How Much Did Amazon Pay for Goodreads? Breaking Down the Speculation

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

Was it $10 million, $100 million, closer to $1 billion, as one reporter speculated?

We’ll probably never really know, but here’s a summary of the speculation of how much Amazon paid for Goodreads.

On the high end, Bloomberg Businessweek speculates close to $1 billion, “Based on the market for monthly users, probably somewhere close to, but not quite, $1 billion.”

The guess is based on the valuation of each user on other social networks. For instance, LinkedIn has 202 million users and a current market cap (its stock price multiplied by its outstanding shares — basically, the overall value of the company) of roughly $19 billion, meaning that investors value each user at $95.

That’s the high end. The low end is Instagram at $29 per user at the time of its $1 billion sale to Facebook. Other social networks are somewhere in between. Bloomberg Businessweek reasons that if you value Goodreads users at $55 a head, 16 million of them would value the company at $880 millon.

Even if you gave it an Instagram-like valuation, the company would be priced at $464 million.*

Heavy-hitting reporter Kara Swisher at AllThingsD says, “nuh uh.” She is claiming to have talked with two “sources familiar” with the situation who say the price was $150 million with the possibility of it hitting $200 million based on Goodreads hitting several milestones. She also reports that the deal was mostly cash but some stock as well.

On my end, one very smart digital publishing person who has no direct knowledge of the matter said they would be shocked to hear that it was in the nine-figure range ($100 million or more). Another speculated a price of about $100 million.

For my part, I have no direct or indirect knowledge of this, but I would guess in the $100 million to $200 million range. I would even piggyback on the Businessweek reasoning that gave us the near-$1 billion valuation. However, knowing a bit about how the book-publishing industry operates, I doubt that even the most persuasive investment banker could get Amazon to shell out that kind of change for anything less than the Barnes & Noble network of bricks-and-mortar retail stores.

Also, as another publishing smart-pants pointed out to me, with about $8 billion in its war chest, is Amazon spending that much of it for a 16 million-person social network that is focused on only one part of its business? The company is more likely focused on building out its prime offering with content deals and original IP, developing a reliable and worldwide same-day delivery program and continuing to grow its business-to-business technology services operation. Each of those things require heavy investment.

* Disclosure: I was quoted in this article, though not asked to comment on the valuation Businessweek developed or my own thoughts on what Amazon might have paid.

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