Om Malik wrote an interesting article in Business 2.0 about valuing eyeballs in some recent Internet deals (for example, Myspace.com, Weblogsinc.com). Malik also has a blog called gigaom.com.

Malik's article is interesting. He has related contemporary site sales with theories of the late 1990s and early 2000 when one could sell Web sites based on eyeballs (monthly unique visitors) and projections (interestingly Malik gives a backhanded compliment to our JupiterResearch division by suggesting that JupiterResearch was mocked for its "over the top" Internet advertising projections made in 2000 for 2005, but that now we can see thatJupiterResearch was just about on the mark!).

Malik has his own formula in the above referenced article showing the value of monthly unique visitors in relation to the purchase price of various properties. Jason Calacanis who recently sold his Weblogsinc.com to AOL, fires back at Malik stating that Malik's formula is not correct and that sites should only be valued on multiples of revenue and that valuation should have little do with pure traffic.

Let me digress a bit at this point in this post. In the mid-1990s, probably well before Om Malik was writing about the Internet, Steve Harmon of Mecklermedia was blazing a trail creating metrics much like what Malik has proposed. Harmon left Mecklermedia in 1998 and set up his own company and has had an up and down history since, but it is interesting to note that Malik is recycling much of what Harmon was doing 10 years ago.

My own two cents on all this: Calacanis is correct in that real value depends on eyeballs that produce revenue. Malik, however, is correct in suggesting that "eyeball" value is heating up again. Myspace.com is the perfect candidate for what Malik is questioning. Myspace is a rapidly growing site. It could well be the bluemountain.com site of today that Malik mentions in his article (ExciteAtHome paid $780 million for bluemountain.com many years ago. The site had no revenue. I have no idea what its value is today, but I am sure that that value is a mere sliver of $780 million).

David Hornik, quoted in Malik's article sums up my viewpoint on this matter --- "not all pageviews are created equal." This has been proved over and over again since 1996.

By the way, I must give credit for learning about the ideas behind this post from reading an article by Dan Mitchell in the December 3, 2005 issue of The New York Times entitled "Eyeballs Are Back, or Maybe Not." I would suggest that Dan Mitchell too was not writing about the Internet in 1995!