Thursday, April 19, 2007

Hitwise: biggest Aussie Internet buy-out?

Hitwise, arguably the best Web measurements service in the world and a true Australian success story, has been bought by Experian Labs for US$240 million. The company put itself on the block last December for an asking price of around US$360 million, so co-founders Adrian Giles and Andrew Barlow didn't quite get what they were asking for, but it's a pretty good exit nonetheless.

Revenues for last year were US$40 million, up 50% from the previous year, giving the deal an effective multiple of six times revenue. Compare that to the ten times revenue multiple of the Google-DoubleClick purchase. Hitwise's business model from the start - I interviewed them back in the 90s in a previous life when I was editor of Internet World Australia - was to sign exclusive deals with ISPs to place their software inside the ISPs' systems to siphon usage data. This model has proved defensible, scalable and profitable, and there's no one else who has even approached their technology and partnership lead in their space. Alexa may have gained more publicity, but Hitwise's numbers are far more respected in the marketplace because their methodology is relatively robust.

Hitwise's core business is actually like Google's AdSense product, in a way. In both cases, the target was a disparate range of potential customers to monetise their assets: in Google's case, every Web site with textual content; in Hitwise's case, ISPs who had terabytes of data pouring through their pipes. In both cases, if the provider in question had not come along, it's probable that by now no one else would have thought of it, or would have come up with less satisfactory solutions. At the least, whoever came up with the idea first was bound to get a significant first mover advantage, assuming critical mass. The killer feature of the respective products was their Net-nativity: AdSense evolved past the scattershot old media banner ad format by taking advantage of the online environment, and Hitwise superseded the Nielsen controlled logbook sampling technique by ignoring the shortcuts of probability theory and pushing the boundaries of what constituted a respectable sample. In both cases an old business model was massively scaled by removing humans from the equation, thus reinventing each industry for the Internet.

I can't recall any Australian Internet company being acquired for anything like that price. Congrats to Adrian and Andrew, as well as current CEO Andrew Walsh who is also an Aussie, and also Aussie investment firm Allen & Buckeridge who got a nice piece of the action. Hopefully the local media gives you all the kudos you so richly deserve for building a demonstrably global business.


Blogger L said...

Great, maybe other Australian companies can STFU about not being bought out with an overinflated valuation just because they're not in the US.

Or to put it another way; maybe your products just suck?

2:46 pm, April 20, 2007  

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