   Let me explain. Businesses are worth the net present value of
future cash flows. Cash flows means profits basically (capital
expenditures are important but I'm going to leave them out of
the discussion on this post). So a business is worth the sum of
all of its future profits, discounted back to a net present
value. For those who don't want a lesson in finance, you can
simplify this theory even more by using a cash flow multiple as
a proxy for a net present value. I like to use a 10x multiple
for cash flow as a simplistic proxy for net present value.
Chris Anderson wrote a very good piece in today's WSJ called The
Economics Of Giving It Away. In that essay, Chris wrote:
Meanwhile YouTube is still struggling to match its popularity
with revenues and Facebook is selling commodity ads for pennies
after its effort to charge for intrusive advertising led to a
user backlash. And news-sharing site Digg, for all its millions
of users, still doesn't make a dime. A year ago, that hardly
mattered: The business mod