Why a $400M price tag for Forbes is too high

Ken Doctor writes for the Nieman Journalism Lab about why the $400 million asking price is too much for Forbes Media, the parent of Forbes magazine, and he examines its growth projections for the next five years.

Doctor writes, “Let’s now look at the projected (2013-2018) numbers. Most striking is the earnings (or EBITDA line). Forbes says they will triple in five years, from $20.8 million to $62.3 million, even though they’ve grown only 25 percent in the last three.

“But revenue is projected to increase just 45 percent, to $209.9 million from $144.6 million. In the offering memo, Forbes doesn’t clearly explain why its projected cost increases are so much lower than its revenue increases.

“As important as the projections is the changing marketplace Forbes operated in.

“Forbes.com’s ad revenue is projected to move from $42 million in 2012 to $86 million in 2018. ‘Display advertising impressions are expected to increase in 2013 with rising traffic worldwide, and doubling of site visits resulting from increasing smartphone use. Increase in available display impressions, number of BrandVoice partners and success of the programmatic sales effort is expected to drive this increase in advertising revenue. Revenue is projected to grow at a CAGR of 8.7% through 2018 via a combination of increased traffic, new engaging products, improved sell-through at relatively steady rates and increased performance in programmatic sales.’

“That is, in one word, optimistic.”

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