Update on last week's BW cover

Red Herring has followed up with the main characters involved in last week’s BusinessWeek cover that caused so much consternation among business reporters and bloggers.

If you missed it, the cover (see left) stated that Digg.com founder Kevin Rose was worth $60 million. Rose denies the valuation, and also said that BusinessWeek reporter Jessi Hempel struck out in saying the Web site was breaking even.

Said Rose: “I’m not a multimillionaire. I’m not even a millionaire or a thousandaire; I don’t know how they came up with that cover. It’s all estimates and paper fake money.”

Meanwhile, Hempel is standing by her reporting. She replied, “The $200 million valuation [for the entire company] came from exhaustive reporting from several sources in the valley who are knowledgeable about web properties.”

Red Herring evaluation: “To look at this another way, the $200-million valuation is roughly 66 times current revenue. Put in context, when News Corp. paid $580 million for Intermix, the parent company of MySpace, the offer was seven times company revenues—and News Corp.’s offer was called stratospheric at that time.

“Users can be another benchmark of a company’s value. At the time of the News Corp. acquisition, MySpace parent Intermix had 27 million unique users, valuing the purchase at $21 per user.

“By that measure, if Digg were acquired for $200 million with 1.35 million unique visitors, according to comScore Media Metrix’ traffic estimates, it would be valued at $148 per user.

“Applying the $21 per user multiple assigned Intermix to Digg, essentially multiplying Digg’s 1.3 million users by $21, would give a valuation of $27 million. Take 30 percent of that and Mr. Rose would have a net worth of $9 million.”

Read more here.