Russia's Mail.ru portal financial results for 2006-2007

Updated June 27, 2008

   Naspers Holding that owns around 33% of Mail.ru has exposed the portal financial results for 2006-2007. As it turned out, Mail.ru profitability by EBITDA margin had exceeded almost twice Google index and almost six times - Rambler’s one. Banks, with which Mail.ru had been holding talks about IPO organization, estimated the portal at $2 billion. Judging by the company reporting this value corresponds the unprecedented multiplier - 56 EBITDA.

   Mail.ru financial results were published in the reporting posted on Naspers website, the South African media holding. As it is stated in the reporting for 2008 fiscal year (ended on March, 31), in 2007 calendar year Mail.ru earnings grew by 90% to $55,8 million (see Table 1). And EBITDA grew by 94% and totaled $36 million for the same period. Rapid earnings growth did not influence the profitability drop - if in 2006 EBITDA margin was at 63,1% level, in 2007 - 64,5%. Mail.ru revenue is rather high as compared to the analogical indices of its competitors: Google EBITDA margin - 35,9%, Rambler - 11% (see Table 2).

   As it is said in the reporting, 68% of Mail.ru earnings falls to media advertising and only 14% - to context one. The rest 18% falls to various partnership projects, fee-based services etc.

   According to the reporting data, Mail.ru monthly audience totals 52 million unique users worldwide. Number of active email users attains 41 million people (in September, 2007 this index was 30,7 million). On comparison, "My World" online community audience is 13,5 million people.

   Offshore Netbridge Ltd (beneficiaries structure is not exposed) owns 100% of Mail.ru OJSC. It is only known that 33% of the offshore controls Naspers Ltd, the rest belongs to Digital Sky Technologies fund owned by businessman Yuriy Milnera and the US Tiger Global Management.

   In May Mail.ru stockholders were holding talks with Citibank, Goldman Sachs and Credit Suisse about stocks placement on the London Stock Exchange by the year-end. Sources in these banks stated that Mail.ru was going to sell stocks at all company value $2 billion. This price corresponds almost 56 EBITDA of the company for 2007. "Multiplier higher than 40 EBITDA is almost impossible. Even 25 EBITDA is much. Mail.ru can cost $1,2 billion at rough estimation", as considers Moorgate Capital chief executive Andrey Zubkov. But Uralsib Financial Company analyst Konstantin Belov is sure that Mail.ru costs more. "Rambler EBITDA was $7,6 million in 2007, thus, the company costs $400 million now, i.e. its multiplier is around 52 EBITDA. In this case Mail.ru can cost $1,8 billion", as calculates Mr. Belov.

   According to an analyst, dependence of Mail.ru earnings on one of its resources can discount a price, while new popular projects that can quickly take large stake at the advertising market appear in the Internet. "For instance, online communities that have become the most visited websites of Ru.net within the few months. And there is the risk that Mail.ru grows slower than the market", explained Konstantin Belov.

   However, currently Mail.ru demonstrates positive dynamics of users visits. According to TNS Gallup Media data, in March Mail.ru was leading in Ru.net by the daily all-Russian audience on weekdays (number of users that have only once a day visited this website): 5,85 million against 5,56 million people of Yandex. However, Yandex was still leading by weekly and monthly scope. In May Mail.ru already became the absolute leader: daily Mail.ru scope attained 6,48 million users, weekly - 11,54 million, monthly - 14,9 million. Yandex has the analogical May indices - 6,12 million, 11,45 million and 14,69 million of users respectively.

Mail.ru financial results

Source: Naspers Ltd.

Financial indices of the largest public Internet companies

* Enterprise value

Data of capitalization is given as of June 26, 2008, earnings and EBITDA - for the whole year ended on March 31, 2008.