What’s wrong with this BusinessWeek cover?

What’s wrong? How about the fact that the article is completely devoid of substantiating the $60 million figure. Worse, it’s clear that there is no way they can substantiate a valuation for a private, non-profitable company that isn’t even for sale. BusinessWeek could have selected any number of impressive factoids to use based on traffic, stories, links, reach, etc. but instead went with a fictitious and misleading number. Shame on them. They should leave that type of reporting to people like us.

We’re on the only ones who think so.

From Techdirt:

BusinessWeek has written the ultimate Web2.0 hype piece without the slightest hint of skepticism about the numbers that it throws around.

…the article doesn’t identify these “people in the know” who figure that a profit-less site is worth 60x revenue. It also never explains how Kevin Rose made $60 million (probably because he didn’t actually make that money), though we’re guessing that they calculated his share of that $200 million, based on his stake in the company. Still, you’d think they wouldn’t ask their readers to guess about how they arrived at $60 million, since they saw fit to put that number on the cover.

From Weblog’s Jason Calacanis:

DIGG is making $3M a year from what people are saying. That would give them a 65x revenue, and if they have $500k in profit a 400x earnings multiple ($1M in profits would give them a 200x earnings multiple).

From CNN/Money:

And BusinessWeek rapidly cops to the cover line being pure fiction: “So far, Digg is breaking even on an estimated $3 million annually in revenues.”

And from PaidContent:

“…has to be the most fisk-worthy Web 2.0 story ever written…”

The problem is not the subject, Digg, and the founder/team, who deserve credit for what they have created, but BW’s treatment of the whole story. It is riddled with so many inanities, without any sense or logic, or journalistic norms, it sounds like a parody of a parody.

Factual errors, false deductive reasoning, and the general lack of awareness of the dynamics of Internet M&A.

Others on this: Blogging Times LeRoy’s Evolving Web and Micro Persuasion

Taggs: businessweek

This entry was posted on Friday, August 4th, 2006 at 3:50 pm by Insider and is filed under How Not To Succeed In Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.