The press, institutionally, has an all-too-short memory. But have we already forgotten some of the lessons of the tech bubble, which burst less than a decade ago?
This week, in a bit of oldish (in tech years) meets new, Intuit, creator of Quicken financial software, gobbled up Mint, the upstart Web-based financial program, for 170 million bucks. That’s just 2 percent of the market value of Intuit, but the latter last year had $3.2 billion in revenue and cleared $447 million in profit. Its revenue was up 39 percent last year from 2006—despite the nasty recession.
I was curious as to how Mint makes its money and doubtful that it actually did. But The New York Times doesn’t give us any information on that beyond noting it’s taken in $31 million in venture capital.
The paper does, however, give us snappy quotes reminiscent of what we saw from the press in the original tech bubble:
“Quicken seems like something your dad uses,” Mr. Higdon said. Younger, Web-savvy users “aren’t likely to sit down nightly and enter in a bunch of financial information online,” he said. “These sites appeal to the iPhone audience.”
Great. But this is a business section. How does this company, purchased for big, real money, propose to make any money itself? Or is that not even the point? Is Intuit’s purchase a rear-covering attempt to take out an undercutting competitor? You just don’t know if you read the Times.
BusinessWeek, which has a longer take, is better but still not good enough.
First the good: It does nod to the potentially anticompetitive reasons for Intuit’s purchase—reasoning that’s almost always absent from deal stories—by calling it “a move that eliminates one of its toughest competitors.”
And this is a good line:
Intuit’s acquisition of Mint illustrates the line software companies need to walk as they extend their brands on the Web, where products are often free, while protecting revenue from desktop PC programs.
What industry does that remind you of?
And unlike the Times, BizWeek tells us how Mint tries to brings in revenue:
The company, which had taken $31 million in venture capital, makes money by directing its customers to partners among credit-card issuers, insurance providers, and other financial-services companies. Mint analyzes users’ finances, spending habits, and demographic information, then suggests money-saving accounts and financial products that may be suitable.
Nice context, but does that work? Does it actually bring in much revenue? For that matter, does it actually “make” money or does it lose money? That’s not looked at.
Bloomberg is better and also puts the anticompetitive angle up high:
The acquisition lets Intuit eliminate a potential threat, said Heather Bellini, an ISI Group analyst in New York.
But Bloomberg also doesn’t get into that basic aspect of the story: How much money Mint brings in.
The Journal hardly tries. Hey, at least its brief isn’t contributing to any hype.
Now, it’s clear Mint and Intuit didn’t release the revenue numbers, but it’s not clear whether any journalist bothered to ask about them. Valuations are a key piece of information in stories like these, and if you can’t do them for some reason, tell the reader.
Felix Salmon does well to note that $170 million is “a lot of money for a company which has yet to make a dollar in profit.” He also reports that the company had to raise another $14 million in venture capital last month, something that doesn’t make it into any of the stories reviewed above. He also raises an excellent point about Intuit being “much-hated.” That also didn’t make it into any of these stories.
There is an educated, if extremely rough, guess out there on Mint’s business. Business Insider did a back-of-the-napkin analysis six months ago and optimistically estimated the site would bring in $8 million to $10 million in revenue this year, with costs equal to that or slightly more. In other words, the purchase price would be an eye-popping seventeen-to-twenty-one times sales.
But even that number is probably too low because it assumes, incredibly, that one in eight Mint users will actually use the service to get a new credit card or bank account. I use Mint occasionally and can tell you I’ve never been tempted with its offerings there.
I’d also note—something none of those stories do in their bid to fuzzy up Mint’s consumer friendliness—that from a consumer standpoint, Mint is not all on your side.
It tries to foist scuzzy financial “services” on you like freecreditreport.com, which lures people in with a free credit score, then hopes they forget to cancel before the trial period is over so it can start charging them $13 every month for a service they don’t need. Remember Ben Stein!
The point is not that Intuit’s buyout of Mint is a terrible deal—we probably wouldn’t know even if we had the data—but that journalists should be puncturing the hype on deals like these, not amplifying it. None of the stories mentioned above say a thing about the Web 2.0 Bubble, which the financial crisis has deflated somewhat, but which apparently has not been fully deflated.
Remembering basic elements of business journalism is as good a counter to such hype as anything.