Agloco

1. http://tkfiles.storage.msn.com/x1pb...NhDYwv4VcjoomNc
   
   
   
   
   
   
   
   
   
   
   
2. Expenses – operating costs seem to be dominated by:
   • Servers and bandwidth – since most of the communications with users are coming from search company servers and ad network servers it would seem should be a relatively small amount.
   • Sales and business development – passionate MBAs etc –while expensive people, this should still be a low cost as a percentage of total revenue
   • Customer services – lots of users, lots of questions – AGLOCO has started by using teams in India, China and the Philippines. Most communication is email so language should not be a significant problem
   • Technology - should be much simpler than a Yahoo or Google as AGLOCO is not building much (a toolbar is a known and simple technology platform.)
   • General and administrative costs need to include processing user payments (PayPal and others make this cheaper) and the management company fee of 10%

A reasonable estimate two years out (assuming 2 to 3 million AGLOCO users) would be a 20% to 30% cost structure - as a % of gross revenue

• Given market comparisons,; a growing community of two million users with revenue above $100 per user and heading toward $200, $300 or $400 per user and a profit margin of 70% prior to cash distributions to users should have a sizeable value, anywhere from $200 to $1,000 per user (depends on the rate of growth of users, rate of growth of per user revenues. With very little per user revenue Facebook valuation was near the $200 amount this summer. MySpace had very little revenue and was losing money when sold and YouTube was similar.
  
  
  
  

• With a 15% to 20% net profit margin (after cash distributions to users), annual profits of $15 to $40 per user would justify a value of at least $300 per user.

• With a $300 per user valuation and 2 million users, AGLOCO would have a total valuation of $600 million. A good range to be in for a fairly new public company.
  
  
  
  
• Per the AGLOCO website statements, about half of the AGLOCO ownership is given directly to active users and about half is given to the referrers who build up the network. With a $300 per user valuation the average each regular user would have been given $150 worth of ownership in AGLOCO (of course people who started earlier would have more than average and people who started later less.)).
  
  
  
  

• That also means that the referrers would (on average) receive $150 of shares for each AGLOCO user – again with the early referrals providing more. There are five levels of referrals in the AGLOCO user referral system, so the $150 is split equally between five levels of referrers, $30 each.

• This result is simple stated as: For each referral in an AGLOCO user’s total referral network, a person should receive $30 in AGLOCO ownership value (plus a share in the AGLOCO monthly cash distributions to all users.)
  
  
  
  
• Since a user can really best affect their own personal referrals, figuring out the ‘potential’ value of each of those is important to understand.
  
  
  
  
  • Obviously if a user refers a new user and that second person does no recruiting then the total value of that new direct referral is only $30.
  • Conversely, if a user refers a very active AGLOCO recruiter who adds 1,000 new users then that new direct referral was worth $30,000.
  • To make some kind of estimate of value it is necessary to ‘guess’ an average referral rate. Looking at blogs about AGLOCO from users a conservative view would seem to be to choose an average of three new referrals every new user.
  • Using three referrals at each level results in each direct referral resulting in 120 new users. Using the $30 valuation for each referral the total value for the 120 is $3,600; plus $30 for the direct user for a total value of $3,630.
• While not a focus of this analysis, a quick calculation of the monthly distributions might be estimated. (This part was added at the request of some early reviewers of this report:
  
  • Using the $200 per user gross revenue and the 60% payout percentage then the annual run rate would be $120 (about $10 per month. This would be in addition to the ownership received). A $100 revenue rate would yield about $5 a month and $300 would yield about $15.
• This valuation analysis has a couple of caveats in it.
  • Obviously, eventually all the users who want to join an entity like AGLOCO will be exhausted so referring will not be very significant and new direct referrals will not result in 100 total new user. At that point, direct referrals would not be so valuable (but with more than 100,000,000 adult US Internet users alone, getting to two million in the US should not hit any limits in the next two years).
  • Different countries users probably have different revenue potentials and thus different valuations (The AGLOCO site states that AGLOCO has the ability to change distribution rates by individual country if needed.)
• Additional sources include
  • Research reports on Yahoo, Google, Microsoft, Fox, and Internet advertising market by Mary Meeker – Morgan Stanley, Bear Stevens, JP Morgan and Merrily Lynch.
  • Online reports including: John Battelle, Internet Advertising Bureau, Mazenarra, TNS Media Intelligence and TechCrunch.