MySpace and the Analyst Posturing Game

Lots of people are understandably up in arms about an RBC analyst’s absurdly oversized estimate of MySpace’s value. In doing so, however, they are missing the point, and meanwhile encouraging more of this sort of silliness.

Like Henry Blodget during the bubble did with Amazon, and other analysts did later with Qualcomm, etc., putting up oversized estimates of a company’s value is mostly a marketing move for a financial analyst, not an exercise in company valuation. The number doesn’t matter; it is simply a piece of red meat to attact the media pack, like me saying, Tim Draper-style, that one of my portfolio companies is worth a billion dollars (which it is, of course). Come talk to me!

Pretending otherwise and writing rationally (or intemperately) about “look at me” numbers using logic, critical thinking, and financial sense is silly, like dancing about architecture. Like Mark Twain said when explaining why he doesn’t vote, “It just encourages them”.

Related posts:

  1. Dell on Playing the Analyst Game
  2. When Is an Analyst Not an Analyst?
  3. The Not-So-Wisdom of Analyst Crowds
  4. Yo, Anyone Speak Analyst?
  5. Juniper Demurs on Playing Beat the Analyst

Comments

  1. Hey, why aren’t you linking to HB? It’s frustrating reading this and now I have to Google the article up to read the story.

  2. Conscientious objector. Linking to these people just encourage them.
    More seriously, was posting from my Treo and it’s really f-ing hard to do hyperlinks.

  3. Forever Geek has a great post on how MySpace is really hyping its 100 million user number to the press. It’s a great study. The study checked out 303 profiles and found that 50% of users don’t even show up in a month. That’s a very high attrition rate! I wonder what happened to those 50 million users?
    Here’s what I think are possible explanations:
    * MySpace users have 2 accounts. Like free email accounts (think Hotmail and Yahoo), many people own more than one account – one for personal email and one for spam. So, if indeed, the average MySpace user has 2 accounts, then it makes sense that 50% of them won’t show up after a month.
    Read More

  4. Niki Scevak says:

    To play the contrarian here, what exactly is MySpace worth?
    You hint at “putting up oversized estimates of a company’s value” but what exactly should MySpace be worth? Similar to the discussion when Murdoch bought the company and that $600m was an absurd figure. But it’s frustrating to see any number people saying Murdoch overpaid or $15bn is too much – but what exactly are they basing that upon? Seriously. Would love to get your thoughts on how you would value MySpace if $15bn is too much.

  5. cmurphy says:

    So you are a fan of Elvis Costello, eh? I recognize the “dancing about architecture” line from his famous diss of music reviewers. Also, of course, your recent headline “watching the (hp) detectives”. Keep it up, man. At least some of us out here are enjoying the subtext.