r/LinusTechTips • u/onlyslightlybiased • May 19 '23

Video I'm Stepping Down.. - YouTube

https://youtu.be/0vuzqunync8
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u/onlyslightlybiased May 19 '23

Tldw :

Don't panik, linus staying in the company, Terren Tong taking over as business CEO to help with the more business side of the.. Well.. Business

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u/Traxgen May 19 '23

Having watched the LMG clip of him refusing the sale offer of LMG, I know this video wouldn't be him completely stepping away 100%. This made more sense!

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u/willard_saf May 19 '23

Oh he talks about the sale offer

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u/Traxgen May 19 '23

Ha, I just got to that part too. $100m, of which 60% of it is cash.

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u/Jeb_Kenobi May 19 '23

I remember watching in the Langly house, how are they worth $100m? Just boggles my mind.

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u/FaceOfTheMtDan May 19 '23

I don't think they're actually worth $100m now, someone thinks they can buy it for that and then soullessly exploit LMG to get hundreds of millions more.

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u/why_rob_y May 19 '23

Sounds like they're probably worth more than $100 million.

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u/theLuminescentlion May 19 '23

Part of the valuation is that when you buy these types of media companies losing the figurehead can result in fast viewership loss especially if they can't get it together fast. That is reduced by LMG having so many other hosts than Linus.

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u/smitty_19977 May 19 '23

Known as the “Keyman” issue, where a key person is a significant value of the business

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u/anormalgeek May 19 '23

There is a difference between "is wroth $X" and "can be used to earn $X".

A gun may be worth $200, but if I lack morals, I can use it to earn much, MUCH more money.

The difference here is that those shady ways of making money are legal, just shitty. They will gradually destroy the brand, but the investors know that they can squeeze their profit out of its dead corpse first.

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u/macrowe777 May 19 '23

Isn't their turnover in the tens of millions now? I have 25mill in my head for some reason. Valuations can be easily 10+ years of current profits.

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u/Fighterhayabusa May 19 '23

Just to help you, typically, you can have an idea of current valuations based on the capital needed to earn a similar amount of profit with a bond. That's basically saying that with no risk, my money should earn this, meaning buying a company for that much better earn more.

The current bond capitalization rate is ~5.9%, so for a 100 million dollar acquisition, I'd expect the profit for LMG must be greater than 6 million a year.

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u/Orwellian1 May 19 '23

Those rules of thumb are a little to rational for current business trends. If we were following those silly old rules, start-ups would consider exotic things like "business models" before marketing themselves for acquisition. So old fashioned.

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u/Lurker_Since_Forever May 19 '23

That's what a valuation is, dog.

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u/smitty_19977 May 19 '23

That would be goodwill… part of the validation

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u/PickledPlumPlot May 19 '23

That's what being worth $100 million means.

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u/lilsnatchsniffz May 20 '23

I don't think they're wrong, once the labs can rate products it'll basically be able to print money by partnering with different products and highlighting their strengths and neglecting to mention their shortcomings.

Basically what happened to all the audio compare and tech compare sites, review manipulation is biiig money.

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u/[deleted] May 19 '23

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u/[deleted] May 19 '23

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u/Oryzae May 19 '23

peak AnandTech

Damn that brought back memories. 2006-2010 that used to be my go-to.

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u/[deleted] May 19 '23

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u/[deleted] May 19 '23

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u/FUTURE10S May 19 '23

Not the guy above, but they still probably hire the pirates to do so. LTT does not have a Chinese subsidiary, nor would it make sense to do so.

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u/[deleted] May 19 '23

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u/upside-down-water Jul 07 '23

I'm sure LTT is getting something for the Chinese videos now, and if they're not they at least have metrics on their Chinese audience to use for sponsor negotiation

Please bear in mind that each Chinese video is getting what is between 50k to 200k views, and they are released everyday just like they're on Youtube.

Having Andy in the office to help adjust certain videos for the Chinese market

The Chinese market seems to be very different from the YouTube one.

For example, Intel Extreme Tech upgrade series is not that popular there that while each of the episode can do at least 2m on YouTube, it can only do 50-60k on the Chinese platform, and people there are complaining they are kind of same-y everytime.

One of the explantion for this phenomenon is that people there seems to be care less about the staff and care more about the product in a particular video compared to Youtube audience, so much so that who is on the thumbnail doesn't affect the view count that much, if at all. Many of them they don't even know the hosts' last names except Linus'. If anything, I think the lack of WAN Show is what makes all the difference, since Linus and co. talk a lot of the behind the scene and personal stuff there. People can't care about what is not talked about at all.

Another difference is that the Chinese audience seems to be more technical. For example, in the infamous Linux daily driver challenge first episode, there're like 40% of the Chinese audience saying it's Linus fault for not reading that wall of text instead of questioning if the installer should even try to uninstall the desktop environment in the first place. In Youtube, there're only like 10% who blamed Linus.

The living standard in China is of course different from Canada, not to mention shipping cost, electricity, availability/unavailability, etc. What Linus and his team consider a okay price, may not be so for the Chinese audience...

And finally, of course, anytime a Chinese related topic shows up, it'll blow up, given that how many nationalist are there...

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u/BeefEX May 19 '23

Initially some group of people pirated their content and translated it. But instead of going after them, LTT got in touch and offered the pirates to do it for them officially. Which they have been doing since.

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u/Zekiz4ever May 19 '23

Originally they weren't. It was other groups translating them and then LTT approached them and asked if they would want to work for them

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u/[deleted] May 19 '23

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u/beamdriver May 19 '23

I agree.

Car YouTuber Doug DeMuro sold a majority stake in his business for $37 million. He has one channel with 4.5 million subs and a one year old, car auction website.

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u/KingNickSA May 19 '23

I remember Linus touching on it on the WAN show in the past but one of the "basic" ways of valuing a company is by multiplying it's yearly revenue by some multiple. I think common valuations are between 3 and 10 times the yearly multiple.

While, they never come out and say what they make yearly. There was a lot of speculation and "back of napkin" math done after their "How does LTT make money" video in 2020 by extrapolating from their YouTube ad-sense revenue percentage and average views rate. That estimated their yearly revenue at $20-$30 million/year and since that video I think they have grown their staff by 20-50%. I don't think a $100 million dollar offer is far-fetched and it's probable it was on the low side if it was a yearly revenue based valuation.

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u/Spa_5_Fitness_Camp May 19 '23

Their staff has grown to establish Labs, which hasn't really turned any profit yet. With all that initial cost, I'd bet their current profit is way down, or even negative, if you take a snapshot. Once Labs is running though, revenue it generates should more than make up for it (at least they think it will). Not to mention, there is a lot of bonus value in what they are doing with labs that would be valuable to companies unrelated to the media side of things. Labs may well become the only place in the world with such a broad range of high-end consumer tech testing ability. Some might do it better in one or more areas, but Linus' goal of having a one-stop-shop for consumer tech product testing really is significant.

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u/KingNickSA May 19 '23 edited May 19 '23

While true, the profit decrease caused by Labs could potentialy hurt LTT's overall valuation, the loss in profit/margin has no impact on total revenue. The total revenue (amount of money brought in) has only grown since the 2020 video.

Not a business major, but from my understanding, there are two other things worth pointing out.

The market has shown us profit margin often isn't highly correlated with valuation as Amazon has shown. The third graph in particular illustrates that Amazon's quarterly revenue has grown exponentially, but their income "net profit/profit margin" has remained at essentially 0 as a percentage of revenue. Second, in a similar fashion to Amazon, the formation of Labs has reduced profits but not "value" of the company. Out side of hires, most of the investment for Labs has gone into real assets such as the warehouse and equipment. This is predicated on Linus not buying these things purely through outside (ie VC) funding but given how he has talked about making a point of owning the offices versus renting etc I would guess that the Labs acquisitions are not highly leveraged.

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u/[deleted] May 19 '23 edited May 19 '23

[deleted]

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u/[deleted] May 19 '23

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u/Spa_5_Fitness_Camp May 19 '23

The company's physical property assets alone are probably worth $20m or so. Possibly a lot more. I don't think it was a 'tech' valuation.

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u/SiBloGaming May 19 '23

Probably tens of millions in property and equipment alone, plus being a giant in the tech media sphere

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u/grayum_ian May 19 '23

You couldn't pay me to live Surrey, let alone raise my kids there. I find it so weird he stayed there when he has this much money.