Valuation of Intangible Assets of Internet Companies: Customer as an Asset

Abstract

In case of Internet companies, especially Internet Information Providers, customer or user brings the critical value for the firm. The goal of the work was stated as to determine the factors influencing on the customer value. The research is based on two cases of real companies from Internet Information Providers Industry: Travelzoo, Inc., online media company provided customers with information about travel and entertainment deals, and OpenTable, Inc., provider of online restaurant reservation solutions with operating network for diners. In order to achieve considered goal following objectives was determined. Firstly, analysis of possible ways to evaluate customers in company was conducted. Due to peculiarities of Internet companies the CLV approach was chosen for valuation. Then the customers in both companies are valued and the key value drivers are determined. Such factors as retention rate, acquisition costs, contribution margin, discount rate and growth of customer base have an influence on the customer value in company. However, for two considered companies retention rate has the strongest impact on the customer value and so on the company, rather than acquisition of new customers cost. Therefore current and prospective strategy of the company should be adjusted.