In 2005, mobile media companies sold at an average forward-year revenue multiple of just 1.4X, the lowest multiple we have seen since 2008. Deal multiples hit a high of 9.0X in 2014 thanks to Facebook’s $19.5 billion Instagram acquisition, which alone comprises of about half of the total $38.6 billion of the 97 deals we have tracked over the last decade. All-in, the average forward-year revenue multiple for all mobile media deals in our database is a high 6.3X, or 3.1X if we exclude WhatsApp. Click here for the details of all 97 deals.
We believe that some of the pressure on revenue multiples comes from muted future growth expectations now that Smartphones and apps have nearly reached market dominance. For instance, in 2010 the U.S. was home to 74.3 million Smartphone users and that number was rising fast. At the end of 2015, the figure had nearly tripled to 221.3 million, but fresh Smartphone net adds had slowed considerably. In addition, Yahoo, Zynga and Gree all reported large write downs on their respective acquisitions of Tumblr, OMGPOP and OpenFeint, which all closed several years ago.Excluding the Facebook/WhatsApp deal from 2014's data, the best recent year for deal multiples was 2012 when the market hit a multi-year high of 7.4X. In 2015, which was mundane by comparison, three of our seven comps were for fairly established businesses (Millennial Media, Muve Music and Wimp), each of which sold for a multiple below 2X. Neither Millennial nor Wimp were reporting operating income at the time of sale. The Deezer acquisition of Muve Music may have come in at a low 0.4X revenue multiple because the deal only included certain assets and excluded the outright acquisition of Muve Music subs.
While mobile has consumed the Internet, it appears valuations, for now, are earning slimmer exits.