Valuing Social Networks
Posted by Petrice Gaskin at Jun. 30, 2008
Michael Arrington at TechCrunch has some really great and interesting analysis about determining the value of social networks.
In addition to looking at page views and unique visitors, Arrington argues that it would be helpful to look at how much advertisers are willing to spend on users in particular markets and estimate a social network's value based on how much advertisers are willing to spend to get access to their users.
According to Arrington's data Myspace is them most valuable social network followed by Facebook and Bebo. But, because Myspace has such a large share of U.S. and other valuable markets, Facebook has only 1/20 of Myspace's value.
Arrington's analysis is extremely interesting and definitely speaks to the ongoing discussion about how to monetize and value social networks. Dan Frommer over at Silicon Alley does a good job of dissecting Arrington's analysis as well.
In addition to looking at page views and unique visitors, Arrington argues that it would be helpful to look at how much advertisers are willing to spend on users in particular markets and estimate a social network's value based on how much advertisers are willing to spend to get access to their users.
I believe an effective way to value a particular user is based on the average Internet advertising spend per person in the country they live in. The higher the spend, the more value the social network can get out of the user by serving them advertising and other products. That means that, for now, users in a handful of key countries are worth far more in terms of revenue potential than those in the rest of the world.
According to Arrington's data Myspace is them most valuable social network followed by Facebook and Bebo. But, because Myspace has such a large share of U.S. and other valuable markets, Facebook has only 1/20 of Myspace's value.
Arrington's analysis is extremely interesting and definitely speaks to the ongoing discussion about how to monetize and value social networks. Dan Frommer over at Silicon Alley does a good job of dissecting Arrington's analysis as well.