Facebook released its Q1’19 earnings report this week, announcing an allocation of $5 billion towards an investigative fine by the FTC into the Cambridge Analytica data breach. Of the reported $15.07 billion in Q1 revenues (up 26% year-on-year), 99% came from advertising.
The close of Q1 also brought with it results for growth in the economy, which was reported to have risen 3.2% in Q1’19, surpassing economist estimates of a 2.3% expansion in GDP (following a 2.2% growth posted in Q4’18). Contributing to the higher-than-expected growth was a 2.3% rise in final sales to domestic purchasers, as well as bolstered inventories, which increased in value to $128.4 billion from $96.8 billion. A rise of 3.7% in exports, coupled with a decrease in imports by the same amount, lead to a narrowing of the trade deficit and points to strong production by US businesses.
In cloud streaming news this week, Google and Verizon have announced a partnership which will allow Verizon customers to stream YouTube TV on Verizon devices. This partnership comes right after Google and Amazon have reached an agreement allow each other to stream content on their respective platforms. Verizon will be able to offer promotions for YouTube TV, a move which allows them to remain competitive among a market saturated with streaming offerings, without having to produce unique content.
As we push further into Q2, we continue to receive interest from many business owners wanting to plan for an exit later in the year. With over 700 precedent acquisitions completed over the past decade, we have plenty of data points and experience to help those in this position plan a safe, secure and successful exit. But don’t take it from us! Here is what Patrick McKenzie, now at Stripe, had to say after selling his (second) business through FE: https://www.youtube.com/watch?v=ManOXZAu3Pc&t=. Get in touch if you want to get a free valuation and exit plan for your business!
Featured in SaaS business listings this week we have a $950K B2B Email Marketing and Automation business, a leading email software provider with a mature product aimed at a growing target market. The business has already achieved steady MRR growth with a CAGR of c.181% for 2014 to 2018, demonstrated an effective product with low MRR churn of c.2%, high LTV of c.$12,000 over the LTM and simple operations with the developer staying on post-sale. If you think you may be interested in this business, please follow the link to request a prospectus sooner than later as it has already received several competitive bids.
In events news, Founder Thomas Smale had a great time at SaaStock LatAm this week, where the coming edition of SaaS Mag was distributed to each attendee in an exclusive sneak peak! Next up, the FE Team is heading to FemtoConf in Darmstadt, Germany from May 3-5; make sure to reply to this email to set up a meeting if you will be in attendance!
Continue reading below for more on Facebook’s FTC fine and Q1’19 earnings, as well as Google’s and Verizon’s new partnership.
Listings
Featured
SaaS – B2B Email Marketing & Automation – $30K MRR
• Steady MRR growth with MRR reaching a CAGR of c.181% for 2014 to 2018
• Leading email marketing software provider with a mature product aimed at a growing target market
• Effective product with low MRR churn of c.2% and high LTV of c.$12,000 in the LTM
• Lean and scalable cost structure allowing for strong net margins
• Simple operations with the developer staying on post-sale
Yearly net profit: $230,000
Asking price: $950,000
New
SaaS – Online Privacy & Hosting – $22K MRR
• Well-built and highly scalable portfolio of SaaS businesses with over 1 million lifetime users
• Continuous YoY growth with revenues reaching c.49.8% CAGR for the period 2016 to 2018
• Award-winning software with cross-platform compatibility and c.96% average customer support satisfaction rating
• Firm foothold in the rapidly-growing VPN niche
• Strong synergies allowing for a scalable cost structure and driving high net margins
Yearly net profit: $227,000
Asking price: $1,074,000
Affiliate – Home Furnishing – $12K gross/mo
• Explosive revenue growth with earnings reaching a CMGR of 30.3% over the L12M
• Steadily-increasing traffic with the site seeing c.125,000 visitors in the L3M
• Extensive content library of over 140 articles driving keyword rankings for over 13,500 keywords
• Simple operational structure driven by effective website management and business continuity planning
Yearly net profit: $137,000
Asking price: $423,000
SaaS – B2B Conversion Optimization Tools – $4.9K gross/mo
• Portfolio of well-built Apps with steadily-increasing installs rising at a c.46% CAGR for the period 2016 to 2018
• Product market fit with c.110,000 business serviced over the years
• Well-received products with an average App rating of 4.9
• Lean and scalable cost structure driving high net margin of c.80% in the LTM
• Low owner involvement creating plenty of time to invest in growth
Yearly net profit: $47,000
Asking price: $182,000
Sold
Digital Services – SEO & Content Marketing Business – $94K gross/mo
E-Commerce – 16,000-Tier Eligible Amazon Merch – $3K gross/mo
In The News…
Facebook Posts Q1 Earnings
Facebook has released its earnings report for Q1’19 this week, in which the social media giant announced it has allocated between $3 and $5 billion towards an fine by the FTC.
In a statement, Facebook said of the allocation, “In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices…We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion.” Facebook reported revenue of $15.07 billion in Q1’19, which means the fine will not impact the company’s profitability. However, the key component to watch will be whether the FTC’s investigation in to Facebook’s Cambridge Analytica data breach will set a precedent for regulating big tech companies. The potential $5 billion fine is much larger than the $22.5 million fine Google had to pay the FTC for failure to improve privacy practices.
Despite the expected fine, Facebook’s stock surged following the earnings report due to strong reported earnings, reaching a high of an 8% increase the morning after the announcement.
US Economy Grows 3.2% in Q1’19
The US economy posted a 3.2% growth in GDP, higher than economist estimates of 2.3%.
There were several factors driving the increase, including higher local government spending due to the federal government shutdown, as well as strong inventory investment and trade. Inflation was also tempered in Q1, with headline inflation falling to a 1.4% annual rate (down from 1.9% in the quarter prior). Following Q4’18, estimates of economic growth were not optimistic, which makes the growth in the economy all the more encouraging. Economists are predicting that a strong gain in retail sales in March will lead to strong growth in Q2’19.
The Federal Reserve is not expected to change interest rates in response to Q1 results, but rather are expected to see results from Q2 before making any decisions.
Google and Verizon Form Partnership
Verizon and Google have announced a new partnership which will bring YouTube TV to Verizon accounts and can be streamed on any platform they select.
Google and Amazon recently agreed to stream each others’ apps on their platforms, which means the YouTube app will be available on Amazon Fire TV devices and Fire TV Edition smart TVs, and the Prime Video app will be available on Chromecast and Chromecast plugins. This was a big step for the two companies in terms of resolving past issues around competition, as they operate with a competing customer base. Key to the partnership for Verizon is they are given the opportunity to remain competitive in the content streaming market without (yet) having to invest in the production of unique content. Verizon stated of the partnership, “With this partnership, we’ll have unique offers and promotions alongside other great bundles for our customers. More details, including pricing and availability will be announced later this year.”
There are not yet details of when the functionality will launch.
For more updates throughout the week on the financial world of online business M&A, follow our team on Facebook, LinkedIn, Twitter, and Instagram.