Enterprise valuations of companies comprising the SEG Internet Index varied widely by Internet category in 4Q11 (Figure 26). Despite a 15% drop YoY, Internet Travel companies closed 4Q11 with the highest median EV/Revenue multiple, 5.5x. The category benefitted from the strength of HomeAway (11.4x), newly listed in 2011, and Ctrip (6.4x).
The Internet Services category was also favored by investors, closing 4Q11 with a median 5.1x EV/Revenue, a 59% YoY improvement. Five high flyers in the Internet Services category finished 4Q11 with median EV/Revenue multiples above 10x: Qihoo (14.0x), Jive Software (12.5x), Zillow (12.2x) and Angie’s List (11.3x). All but Qihoo went public in 2011.
The Media category saw the largest YoY decline in EV/Revenue, closing 4Q11 with a median multiple of 1.8x, 36% lower than a year earlier. The decline in median EV/Revenue of this Internet category at the close of 4Q11 was in part attributable to the falling market values of DemandMedia (1.6x), AOL (0.5x) and Local.com (0.7x). But the Internet stock with the largest negative impact on the category’s median multiple in 2011 was Netflix. Following its confounding decisions to raise prices and split its DVD mail and online streaming businesses, the EV/Rev multiple of Netflix went into free fall, nose diving from a 5.4x EV/Revenue multiple in 2Q11 to 1.4x at the close of 4Q11.