How to value internet companies. By Stuart Whitwell

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Placing a realistic value on an internet company is difficult. Ideally, the valuation should be no different from that of a bricks and mortar company; predicting future cash flows through an understanding of the business and market dynamics. However, internet companies are still a relatively new phenomenon and there is often little robust historical data to support the valuations. Internet companies are also, by nature, unpredictable. They can enjoy huge success for a short while and quickly plummet into obscurity. Internet users can also afford to be fickle since the latest, best technology is only a click away.

Example valuations

There have been a number of high profile, high value acquisitions in recent years. Only recently, Yahoo! rejected a $45bn bid from Microsoft claiming it un...

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