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M&A FOR HR PLAYERS: Cost Per Customer...

Hey Kids, Can I Have Your Attention? (Quick - name the band, song and shooter game that features the the lyric and song... If you have teenage sons, they know the lyric... I'll throw the answer in the comments tomorrow...No Googling!)

But I digress... Shooter games, pop culture, technology. Let's get out of the normal HR world and talk Instagram-20101006-102306 about some metrics that can make you look smart when your company (small or large) is thinking about an acquisition.

Let's talk about Cost Per Customer...as it relates to M&A activity...

You heard that Facebook bought Instagram for over a Billion dollars right? Your first reaction was probably like mine - what were they smoking? That was actually your second reaction. Your first reaction was "how can I start a company like that and get PAID, yo...." So you think that price is crazy talk, right? Maybe. Maybe not.

One way to think about it in basic terms is cost per customer. It's a free service, but Instagram has 35 million users, so at a billion dollars, that works out to something like $29 per customer/user. Do you think Google overpaid a few years back for YouTube? What about Amazon overpaying for Zappos? And let's not forget the deal that made Mark Cuban a billionaire, Yahoo's purchase of broadcast.com. What were those deals worth from a cost per user/customer basis? Here's what the acquisition price says the same metric on those deals works out to:

--Zappos: Amazon looks to have bought them for $206 per user/customer (interesting since we know Zappos has revenue and I'm assuming they're profitable)

--YouTube: Google looks to have bought them for $49 per user (hmm. A little more apples to apples)

--broadcast.com: Yahoo paid a whopping 11,000 per user by my math (good bless Mark Cuban, a hard working guy who walked into one of the sweatest deals via timing and a bubble)

So based on those numbers, did Facebook overpay? I'm not sure they did, and after seeing the way kids are using Instagram both for pictures and as a social network on a recent vacation, I'd say they didn't.

Add cost per customer to your toolkit. Some interesting stuff results when you look at the world this way. You don't have to be right, you just have to have an opinion based on the language.

That's all it takes to look different from 95% of the other HR pros out there.

Post inspired by data at thebuildnetwork.com.

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