Microsoft makes acquistions to grow presence in key verticals

Mashable has reported that Microsoft has acquired Farecast.com (travel website that predicts the price of airline tickets so users know when to buy at the cheapest price…what a great idea!). Microsoft has made public its intention of acquiring websites in key verticals to expand its advertising networks potential. Certainly a good sign for vertically focused websites with a unique offering to users that is able to build a large enough audience to get the attention of the big media players like Microsoft/MSN.

The rumored purchase price was $115 million. With about 1 million unique visitors according to Compete.com, that places a hefty valuation of 115x monthly visitors. A similar merger in the on-line travel vertical was completed at a valuation of 100x monthly visitors. To put that in perspective, Google paid 23x monthly visitors for YouTube and News Corp paid 7.3x monthly visitors for MySpace. The key difference is that the on-line travel sites are able to monetize that traffic a lot more (CPMs for travel sites are among the industries higest). Also, keep in mind that YouTube had enormous traffic but didn’t have a proven business model…and the CPMs on MySpace are apparently in the nickel and dime range (among the lowest of any site).