While it seems like mobile companies are regularly being sold for hundreds of millions of dollars these days, not every company is able to attract such large sums, raising the question of what goes into determining the value of these new media up-and-comers?

Well-established firms across a variety of sectors are recognizing the need to gain a foothold in the quickly growing mobile industry and are willing to pay a premium for entry. However, because mobile is still a relatively new industry, it is not always easy to find comparable deals to gauge the value of a targeted acquisition.

?Mobile is an emerging market ? it is growing rapidly,? said Colin R. Knudsen, managing director of Coady Diemar Partners, New York. ?People are paying entry prices.

?From a big company perspective, mobile remains a relatively nascent market,? he said.

?What you are seeing is that these big companies are realizing that the market is here to stay and if they do not put a stake in the ground, it will be too late. They will miss the market opportunity and their customer base will go somewhere else.?

Premium pricing
Last year, mobile marketing was the most active segment within digital advertising for mergers, acquisitions and investments. Mobile marketing deal activity in 2011 increased 150 percent from 2010 with 41 mobile-related acquisitions worth $780 million and 39 investments worth $314 million, according to investment bank PetskyPrunier.

So far, in 2012, mobile deals appear to be continuing apace. Opera Software announced two acquisitions, Apple said it would acquire Chomp and Singtel recently agreed to acquire mobile advertising firm Amobee for $321 million.

With Amobee rumored to be generating between $30 and $35 million in revenue, this means the purchasing price paid by Singtel was approximately a ten time multiple of revenue.

?Singtel paid a premium price for Amobee to gain access to its technology and to a company that has reached scale in a market that they feel they need get into but did not have any direct exposure,? Mr. Knudsen said.

?This would apply to all of these large-scale deals, where a premium is being paid for growth, a platform and entry,? he said.

Many deals are valued based on what other similar companies have sold for, which is why numerous mobile companies have been sold for approximately ten times their revenue.

This is a very high rate compared to other industries and for companies that, in most cases, are not yet generating positive cash flow.

?It is fair to say in most cases that companies are paying a very high multiple in revenue relative to other sectors and it has everything to do with the rapid growth and future prospects of an expanding industry and the requirement of these companies to put a stake in the ground,? Mr. Knudsen said.

?There companies are being valued for their future prospects,? he said.

On top
In order to attract this kind of revenue, mobile companies need to have a proven business model, scaled revenue, repeat customers and proprietary technology that is scalable and proven.

If a mobile company does not have the track record or a charismatic leader, it may not be able to attract a deal at such a high multiple.

When little information is available that would help value a mobile startups, these companies are often valued based on if they have a leader who has proven to be able to develop products that drive significant excitement and attract media attention for their products and themselves, such as the late Steve Jobs from Apple or Facebook?s Mark Zuckerberg.

One of the hardest kinds of mobile businesses to determine a value for can be a mobile application. This is because there is a wide variety of apps, from niche-oriented apps to blockbuster apps such as Angry Birds or Facebook.

?The earlier the stage, the more you are betting on the people,? said Palo Alto, CA-based John Sternfield, a managing director at PetskyPrunier.

Where?s the money?
One of the biggest hurdles in valuing a mobile app or company is determining how much money it is has the potential to make over time.

The reality is that while there are a lot of really neat mobile-based services available to consumers ? and the number is growing daily ? very few mobile companies have yet to figure out how to make any money from these services.

There are exceptions. For example, Square can point to the high dollar volume of transactions that it is processing via mobile while Angry Birds can point to its staggering number of downloads.

?Even companies in the same space and selling to the same group are being valued at distinctly different multiples because of their growth prospects,? Mr. Sternfield said.

Valuing companies that are trying to monetize mobile via advertising can be a little bit tricky.

For example, Pandora?s stock frequently trades well below its IPO offer last year as the company tries to translate its significant and growing mobile customer base into advertising revenue but with little success so far.

?One of the biggest hurdles in driving revenue is creating a business model that works,? Mr. Sternfield said.

?Desktop has a bigger platform and a greater amount of real estate than mobile so you can really use the advertising model. ?Advertising as a business model for mobile is a challenge,? he said.

?A lot of people are working on it, but I do not think anyone has cracked the code.?