Was Bookabach a bargain?

AA bought into Bookabach – so what are they getting and how much is it worth?

I’m arguing they got a bargain, even though I don’t know how much they paid for what % or even how much bookabach makes. Here’s the reasoning and estimation:

The site looks great – very well laid out and simple to use.  It’s a great concept as well – matching empty baches with people looking for a place to stay. It fits with AA’s aim in life.
There are 1884 listings on bookabach right now.

Those listings attract a yearly fee of $149 each, but there is a discount structure for folk with multiple listings. There is also a free trial period. So I’m going to make the assumption that the average discount is 20% and that 10% of the listigns are freebies. That means the average listing price is probably closer to $110.

$110 x 1,884 = $207,000 odd, which is a good ballpark for annualised income from listings right now.

Given the summer season we should assume that the listing numbers are on the back of some strong recent growth, and the founders state they are seeing 100% growth per year.

There are also APN ads on the site, and they have had an advertising partnership since early September. At around 10,000 UB’s and 200,000 PI’s per week, and at a CPM rate of $35 per banner/skyscrapper that’s potential gross ad revenue to APN of  $15,000 or so per week.

Now we need to factor in a few things, like sell through rate (% of times there is a paid ad – e.g. 50%), yield (average discounted price – e.g. 80%) and net commission (what percentage Bookabach recieves of ad revenue – e.g. 80% of 80%). We also need to determine what Bookabach receives when an advertiser buys ads across the entire APN network. (e.g. bugger all)
Right now the ads are looking pretty APN-ish (e.g. for Search4jobs), so I’m going to go wild using the assumptions above and estimate Bookabach makes about $4k a week out of those ads. So that’s another $200,000 per year, but they have only been making that recently.

So overall right now Bookabach is making an annualised $400,000 a year or so, plus or minus about $100,000.

Expenses. What about expenses?  Annoyingly there is no ‘about us’ of any meaningfulness, so the site has no personalities behind its personality.

From the Scoop press release above we find there are two founders, and they are on the third iteration of the website. That means they have either been semi or full time, or they have paid folk to do it all for them. The site is slick, so either way is not cheap, and they would need at least one or two customer service staff.

They seem to have had strong word of mouth growth, and I see no Google ads from here in Australia, so ad spend seems low. That reeks of a low spend culture (similar to Trade Me) so I’m going to guess that expenses (before AA) are about $300,000 a year.

S o that’s income of about $100,000 a year. If that is growing at 30% then the company is worth about $1.5m. I’m guessing AA paid a chunk more than that as the NPV is much higher when you can cross-promote to AA members.

Actually I think the founders did themselves a real disservice if they sold for that sort of money.

The real value of Bookabach is much much higher, if they follow a tweaked version of the standard industry model and clip the ticket per sale.

TravelBug grabs 9% of sales made through the site, and Bookabach could do similarly, now they have scale. At, say, $150 rental per night on average, and an average sell through rate of, say, 25% that’s $25m worth of sales per year going on.

Now that sell through rate may be way to high, but you get the scale. If Bookabach charged a 5% fee then they stand to grab $1.2m odd. 10% and that is $2.4m. An alternative way to go is to charge a fixed fee of say $45 each time a listing is sold, or say $10 per day say.

When your site is making $1 or 2m a year then your valuations are going to be in the $15-40m range, without factoring in growth.

AA bought in as a JV partner, and the press release wording makes it sound like they got 30-40% or so. So if AA gets it, and they should, then they should have paid up to $10m or so for that 30% or so of Bookabach.

I’m guessing they paid much less than that.

One caveat – Trade Me can step into this market at any time – they just have to take over Vianet’s rather clunky interface and build their own. So temper that valuation estimate with a fair degree of risk.

Published by Lance Wiggs

@lancewiggs

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