrational environment does provide opportunities in the short-term. If Red Hat hadn’t gone public in a frothy environment and had a secondary offering in an even frothier environment, it wouldn’t be around today. Raising that much cash opens up doors. I expect companies like ET to be opportunistic and try to IPO in this window while the access to the public markets is open. If they wait too long, then yes .. the CC stock will most definitely go down and it make their future fund raising attempts more challenging.

In business school, one of my professors used to add on to the classic economics truism “there are no profits in the long run” with ”
but you can make a lot of money in the short-term.” I think that applies here.

Cheers,
Joe

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