How Much Is a User Worth?

How Much Is a User Worth?

When Facebook went public last week, the company was valued at $ 104 billion, an astonishing figure for an Internet company. Is the figure preposterously high? That depends on how you look at it. The value in Facebook lies in its enormous audienceâ€"901 million people every month who are potential viewers of advertisements and buyers of virtual goods. So you could think of Facebook this way: it is worth about $ 116 for every user it has. On that basis, the company isn’t being valued as highly as Google ($ 200 per user) or even the question-and-answer service Quora ($ 145). This metric also reveals that investors are much less optimistic that Twitter (worth less than $ 60 per user) or Tumblr (about $ will profit handsomely from their very large audiences.

Another reason this metric is useful: it indicates that for all the hype around Facebook and its kin, the situation isn’t as hyperbolic as it was in the dot-com boom. Remember Excite, one of the first Web portals? It and its 18 million users were worth $ 6.7 billionâ€"$ 372 per userâ€"to the @Home Network in 1999. The next year, Lycos was acquired for $ 5.5 billion, or $ 186 per user. It might be of little solace that valuations aren’t as inflated as they were 13 years ago, but at least today, unlike then, there is a sizable amount of Internet ad revenue to vie for.