How much was GoodReads worth? My calculation says $3 billion
Earlier today, BusinessWeek speculated that Good Reads — the terrific social network founded by Otis Chandler and Elizabeth Khuri Chandler — was acquired for about $1 billion.
Like most people who read this headline, I immediately clicked the article, drove a unique visitor to BusinessWeek, viewed an advertisement, and contributed a tenth of a penny to Michael Bloomberg’s net worth.
I then read a ridiculous article that made nonsensical claims about valuing social networks. It claimed that valuing “users at $55 each” would make sense, though the author — Kyle Stock — felt that was still too low. Since it only added up to $880 million, once you factor in the company’s 16 million registered users.
Mr. Stock points out that Instagram — which received a valuation that was two times what the venture community would pay — only went for “$29 per Instagrammer.” But for some reason he thinks that GoodReads breaks that mold. Never mind that Instagram was experiencing massive growth and fit all of its 35 million users into a very narrow time window (compared to seven years for GoodReads).
Anyhow, the point of my article is not to denounce the sticker price that the wizards at BusinessWeek suggested. After all, people thought that Sarah was crazy when she valued Digg at $180 million in 2006.
My goal is to one-up the amateurs at BusinessWeek by proposing a far bolder speculative price for Good Reads — $3 billion.
Sound crazy? Perhaps, but consider my three valuation methods, all of which dovetail to the same amount.
1. The "March Madness" theory of GoodRead’s valuation
As everyone knows, Marquette won their upset game against Miami last night in the Sweet Sixteen round of the tournament. What seed was Marquette? They were the No. 3 seed. Coincidence? Look deeper...
Tonight, Florida is playing a can’t-lose game against measley FGCU — a school so irrelevant that nobody even knows what FGCU stands for. What seed is Florida? You guessed it, a No. 3 seed.
Then let’s factor in Michigan State vs. Duke. We can all assume that Duke will lose, after their early exit last year to Lehigh. This means that Michigan State is sure to go through to the Elite Eight. What seed is Michigan State? No. 3.
All of this would seem to imply the obvious — the No. 3 has to be an omen that explicitly indicates GoodReads' value. $3 billion.
If GoodReads had only been worth $1 billion, then Gonzaga and Indiana would be on the cusp of winning this tournament. They’re not. They went home. Case in point.
2. The "Number of Goldberg Children" theory of GoodRead’s valuation
Everybody knows that there are three Goldberg boys. Brandon, Bryan, and Alex.
If you take the number of Goldberg sons — and put the standard Reading Enthusiast Social Network’s multiplier of $1 billion on that metric — it gets you a market value for Good Reads of... $3 billion.
Not convinced? The plot thickens...
As it turns out, the company’s co-founder, Elizabeth Khuri, has a brother named Paul who grew up with my older brother. He’s practically family. And it is highly unlikely that with this knowledge in hand, Elizabeth would have accepted one penny less than $3 billion for her company. She knew the number of Goldberg children. Thus, she knew the market value for her website.
Given the same circumstances, would you accept a pathetic sum like $2.9 billion for your company? I wouldn’t. And I would be stunned if they did.
3. The "Game of Thrones" theory of GoodRead’s valuation
[Warning, minor spoilers included]
This theory of GoodRead’s valuation is so sound that it basically ameliorates any remaining doubts.
First, what is the most popular book saga on GoodReads? You guessed it, it’s the George R.R. Martin series that featured "A Game of Thrones."
And what season of "Game of Thrones" is airing on HBO? No. 3.
Oh, isn’t that interesting? And which of the seven books in the series do people love the most by far? Yup. No. 3. Two of them have yet to be released, but that doesn’t matter, there is no way you can top book No. 3.
But that’s not the real explanation. That’s just the appetizer.
For those of you who have read the books — and I know that the employees of Good Reads all have — you will no doubt recall the War of the Five Kings, the central conflict in the struggle for Westeros.
Wouldn’t such a conflict imply that Good Reads was worth $5 billion? One for each king, right? Well, it might have, but here’s the rub: Throughout the third book, there are no longer five kings. Everyone knows that Renly Baratheon was killed in one of the most pathetic and cheap deaths in the history of novels. A ghost-shadow born out of a fire-worshiping priestess? Give me a break. I cringed when I watched that scene on HBO, because it’s so damn unfair. He was going to win the war for sure.
But there’s another death. I won’t spoil who it is, but another king is going to die before this season is over.
This leaves us with… [cue suspense music]… THREE KINGS.
Oh, and did I mention that "Three Kings" is also the name of a hit movie staring George Clooney?
When you assemble the evidence, this argument is so persuasive, that we can all laugh at the idiots at BusinessWeek, who totally missed the valuation on this.
GoodReads isn’t worth a cheap $1 billion. It’s worth $3 billion.