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British market research firm Taylor Nelson Sofres plc is buying Web analytics firm Compete Inc. for up to $150 million. The consideration includes an up-front payment of $75 million in cash and an earnout of up to an additional $75 million.

VentureBeat and a few other outlets say the price is disappointing for Compete, which according to TechCrunch has raised $43 million in private capital from investors including Charles River Ventures, Commonwealth Capital Ventures, North Hill Ventures of Boston, Split Rock Partners and William Blair Capital Partners. In fact, it's not a bad deal.

First, Compete is small and unprofitable, having lost $4.5 million last year on sales of $14.9 million, meager revenues for an eight-year-old company. By comparison, in 2007 Experian Group Ltd. paid $240 million to acquire another leading Web intelligence company, Hitwise Pty Ltd., which made money and had annual revenues of roughly $40 million. In other words, at a price tag of $75 million TNS is offering roughly 5 times Compete's trailing revenue, and it will pay 10 times sales if the target reaches the financial milestones stipulated under the earnout. Experian paid a multiple of only 6 times sales for Hitwise, which was owned by Australia's Allen & Buckeridge Pty. Ltd. and New York's Insight Venture Partners (and management). Meanwhile, Alexa Internet Inc., another leading Web analytics company, was acquired by Amazon Inc. for $250 million in 1999, when buyers were throwing cash around like used laundry.

In a post on its corporate blog, Compete says it will operate as an independent unit within TNS, but has "already identified stellar new product opportunities" to develop in collaboration with its new owner. "From the start, the Compete vision has always been to become the No. 1 digital intelligence company in the world," Compete says. "TNS has tens of thousands of clients across 80 countries. That's a nice global platform to be a part of."

The sale of Compete also must be encouraging for rival Quantcast Inc., which in January closed a $20 million Series B financing from Founders Fund and Polaris Venture Partners. - Alain Sherter

See March 3 press release from TNS
See April 2007 story from TheDeal.com
For more see VentureBeat, TechCrunch and paidContent.org

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