Mail Online: Big, but not valuable
Back in December 2011, the Daily Mail had 45.3 million unique visitors, according to ComScore. By March 2013, 15 months later, that number had grown to 46.4 million, again according to ComScore. We learn the latter figure — but not the former — from Christine Haughney’s article about the website today:
For now, many analysts consider the Mail Online a growth source for a strait-laced media company. The parent company’s total annual revenue is about $2.7 billion and its net income is $466 million. It depends on newspapers for about 20 percent of its profits, according to Mr. Reynolds.
Alex DeGroote, a media analyst with Panmure, Gordon & Company, said that while Mail Online was still not profitable, its growth had helped its broader company’s stock price grow roughly 80 percent in the last year.
This is crazy. For one thing, as we’ve seen, the Mail Online isn’t really growing: on the internet, 2.4% growth in 15 months is decidedly weak. For another thing, as DeGroote points out, it isn’t making any money. But more to the point, DMGT, the parent company, is so enormous that Mail Online can’t possibly account for the rise in its share price.
DMGT’s market capitalization is $2.84 billion; it has risen some $1.26 billion in the past year. If DeGroote really thinks that Mail Online accounts for a significant chunk of that growth, he would have to think that the rise in the value of Mail Online, just in the past 12 months, has been the best part of a billion dollars. By that logic, given that the site was already extremely popular a year ago, the overall value of Mail Online would probably have to be more than the entire value of its parent company.
In reality, the value of DMGT has almost nothing to do with Mail Online. The site might be a traffic powerhouse, but the internet is full of high-traffic sites which are worth very little. Traffic, in and of itself, is worth very little, and there’s no indication that readers are willing to pay for Mail Online, or that advertisers are willing to pay much for those readers. (The site’s revenue of $7.2 million is about 0.25% of DMGT’s $2.7 billion total revenue.)
DeGroote, here, is falling victim to the visibility fallacy: Mail Online is by far the most visible part of DMGT’s business, and so he thinks that it must account for most of the change in its share price. In reality, however, if DMGT decided to shut down the entire site tomorrow, its value would probably barely be affected. If you want to find a reason for why DMGT’s share price has performed so well of late, you’re going to have to look elsewhere.