Wikia: Making Money Yet?, Or a really bad business model? Options Rating

[GlassBeadGame]

I recently saw a claim in a sycophantic piece of coverage that Wikia was the 75th most popular website. That didn't sound right, and its not. Wikia.com has an Alexa rank of 216 (world) and 116 (USA). That seems not too shabby. Probably much better than the Web 1.0 equivalents of Geocities, Anglefire or Tripod ever had. Has Wikia started to make significant money yet or is the business model so FUBAR to make even a lot of traffic not amount to success? Greg?

[thekohser]

Jimbo's going by the Quantcast system, not Alexa.

These ranking systems are not foolproof, and you can see Wikia's already back down to 105 from the recent 75 claim. (Or is that "clam"?) (NSFW)

I've tried to figure out Wikia's bottom line, and all I've ever been able to conclude is that maybe after paying their own office rent, collect the sub-lease money (now ceased) from the Wikimedia Foundation, pay staff, return the trampoline to the trampoline store, and rake in ad-click money...

Wikia might be clearing $10,000 to $20,000 per month in profit margin.

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

[Push the button]

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

Except, of course, the investors' investment was into equity, and not into debt.

[Milton Roe]

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

Except, of course, the investors' investment was into equity, and not into debt.

(IMG:smilys0b23ax56/default/biggrin.gif) (IMG:smilys0b23ax56/default/biggrin.gif)

You do know that the shareholders in a for-profit private corporation are last-in-line to get paid? All creditors are paid before owners can claim anything against assets (positive equity). The whole idea is the corporation's debt is the shareholder's debt also, up to the amount they invested. They can't choose to just "invest in equity", if by "equity" you mean something positive. The owners of Wikia, Inc., a Delaware corporation, have equity, all right, but it's negative equity right now. It's probably about equal to the amount of money they put in and may never get back out.

[GlassBeadGame]

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

Except, of course, the investors' investment was into equity, and not into debt.

(IMG:smilys0b23ax56/default/biggrin.gif) (IMG:smilys0b23ax56/default/biggrin.gif)

You do know that the shareholders in a for-profit private corporation are last-in-line to get paid? All creditors are paid before owners can claim anything against assets (positive equity). The whole idea is the corporation's debt is the shareholder's debt also, up to the amount they invested. They can't choose to just "invest in equity", if by "equity" you mean something positive. The owners of Wikia, Inc., a Delaware corporation, have equity, all right, but it's negative equity right now. It's probably about equal to the amount of money they put in and may never get back out.

Probably meant "equity, not debt" as in "shares, not bonds." If all the investors took "equity positions" (stock) there should be no debt other than ordinary payables. Previous losses would be reflected as lower equity on the balance sheet.

[Milton Roe]

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

Except, of course, the investors' investment was into equity, and not into debt.

(IMG:smilys0b23ax56/default/biggrin.gif) (IMG:smilys0b23ax56/default/biggrin.gif)

You do know that the shareholders in a for-profit private corporation are last-in-line to get paid? All creditors are paid before owners can claim anything against assets (positive equity). The whole idea is the corporation's debt is the shareholder's debt also, up to the amount they invested. They can't choose to just "invest in equity", if by "equity" you mean something positive. The owners of Wikia, Inc., a Delaware corporation, have equity, all right, but it's negative equity right now. It's probably about equal to the amount of money they put in and may never get back out.

Probably meant "equity, not debt" as in "shares, not bonds." If all the investors took "equity positions" (stock) there should be no debt other than ordinary payables. Previous losses would be reflected as lower equity on the balance sheet.

I suppose, but the fact that corporate bond-debt doesn't show up as investor negative equity on the books in any sort of accounting, doesn't mean it isn't effectively there anyway. The bond holders are actually in a better position than the stockholders. When the company is liquidated or sold, those bonds have to be paid before the "equity-investors" get anything, so it's effectly an extra debt taken out against the possibility of equity-holders ever making a return (if not an actual liability for them personally, beyond the fact that they stand to lose their initial investment only. But then that's all the liability that bondholders have, too.).

Of course that's the reason why many small limited liability corporations can't get loans at all without somebody countersigning for them, so that they ARE personally responsible. That's so that LLC corporations can't declare bankrupcy with impunity, defaulting on their debt without affecting anybody's real-life credit. Only larger LLC corps (GM comes to mind) get to do stuff like that.

BTW, don't you think the Obama team is rather sweet? They gave all that fed money to banks, and then expected that the recued banks would turn around and put the money into the same kinds of bubble investments that got them into trouble in the first place. No, they're not doing it. So now, Obama's plan is to force them to. Which is ALSO sort of how they wound up making all those crappy loans. The feds always think they can turn a high-risk loan into a low-risk one, by passing a law! As I said, I'm waiting for one of Obama's advisors to announce that this Administration can command the tides and otherwise amend the laws of physics. (IMG:smilys0b23ax56/default/hrmph.gif)

[Push the button]

Now, remember, the investors are trying to recuperate $14,000,000, so that's going to take about fifty-eight years to break even, unless the pace picks up.

Except, of course, the investors' investment was into equity, and not into debt.

(IMG:smilys0b23ax56/default/biggrin.gif) (IMG:smilys0b23ax56/default/biggrin.gif)

You do know that the shareholders in a for-profit private corporation are last-in-line to get paid? All creditors are paid before owners can claim anything against assets (positive equity). The whole idea is the corporation's debt is the shareholder's debt also, up to the amount they invested. They can't choose to just "invest in equity", if by "equity" you mean something positive. The owners of Wikia, Inc., a Delaware corporation, have equity, all right, but it's negative equity right now. It's probably about equal to the amount of money they put in and may never get back out.

Probably meant "equity, not debt" as in "shares, not bonds." If all the investors took "equity positions" (stock) there should be no debt other than ordinary payables. Previous losses would be reflected as lower equity on the balance sheet.

I suppose, but the fact that corporate bond-debt doesn't show up as investor negative equity on the books in any sort of accounting, doesn't mean it isn't effectively there anyway. The bond holders are actually in a better position than the stockholders. When the company is liquidated or sold, those bonds have to be paid before the "equity-investors" get anything, so it's effectly an extra debt taken out against the possibility of equity-holders ever making a return (if not an actual liability for them personally, beyond the fact that they stand to lose their initial investment only. But then that's all the liability that bondholders have, too.).

Of course that's the reason why many small limited liability corporations can't get loans at all without somebody countersigning for them, so that they ARE personally responsible. That's so that LLC corporations can't declare bankrupcy with impunity, defaulting on their debt without affecting anybody's real-life credit. Only larger LLC corps (GM comes to mind) get to do stuff like that.

BTW, don't you think the Obama team is rather sweet? They gave all that fed money to banks, and then expected that the recued banks would turn around and put the money into the same kinds of bubble investments that got them into trouble in the first place. No, they're not doing it. So now, Obama's plan is to force them to. Which is ALSO sort of how they wound up making all those crappy loans. The feds always think they can turn a high-risk loan into a low-risk one, by passing a law! As I said, I'm waiting for one of Obama's advisors to announce that this Administration can command the tides and otherwise amend the laws of physics. (IMG:smilys0b23ax56/default/hrmph.gif)

Thanks for the impromptu (and a bit unnecessary) Corporate Law 101, but my point was a simple one, that Mr. Kohs was, in his original post, confusing the position between an equity investor and a debt investors.

Whatever terminology one uses, and I was using UK terminology, Amazon et. al.'s investment was an equity investment into Wikia, and not a debt investment by way of a loan to it. They're not trying to recoup their investment through the dividends that any profit would presumably generate (and debt investors wouldn't be repaid out of profits, as repayments of interest and capital to them would come out much further up the profit and loss account), they'd recoup their investment on one of three exits - a float, a sale, or a solvent liquidation. Claiming that whilst Wikia generates $20k a month profits they'd have to wait 58 years to break even was, therefore, mixing the two. Depending on your valuation mechanism, they may well have already broken even on their investment, if their stake is worth the same as or more than they originally invested . Dividends flowing from monthly profits are, well, profit.

To pick up on one of your points, Milton, whilst debt-holders would be paid out before equity holders in a solvent winding up (and either partly, in whole, or not at all on an insolvent winding up), that's not necessarily the case on a sale. In that situation whether or not bond-holders would be paid out would depend on the terms of the bond (on the presumption that US corporate bonds are broadly equivalent to, say, UK loan note instruments). A proposed sale could be a trigger for repayment, but there's absolutely no reason why the one must trigger the other. The transaction between the equity-holders and the people purchasing their shares is a completely separate arrangement to the day-to-day financing of the company and its operations. A bank wouldn't necessarily be in a position to insist that an overdraft owed to it by a company be repaid before the owners of the company can sell there shares, for example, and depending on the terms of the bond the same analogy will extend to bond holders.

And if we're being really picky in my original post I could also have pointed out that $10k to $20k a month is profit, and not a profit margin. 10% to 20% would be a profit margin. But hey, who cares.