The bell tolls for Classmates.com
Classmates.com has filed for an IPO. The company is valued by the underwriters at $600-700 million. Tech Crunch gives a nice overview of the terms:
-Revenues the first nine months of 2007 weer $140 million. (Full-year 2006 revenues weer $139 million; 2005 revenues were $85 million).
-Net income the first nine months was $1.6 million. ($1.9 million loss in 2006; $8.2 million loss in 2005).
-50 million registered users as of September, 2007. Only 12.8 million of which are active and 3 million of which pay on average $3.33 a month to email and connect with old friends directly.
-Monthly churn of 4.6 percent
These numbers would not normally have justified an IPO, but they are obviously trying to cash in on the Facebook lollapalooza. Classmates is not really a social networking company, well maybe they are. They are, however antiquated and have been or soon will be replaced by Facebook. Unfortunately for Classmates, niche businesses like theirs often lead the way for broader, more pervasive plays. It took companies like Classmates to make Myspace acceptable and ultimately pave the way for the wheeled juggernaut that used to be Facebook.
I am afraid that in the long run, companies like Classmates are not actually businesses, they are products; perhaps one of a long line of offerings in a larger company. Regardless of how the stock performs at the IPO, I question the long-term viability of one-trick pony social networking companies.
Posted on November 27, 2007