Facebook recently passed MySpace as the most-visited social networking site worldwide. But most of its growth is international, and it’s still significantly smaller than MySpace in the U.S., where ad rates are higher than, say, Brazil. So what’s it really worth?
According to a useful analysis by TechCrunch’s Michael Arrington, News Corp.’s (NWS) no. 2 MySpace is still the most valuable social network. Facebook, he figures, is worth just 75% of MySpace, despite more unique visitors. And LinkedIn is only worth 6% of what MySpace is worth.
How’d he get there? By dissecting each site’s traffic by country, and assigning each unique visitor a value based on their country’s average online ad spend per Internet user.
He also applies three recent deals — Bebo’s sale to AOL (TWX) for $850 million, Facebook’s funding at a $15 billion valuation, and LinkedIn’s funding at a $1 billion valuation — to put real-world dollar ranges on each site. He concludes that MySpace could be worth as much as $20 billion; that Facebook could be worth as little as $2.5 billion, etc.
This is a smart piece of analysis, but it’s just a starting point. Why?
- The data he uses to establish the average Internet ad spend per person factors in all Internet advertising — not just the social networking sector, which is relatively cheap ad inventory. We assume that’s the best data he could get for all of the countries he analysed. (We don’t know if it varies enough by country to make much of a directional difference, anyway.)
- The two most lucrative valuation comps — LinkedIn and Facebook — should both come with big asterisks. The first one, which Mike acknowledges, is that LinkedIn’s employed professionals should be worth much more per eyeball than any other social network user base. The second one, which he doesn’t really spell out, is that no one really believes Facebook’s $15 billion valuation, and that it’s really the product of Microsoft’s (MSFT) desperation to beat out Google (GOOG) for an investment bake-off.
Will those details skew a real, real-world valuation of each company? Yes. Does it matter? Not really. In the absence of better metrics, Arrington’s analysis is a useful start.
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