The Brand Value of MySQL

Totally expectable, the sun has gone up and down for the past two weeks since Sun bought MySQL for $1 billion and we still trust in MySQL – do we trust in Sun?

In fact, Sun paid a high premium for MySQL’s credibility (aka brand value) to benefit from the high profile of the cute dolphin publicly. MySQL simply knows how to play the Open Source game right, that’s their largest asset. How high is it actually?

Let’s look at MySQL’s reputation management:

  • MySQL is everybody’s Open Source darling. Their consistent brand design created trust and allowed for the amortization of goodwill.
  • In the past 5 years, there was no proof of the viability of an Open Source business model without mentioning MySQL. MySQL is an Open Source thought leader.
  • MySQL is the M in LAMP. Any doubts?

Let’s look at some numbers:

  • MySQL’s revenue is assumed to be $65 million in 2008.
  • MySQL’s profit is paltry.
  • I estimate MySQL’s lines of code to be approximately that of PostgreSQL worth $8 million.
  • When calculating MySQL’s forward-looking revenues and optimistically assuming growth of 100% per year, revenues should reach $1 billion in 2012 – but that’s still not profits amortizing Sun’s acquisition costs.

None of these numbers really explain the $1 billion price tag: forget about revenue, forget about profits, forget about the code – all irrelevant. Forward-looking revenues? Maybe, but they rely on assumptions about the continued business relevance of MySQL – something that is highly related to its brand.

Together with Lars, I tried to find a way how to reasonably calculate MySQL’s brand value. This is what we came up with:

  1. Equate MySQL’s fictious market capitalization with the $1 billion price tag.
  2. Estimate MySQL’s profits to be $10 million (remember, “paltry”?).
  3. Let’s keep in mind that MySQL’s fictious market cap is a 100 multiple of its profits.
  4. Take Sun for comparison: Their market capitalization is roughly 15 times their profits.
  5. When applying Sun’s brand value to MySQL’s profits, the expected acquisition price would be $150 million.
  6. What about those additional $850 million that Sun paid?

As of today, a whopping 85% of MySQL’s economic value added can be attributed to its strong Open Source brand. If you are in general skeptical about the brand concept, The Brand Gap will open your eyes.

Let’s compare MySQL’s brand value with some of the top 100 global brands:

  • Xerox has a brand valuation of $6 billion accounting for 93% of its market capitalization.
  • Coca Cola is the leading global brand with $70 million brand value, that’s 60% of its market capitalization.
  • Hertz is bottom of the top 100 table, with a brand value of $3 billion.
  • Sun is not part of the top 100 and MySQL’s $850 million won’t qualify it either.

MySQL was able to negotiate a good price due to its brand value – and rightly so!

Everyone I ever met at MySQL is straightforward, honest, simply credible and focused on creating a trustworthy Open Source business. I am very sure that MySQL’s founders and top management agreed on the acquisition because they were able to develop a trustful relationship with Sun in the past years and realized that Sun is truly embracing Open Source.

MySQL will be able to provide a lot of input to Sun on how to become a widely acknowledged authority in the Open Source domain. Even better: MySQL will lead by example. You can tell from Kaj Arnö’s blog post about his new role as MySQL’s Ambassador to Sun that MySQL is well aware of their strong role within Sun: “We want to take Sun by storm”.

Does MySQL orbit Sun or Sun orbits MySQL? As MySQL’s co-founder Monty Widenius put it in his recently opened blog:

Sun is a hardware company who has been for a long time in a transition to also be a software company. In their software space they where first closed source but has lately started to change most of their software to open source/free software.

MySQL AB on the other hand is a company that was originally totally committed to free software / open source but who has lately changed to be more closed.

This deal will allow both companies to learn from each others successes and failures and build a stronger company than we would have been able to do separately.

I am very confident that MySQL will successfully help Sun become one of the main centers of the Web universe and it seems that some MySQLers hope for the best from sun. We will see Sun’s brand value grow significantly this year – not sure though if they will already make it into the top 100 global brands.

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