Disney has officially lost its mind. The Immodest Mouse bought Club Penguin, a social networking site for the tween and pre-tween demo. As the name suggests, Club Penguin allows you to make your own penguin avatar and enter a virtual world where you can endure the brutal, constantly near-death existence of a penguin to the High School Musical soundtrack. Nothing eases the pain of standing on the outer edge of a pack during a blizzard on the verge of starvation and metabolic shutdown than “We’re All in This Together.”
Capitalizing on the popularity of penguins, who have displaced the morbidly obese in Hollywood as the de facto generators of lazy comedy (we all know, from Eddie Murphy movies to Big Momma’s House to Tyler Perry that everything fat people do is hilarious, but we are just beginning to discover that everything penguins do is hilarious, like surfing, dancing, or getting eaten), Club Penguin was founded by three Canadian dads in 2005. The site is ad-free, which makes it all the more un-monetizablelicious.
Disney paid $350 million for Club Penguin. The site must be huge to generate a price that’s almost 70% of what MySpace went for, right? Here’s the kicker – the site has 700,000 users. That means that Disney paid $500 per user (on what we’re sure is a pretty sad revenue number). Disney, deciding this wasn’t ridiculous enough, has promised another $350 million by 2009 if the site meets its growth targets.
The Wall Street Journal reports that the Club Penguin founders “decided to sell now because the company had got to a point where it needed a partner to grow.” That and they realized they hit the jackpot by coming across a drunkenly irrational mouse.
When Zuckerberg heard this, he instantly upped the required facebook bid in his head to $35 billion.
Disney Buys Kids’ Social-Network Site [Wall Street Journal]
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For fuck’s sake. It’s not $500,000 per user and it’s not $5,000 per user, it’s $500.
you didn’t really just delete those comments did you?
is someone a bit insecure about his little mistake there?
no no no its just insane
No, but I’m still embarrassed. For everyone who missed it, my math was wrong.
They didn’t teach us that whole place value thing in Magic of Numbers.
Cheers,
Keith
this may be a clue as to why KH is no longer working in finance and is writing about it.
Hehe wow keith i usually defend you around here but damn, that was glaring.
a million bucks a user eh?
Didn’t keith go to harvard?
We all know they are big picture people, don’t expect them to do their own math. This one is probably some intern’s fault.
it’s tough when you always mess up some mundane detail like that
numbers are pretty
hahvood is so overrated … remember sowood anyone? they weren’t good with numbahs either!
Who wants to make a “social networking Web 2.0 paradigm” website for toddlers? We will only sell out for no less than $800 a member.
-Toddlers need friends too, gotta start early.
Obviously none of you have children, or you’d know how wildly popular Club Penguin really is. Also, stop and think about the revenue possibilities of 700,000 subscribers paying $58 a year… since Keith is bad at math, it comes to $40,600,000. Not too shabby considering the fact that other social networking sites rely upon advertising rather than subscriptions. In reality, may be it was News Corp. that over paid for MySpace, and Disney who got the steal for Club Penguin.
From Seeking Alpha:
But Disney, how closely did you look at the numbers, or is this a strategic acquisition where math and those guys from finance are not allowed into the meetings? Penguin currently has approximately 700,000 paying subscribers, and yes it is growing quickly. But it only generates gross revenues of $5.00 per subscriber, which is only $3.5 million. That’s only a 1% yield assuming there are no expenses.
$5.95 per MONTH, plus merchandise, according to Bloomberg news. According to my HarvardMath, that’s $71.40 per user a year or $50mm, gross. So they pay a dot-com-type multiple, but it is only 0.5% of their market cap, so a moment of insanity shouldn’t drag them down too much. Isn’t that less than they paid Mike Ovitz to leave?
Shockingly enough this is a Bubble2.0 deal where the numbers make sense. DIS being the leaders at monetising youth IP through merchandise, DVDs, happy meals, park visits, etc.
Great deal, and great idea. I’m kicking myself because I haven’t built and sold a company in 20 months recently for a few hundred million. Very depressing!
They lost their minds when they hired Miley Cyrus