The most surprising thing about RBC analyst Jordan Rohan's comment that MySpace could be worth $10-$20 billion in a few years is that he deemed this assessment "audacious"--and the press seemed to agree. Why is this audacious? In little more than two years, MySpace has come out of nowhere to become the 7th biggest site in the U.S. Per NetRatings, it now has 50 million monthly users--closing in on half of Yahoo!'s domestic user base--and it is still growing at a fantastic rate (a reported 250,000 sign-ups a day). MySpace recently signed a $900 million multi-year search deal with Google, showing that the revenue is starting to follow. Etc. Given all this, the theory that, in a few years, MySpace could be worth less than half of what Yahoo is worth with its now-battered valuation seems eminently reasonable. On its current trajectory, in fact, MySpace could end up being worth a lot more.
That said, of course, it is also conceivable that MySpace might not continue on its current trajectory, might not be able to meaningfully monetize the site, might get so clogged with sex-predator and teen-porn lawsuits that advertisers stay miles away, might fail to lock in a fickle user base given to pronouncing formerly cool trends as "so last year," might, in any number of ways, prove a major disappointment. It might even end up being worth less than Newscorp paid for it (circa $600 milllion). Right now, however, it is certainly headed in the right direction.
Jordan's careful packaging of a not-so-audacious hypothesis is probably in part the result of a research environment in which analysts are terrified of saying anything bold for fear of getting sued. For those who have watched the Internet for a while, however, the idea is far from outrageous. MySpace could easily be worth $15 billion in a few years, or more...or $1 billion, or somewhere in between.
The key now, for those trying to make a more refined assessment of the property's potential value, is to follow the money--on both sides of the ledger (revenue and costs). One big search deal--and an obsession with music-related content--will not a $15 billion company make.