The Valuation of Digital Intangibles: Technology, Marketing, and the Metaverse

Contents
List of Figures
List of Tables
1 Introduction
Part I A General Valuation Approach
2 The Valuation of Intangible Assets: An Introduction
	2.1 Purpose of the Firm Evaluation
	2.2 Digital Business Modeling and Planning as a Prerequisite for Valuation
	2.3 The Balance Sheet-Based Approach
	2.4 The Income Approach
		2.4.1 Estimated Normalized Income
		2.4.2 Choice of the Capitalization Rate
		2.4.3 Choice of the Capitalization Formula
	2.5 The Mixed Capital-Income Approach
	2.6 Cash Is King: The Superiority of the Financial Approach
		2.6.1 The Capital Asset Pricing Model and the Dividend Discount Model
	2.7 Empirical Approaches
		2.7.1 The Economic Value Added (EVA®)
	2.8 Potential Tax Liabilities
	2.9 Majority Premiums and Minority Discounts
	2.10 The Control Approach
	2.11 The Accounting Value of Intangible Assets
		2.11.1 Intangible Assets and Capitalized Costs
		2.11.2 Valuation Drivers, Overcoming the Accounting Puzzle
	2.12 Intangible Assets Valuation According to IVS 210
		2.12.1 Cost Approach
		2.12.2 Income/financial Approach
		2.12.3 Market Approach
	2.13 Intangibles with a Defined and Indefinite Useful Life
	2.14 Surplus Intangible Assets
	2.15 Hard-to-Value Intangibles
	2.16 Resource-Based View and Balanced Scorecard: Introductory Remarks
	2.17 The Intangible Roadmap: From Patents and Trademarks to Blockchains, Big Data, and Artificial Intelligence
	2.18 Intangible-Driven EBITDA
	Appendix 1: Interaction Between WACC and Other Key Financial Ratios
	Notes
	Selected References
3 Digital Scalability and Growth Options
	3.1 Introduction
	3.2 Vertical and Horizontal Scalability
	3.3 Digital Scalability
	3.4 Scalability as a Real Option
	3.5 The Impact of Scalable Intangibles on Capex and Opex
	3.6 The Accounting Background: Operating Leverage
	3.7 Break-Even Analysis
	3.8 The Impact of Scalability on the Enterprise Valuation
	3.9 Corporate Profitability and Scalability
	3.10 Metcalfe’s Law
	3.11 Moore’s Law and Other Scalability Patterns
	3.12 Exponential Growth
	3.13 Geolocalization and Traceability
	3.14 From Digital Scalability to Blitzscaling
	3.15 E-commerce and Scalable Internet Trading
	3.16 Scalable and Digital Supply Chains
	3.17 Digital Transformation
	3.18 Networking Digital Platforms
	3.19 Sustainable Business Planning
	3.20 Digitalization Beyond the Pandemics
	3.21 APPENDIX—Examples of Operating Leverage Changes
	Notes
	Selected References
Part II Technology
4 The Valuation of Know-How
	4.1 The Uncertain Perimeter of “Know-How”, Between Organization and Technology
	4.2 Galilean Replicability and Industrialization of the Experimental Scientific Method
	4.3 Protection, Sharing, and Transfer of Know-How
	4.4 Economic and Financial Valuation
		4.4.1 The Relief-from-Royalty Approach
		4.4.2 The Incremental Income Approach
		4.4.3 The Estimate of the Cost Incurred (or of Reproduction)
		4.4.4 The Complex Balance Sheet-Based Approach
		4.4.5 The Mixed Capital-Income Approach, with an Independent Estimate of Goodwill
	4.5 Product and Process Innovation
	4.6 Know-How and Creditworthiness
	4.7 The Impact of Artificial Intelligence and Digitalization on Know-How
	Note
	Selected References
5 Patent Valuation
	5.1 Patents: Definition and Rationale
	5.2 From Know-How to Patents
	5.3 Accounting as a Prerequisite for Valuation
	5.4 License or Sale?
	5.5 A Comprehensive Valuation Approach
	5.6 Cost-Based Approaches
	5.7 Market Valuations and Net Present Value
	5.8 Comparability Factors
	5.9 Income Approach
	5.10 Real Options
	5.11 Quick and Dirty Valuation Techniques
	5.12 Forecasting Patent Outcomes with Big Data and Stochastic Estimates
	5.13 Medtech and Biotech Companies and the Technology Transfer Cycle
	5.14 The Impact of Digitalization on Patents
	Notes
	Selected References
6 The Valuation of Digital Startups and Fintechs
	6.1 Risk Capital for Growth: The Role of Venture Capital, Private Equity, and Business Angels
	6.2 Types of Investments, Intermediaries, and Bankability
		6.2.1 Startup Loans and Venture Capital Activities
		6.2.2 Financing for Expansion and Development: The Role of Private Equity and Bridge Financing
		6.2.3 Financing of Change and Modification of Ownership Structures: Replacement Capital, Buyout, Venture Purchase, and Turnaround Financing
		6.2.4 Scaleup Valuation
	6.3 The Investment Process
	6.4 The IPEV Valuation Guidelines
		6.4.1 An Estimate of the Fair Value in Investee Companies
		6.4.2 An Estimate of the Fair Value of Investments in Portfolio Companies
	6.5 Startup Evaluation with Binomial Trees
	6.6 The Venture Capital Method
	6.7 Break-Up Value of Venture-Backed Companies
	6.8 Stock Exchange Listing and Other Exit Procedures
	6.9 Valuation of the Investment Portfolio with a Net Asset Value
	6.10 Fintech Valuation
		6.10.1 Business Models
		6.10.2 Valuation Metrics
	6.11 Unicorns
	6.12 Key Person Discounts
	Notes
	Selected References
7 The Valuation of Software and Database
	7.1 Definition and Main Features
	7.2 Accounting and Fiscal Aspects
	7.3 Legal Protection of Software: Introductory Remarks
	7.4 Economic and Financial Valuation
		7.4.1 Software House Revenue Model
		7.4.2 Applicability of Empirical and Analytical Evaluation Approaches to Software
		7.4.3 CO.CO.MO Method and Putnam Model
	7.5 Open-Source Software
	7.6 Software as a Service (SaaS)
	7.7 Definition and Characteristics of Databases
	7.8 Legal Protection
	7.9 Accounting and Fiscal Aspects of the Database
	7.10 Information Value Chain, Data Mining and Interaction with Networks, Big Data, and the Internet of Things
	7.11 Economic Valuation of Database and Links with Cloud Computing
		7.11.1 The Cost Approach
		7.11.2 The Income-Financial Approach
		7.11.3 The Empirical Approach
		7.11.4 New Assessment Scenarios and Monetization Strategies
	Notes
	Selected References
8 The Valuation of Artificial Intelligence
	8.1 Introduction
	8.2 The Fundamentals of Artificial Intelligence
	8.3 Applications and Business Models
	8.4 Legal Aspects: Introductory Notes
	8.5 Valuation Metrics
	8.6 The Financial Method
	8.7 The Empirical Method of Market Multiples
	8.8 Forecasting Rational Expected Outcomes: Sales Prediction
	Note
	Selected References
Part III Marketing
9 The Valuation of Trademarks and Digital Branding
	9.1 The Trademark’s Differential Strategic Value
	9.2 Trademark Accounting
		9.2.1 Trademarks and International Accounting Standards: Impairment Test and Inapplicability of the Fair Value
	9.3 The Evaluation Standard ISO 10668
	9.4 Economic, Financial, and Accounting Analysis
	9.5 Valuation Approaches
		9.5.1 Income Approach
		9.5.2 The Relief-From-Royalty Approach
		9.5.3 The Incremental Income Approach
		9.5.4 Market Approach
		9.5.5 Cost Approach
	9.6 Other International Evaluation Standards
	9.7 Brand Equity
	9.8 Brand Valuation in Business Crises and Residual Creditworthiness
	9.9 The “strong brand - weak company” Paradox
	9.10 Logos
	9.11 Digital Branding
	9.12 The Impact of Advertising Platforms on Brands
	9.13 FashionTech and Digital Clothing
	9.14 Digitalization and Sports Brands
	Notes
	Selected References
10 The Valuation of Newspaper Headings, Digital Media, and Copyright
	10.1 The Characteristics of Newspaper Headings
	10.2 Accounting Issues and Tax Treatment
	10.3 Valuation Approaches
		10.3.1 The Contextualization of the Assessment, Depending on the Type of Heading
		10.3.2 The Valuation Paradox “Strong Heading, Weak Publishing Company”
	10.4 The Online Headings
	10.5 The Valuation of Thematic Channels
	10.6 The Prospects of the Media Sector, from Paper to Digital
		10.6.1 Legal Protection of Editorial Headings and Copyright: Some Introductory Notes
	10.7 Digital Publishing
		10.7.1 Forms of Digital Publishing
	10.8 Bankability of the Newspaper Headings
		10.8.1 Copyright and Artistic-Related (Creative) Intangible Assets
		10.8.2 Digital Media and Video Games
	Notes
	Selected References
Part IV Internet and the Metaverse
11 Domain Name and Website Valuation
	11.1 Introduction
	11.2 Input Parameters for Valuation
	11.3 Characteristics of Sellable Domain Names
	11.4 Accounting Data
	11.5 Web Search Engine Ranking
	11.6 Internet Traffic and Advertising Impact on the Evaluation
	11.7 Web Analytics
	11.8 Ranking Parameters
	11.9 Domain Auctions
	11.10 Other Valuation Parameters
	11.11 Valuation with “Quick and Dirty” Algorithms
	11.12 Market Approach
	11.13 Premium Domain Names
	11.14 The Valuation of Stand-Alone Domain Names
		11.14.1 Domains and (Web) Trademarks
		11.14.2 Domains and Social Networks
	11.15 Cybersquatting, Typo-Squatting, and Domain Trolls
	11.16 Internet Protocol Addresses
	11.17 Conclusion
	Notes
	Selected References
12 The Valuation of Mobile Apps
	12.1 Definition and Types
	12.2 Digital Value Chains: From Development to Dissemination of Apps
	12.3 Accounting and Fiscal Aspects: An Introduction
	12.4 The Business Plan and the PESTLE and SWOT Analysis
	12.5 Economic Valuation
		12.5.1 The Cost Approach
		12.5.2 The Income-Financial Approach
		12.5.3 The Empirical Approach
	12.6 Criticalities of the Valuation Assessment
	12.7 Financing App Developers
	Notes
	Selected References
13 Big Data Valuation
	13.1 Introduction
	13.2 Big Data 10Vs
	13.3 Big Data Regulation
	13.4 The Value Chain
	13.5 Data-Driven Information and the Impact on Know-How
	13.6 The Dark Side of the Web: Criticalities of the New Information Paradigms and Impact on the Economic Value
	13.7 Big Data and Augmented Business Planning with Real Options and Stochastic Projections
	13.8 Networking Ecosystems
	13.9 Big Data and Bankability
	Note
	Selected References
14 Internet of Things Valuation
	14.1 Internet of Things and New Intangible Assets
	14.2 Internet of Things, Networks, and Big Data: A Synergistic Interaction
	14.3 Internet-Related Product and Process Innovation and B2B and B2C Solutions
	14.4 Valuation of the Portfolio of Internet-Related Intangibles
	Note
	Selected References
15 The Valuation of Internet Companies, Videoconferences, and Social Networks
	15.1 Internet Companies and Videoconferences
	15.2 Networks
	15.3 Network Theory: An Introduction
	15.4 Social Networks and Social Media
	15.5 The Firm as a Coasian Nexus (Network) of Contracts
	15.6 Social Networks Diffusion
	15.7 Misinformation in the Age of the Internet: Fake News and the Right to be Forgotten
	15.8 Sharing Economy and Value Co-creation
	15.9 Personalized Marketing, Social Networks, and Digital Branding
	15.10 Social Network Valuation
	15.11 Valuation With Traditional Methodologies
	15.12 Specific Valuation Methodologies
	15.13 Valuation With Real Options
	Note
	Selected References
16 Blockchain Valuation: Internet of Value and Smart Transactions
	16.1 Blockchains: Definition and Main Features
	16.2 Disrupting Traditional Business Models
	16.3 Internet of Value
	16.4 The Legal Nature of Public or Private Blockchains as a Prerequisite for Valuation
	16.5 Economic and Financial Valuation
		16.5.1 Accounting of Intellectual Property as a Prerequisite for Valuation
		16.5.2 General Valuation Methodologies
		16.5.3 Financial Evaluation
		16.5.4 “With or Without” Incremental Valuation
	16.6 Conclusion
	Notes
	Selected References
17 Cryptocurrencies, Non-fungible Tokens, and Digital Art Valuation
	17.1 Cryptocurrencies
	17.2 Non-Fungible Tokens
	17.3 Digital Art
	17.4 Timestamps
	17.5 Evaluation Approaches
	17.6 Valuation of Intangible Assets
		17.6.1 Cost Approach
		17.6.2 Income/Financial Approach
		17.6.3 Market Approach
	17.7 Interactive Art (Participatory or Relational) and Value Co-Creation
	17.8 Copyright Framework and Evaluation
		17.8.1 Exploitation and Copyright Protection
		17.8.2 From Copyright to Copyleft and Creative Commons
	17.9 Reproducibility of Works, Real Options, and Digital Scalability
		17.9.1 The Secondary Market
	Notes
	Selected References
18 Metaverse: A Digital Network Valuation
	18.1 The Metaverse
	18.2 Scale-Free Networks and the Metaverse Topology
	18.3 Scalability and the Network Effect
	18.4 Multilayer Networks
	18.5 Sliding Doors: Network-Bridging Multi-Sided Platforms
	18.6 From the Internet to the Metaverse
	18.7 Synchronizing the Physical and Virtual: The Avatar Bridging Node
	18.8 A Holistic Ecosystem: From Physical Reality to the Internet and the Metaverse
	18.9 The Metaverse Monetization
	18.10 Value Co-Creation and Economic Marginality
	18.11 Metaverse Evaluation with Multilayer Network Analysis
	18.12 Concluding Remarks
	Notes
	Selected References
19 Cloud Storage Valuation
	19.1 Introduction
	19.2 The Market
	19.3 Digital Networks and Metcalfe’s Law
	19.4 Networking Digital Platforms
	19.5 The Nature of Cloud Computing as a Prerequisite for Valuation
	19.6 The Accounting Background for Valuation
	19.7 Valuation Methods
		19.7.1 The Financial Approach
		19.7.2 Empirical Approaches (Market Multipliers)
	Notes
	Selected References
20 The Valuation of Digital Platforms and Virtual Marketplaces
	20.1 Definition and Features
	20.2 Legal Aspects
	20.3 Networked Governance Around Digital Platforms
	20.4 Digital (Smart) Supply Chains
	20.5 The Assumptions of Evaluation Between Digital Scalability and Network Theory
	20.6 A Theoretical Background for the Economic Valuation
	20.7 Open-Source Platforms
	20.8 Proprietary (Commercial) Platforms
	20.9 Adaptation of the General Valuation Approaches
	Selected References
Part V Residual Goodwill, Bundled Intangibles, and Bankability Issues
21 Digital Goodwill Valuation
	21.1 The Controversial Concept of Goodwill
		21.1.1 Accounting
		21.1.2 Useful Life, Limited Period of Use, and Impairment Test
	21.2 Badwill
	21.3 An Introduction to Valuation
	21.4 The Estimate of Goodwill: Fair Value, Value of Use, Impairment Test, and Firm Valuation
	21.5 Competitive Advantage Period and Monopolistic Rents
	21.6 Economic and Market Value-Added
	21.7 A Cocktail of Approaches for an Integrated Assessment
	21.8 Valuation of Turnaround Companies
	21.9 Customers’ Portfolio, Churn Rates, and Value Per Client
	21.10 Bankability Issues
	21.11 Digital Goodwill
	Notes
	Selected References
22 Portfolio of Intangibles, Smart Infrastructural Investments, and Royalty Companies
	22.1 The Portfolio of Intangible Assets
	22.2 Smart Cities and Smart Hospitals
	22.3 Digital Infrastructural Investments with Public–Private Partnerships
		22.3.1 The Risk Matrix
		22.3.2 A Synthetic Financial Measure of Risk: WACC
	22.4 Royalty Companies
	22.5 Centralization of the Intangible Assets with a Royalty Conduit Company
	22.6 Royalties Charged to the Licensee
	22.7 The Capital Structure of the Royalty Company and Its Borrowing Capacity
	22.8 Valuation of the Royalty Companies: Intangible Synergies and Holding Discount
	22.9 The Creditworthiness of the Intangible Portfolio and Royalty Companies
	Notes
	Selected References
23 Digitalization and ESG-Driven Valuation
	23.1 Introduction
	23.2 The Big Accounting and Market Picture
	23.3 From Book to Market Value of Equity
	23.4 TOTEX (CAPEX + OPEX) and Capital Budgeting
	23.5 Sustainable Business Planning
	23.6 DCF and Cost of Capital Metrics
		23.6.1 The Cost of Collecting Capital: A Comparison Between Traditional and ESG-Firms
	23.7 Networking Supply and Value Chains, Mastered by Digital Platforms
	23.8 The Financial Value of Growth: Multi-Stage Cash Flows and Dividends
	23.9 ESG Drivers and Ethical funding
	23.10 Sustainability Patterns
		23.10.1 Circular Economy
		23.10.2 Resilient Supply and Value Chains
		23.10.3 Sharing Economy and Collaborative Commons
		23.10.4 Scalability and Real Options
	23.11 Beyond Market Value Maximization: Toward a New Theory of the Firm?
	23.12 Corporate Governance Implications
		23.12.1 Beyond Fake News and Greenwashing: Data Validation with Blockchains
	23.13 ESG Reporting and Investment Management Process
	23.14 ESG-Compliant Investment Ratios
	23.15 The Relationship Between The ESG Drivers And The Investment Parameters
	23.16 Facing the Green Swan: Climate Value at Risk (VaR)
	23.17 Green CAPEX
	23.18 The OPEX Dilemma: Inside the Green Supply Chain
	23.19 ESG-Driven Goodwill
	23.20 ESG-Related Bonds
	23.21 Smart Capital Structure and ESG-Compliant Pecking Order
	23.22 ESG Behavioral Finance
	23.23 From ESG to PESTLE Considerations
	23.24 An Empirical Analysis
	23.25 Concluding Remarks
	Notes
	Selected References
24 Corporate Governance Concerns and Bankability Issues of the Digital Assets: More Guarantees with Less Collateral?
	24.1 Leveraging Intangible Assets
	24.2 Unsecured Intangible-Driven Growth
	24.3 Information Asymmetries and the Signaling Effects of Intangible Assets
	24.4 Types of Debt and Support Guarantees
	24.5 The Financial Hierarchy in the Use of External Capital
	24.6 Profitability and Borrowing Capacity in a Going Concern Context
	24.7 Market Value as Collateral in an Insolvency Scenario
	24.8 Intangible Assets, Rating, and Borrowing Capacity
	24.9 Cover Ratios and Other Bankability Parameters
	24.10 Impact of Intangible Assets on Borrowing Capacity
	24.11 Information Asymmetries and Debt Rationing
	24.12 Corporate Governance Concerns in a Digital Scenario
	Notes
	Selected References
Index