Sometimes you have to apply the smell test to what your sources are telling you, and the rumors we’re hearing about Apple’s purchase of music service LaLa are definitely smelling a little off. $80 million for LaLa? That isn’t what we’re hearing.
LaLa was purchased for $17 million by Apple, according to our sources with indirect knowledge of the deal. And the company supposedly had $14 million in cash in the bank, meaning the actual purchase price was really $3 million.
That’s in line with recent competitive sales like iLike ($20 million) and iMeem ($1 million). LaLa had plenty of cash in the bank, but they were burning $500k/month, say our sources. There’s just no reason Apple would pay $80 million for the company.
We also believe that LaLa was acquired mostly for the star engineering team and the awesome recent Google deal more than for the product. iTunes in the cloud isn’t something we should hold our breath for. $3 million for top-of Google music results and a top team of engineers makes a lot of sense. $80 million not so much.
LaLa has raised $35 million and was valued at $180 million or so in it’s last round of funding. The reason for the misreports on the $80 million sale may have to do with those numbers. We’ve heard that the purchase price was “forty or fifty cents on the dollar” from one source, meaning 40% or 50% of the $35 million in venture capital the company has raised. But a misunderstanding of what that means could easily have people thinking it was 40% or 50% of the last round valuation, which gets you the $80 million number.
If we get additional sources on this story either way we’ll update. LaLa, which used to love to talk to us, has become scarce when we call or email.