My dueling partner, Tim Beyers, drew an interesting comparison between The Knot
Second, from an investor's perspective, the iVillage buyout was an all-cash deal -- not some dilutive stock offering like the deal The Knot coughed up for WeddingChannel.com. Paying cash from operations for a purchase carries with it a far lower hurdle rate than a stock deal, since cash doesn't dilute an owner's stake. Lower hurdle rates translate directly to higher justifiable prices. That combination implies that the all-cash deal for iVillage was that much sweeter by comparison.
Probably most important of all, though, is the nature of the communities behind the site. iVillage has a tremendous advantage over The Knot in that iVillage is building a long-term community. The Knot's primary customers, on the other hand, lose the primary reason to visit shortly after saying "I do." As churn-heavy businesses like satellite radio pioneers XM Satellite Radio
Stretched valuation. Expensive (to shareholders) financing choices. Churn. The romantic in me believes there's someone out there for everyone. The investor in me, on the other hand, knows there's a better match for my money than The Knot.
The Knot is a Motley Fool Rule Breakers recommendation.
Fool contributor Chuck Saletta would like to congratulate his brother-in-law for popping the question to his fiancee just yesterday. At the time of publication, Chuck owned shares of General Electric. The Fool has a disclosure policy.