Six out of seven companies in the (Social) category grew TTM revenue growth rates that were at least twice that of the median Internet growth rate in the third quarter.
This excerpt is from our complimentary Q3 2012 Software Industry Financial Report which can be downloaded here: http://www.softwareequity.com/research_reports.aspx
Compelled by market forces to scale rapidly, then monetize, the Social product category racked up the highest median TTM revenue growth rate (66.1%) among all Internet companies in Q3 (Figure 23). Six out of seven companies in the category grew TTM revenue growth rates that were at least twice that of the median Internet growth rate in the third quarter: LinkedIn (101.9% TTM revenue growth), Facebook (88.0%), Mail.ru Group (75.4%), Yelp (74.5%), Jive (56.8%) and Renren (54.1%).
Three other product categories finished 3Q12 with TTM revenue growth rates above the Internet sector median: Services (41.9%), Ad Tech & Lead Gen (34.5%) and Gaming (32.0%).
Revenue growth in the Services category was boosted by strong TTM revenue growth from Qihoo (169.9%), Zillow (99.4%), Angie’s List (69.7%) and Shutterfly (52.4%). Companies within the Ad Tech & Lead Gen category continued to benefit from the dramatic growth in advertising dollars migrating from offline to online, as well as from increased spending on lead generation services. Notable examples in this category include Groupon (117.6% TTM revenue growth), LinkedIn (101.9%) and Baidu (74.0%).
Gaming, as it has for most of 2012, achieved what was arguably the best overall financial performance among all Internet categories in Q3, posting an impressive 32.0% median revenue growth rate and a stellar median EBITDA margin of 43.9%. Gaming companies posting strong TTM revenue growth and EBITDA margins included Tencent Holdings (49.4%TTM revenue growth, 43.9% EBITDA margins) and ChangYou.com (47.2%, 54.7%).
Infrastructure and Commerce categories posted a median EBITDA margin of 8.3% in 3Q12, the lowest of all Internet product categories. The profitability of Internet eCommerce providers has historically lagged other categories due to the significant revenue sharing inherent in their business model, as well as sometimes significant infrastructure related expenses. As testament, Amazon posted an EBITDA margin of 3.6% in 3Q12.
By contrast, eCommerce providers with business models that eschew inventory management, logistics and distribution expenses were able to achieve considerably higher levels of profitability. As example, eBay generated EBITDA margins of 28.0% in the third quarter