24/7 Wall St.

There was a rather interesting initial public offering filed this week.  A company called FriendFinder Networks, Inc. wants to sell shares to investors.  This is not a run-of-the-mill IPO. FriendFinder is the parent company of AdultFriendFinder, a site for people looking for casual sexual encounters.

The company plans to raise up to $460,000,000.00 via thesale of common stock.  It has applied to the NYSE to take the "FFN"stock ticker, and so far the only listed underwriter is RenaissanceCapital..

This is a social networking and multimedia entertainment company whichclaims over 270 million members in approximately 170 countriesthroughout its networks. Its most heavily visited websites include AdultFriendFinder.com, Amigos.com,AsiaFriendFinder.com, Cams.com, FriendFinder.com, BigChurch.com andSeniorFriendFinder.com.

Revenue to date has been primarily derived from subscription andpaid-usage adult-oriented products and services.  It also produces anddistributes original pictorial and video content, licenses thePenthouse brand to a variety of consumer products companies andentertainment venues and publishes branded men’s lifestyle magazines.

For the nine months ended September 30, 2008, its net revenue was$262.4 million, operating income was $36.1 million, and EBITDA was$66.6 million.  It lost money after accounting for the acquisition ofVarious, Inc. and its net loss was $32.3 million unadjusted for thispurchase accounting.

Social networking sites have found it difficult to value themselves andto monetize what traditional web sites and media operations have seen. 

Alexa lists this as one of the top 5,000 sites, although we’d note that the graph shows some mixed data there. Social networks have a mixed history.  They are total flops as far as using traditional ad metrics, but they can be wildly successful businesses in their own right.  A year ago, the Classmates.com IPO was canceled for several reasons.

Jon C. Ogg
December 24, 2008