Feb 7 2014, 12:32pm CST | by Forbes
You can tweet all you want on Twitter; you can connect like crazy on LinkedIn, but if you really want to impress Wall Street, you’d better be on Facebook. Some fascinating math shows that Wall Street right now is valuing the average Facebook user at $128 , a touch ahead of Twitter’s $118 — and far above LinkedIn’s skimpy $84.
What’s Facebook doing right? It has become an advertising powerhouse , pushing up ad revenue 64% last year, to an astonishing $7 billion. The Menlo Park, Calif., company is a product innovator, recently launching new services such as a news-magazine app (Paper ) and a way for users to create movies from their posts of the past 10 years. Investors have responded by bidding up Facebook stock more than 13% this year.
What’s more, Facebook keeps getting more ubiquitous all the time. With 1.23 billion active users as of Dec. 31, Facebook’s population rivals that of India. Give Facebook another year, Mashable recently reported , and the company’s user base will grow to the point that it could be considered the largest country in the world, more populous than China.
A few pessimists worry that Facebook’s current users might grow tired of the site and leave. Yet right now,
escaping the earth’s gravitational field seems easier. The result: with Facebook’s market capitalization of $158 billion, and its 1.23 billion active users, simple division tells us each user is being valued at $128.
The math isn’t quite as favorable for Twitter, which this week saw its high-flying stock take a pounding amid concern that user growth is slowing. With Twitter’s stock currently at about $50, the company has a market capitalization of about $27 billion, spread over 241 million users. That equates to an average per-user value of $118.
LinkedIn has ended up as the laggard, largely because of investor jitters about costly spending projects and compressed profit margins at the Mountain View, Calif., company. With LinkedIn’s stock tumbling to about $205 in after-hours trading Thursday, the company has about a $23 billion market capitalization. Dividing that figure into 277 million members produces a per-user value of about $84.
These calculations blend each social-media company’s user base into one homogenous average. There’s no effort to distinguish between star users who create lots of widely followed content, as opposed to nearly worthless accounts that don’t engage much with the site. Not to mention any bot-controlled accounts that haven’t been expelled yet.
Even so, the concept of calculating what the stock market is implicitly “paying” for each user is a familiar one. It’s well accepted in many other industries, such as cable television or mobile-phone service, where individual users’ value can vary widely.
While Facebook’s edge looks secure now, a lot can change in 90 days. In November, I ran similar calculations for all three social networks. Back then, Twitter’s users were most valuable, at $114. Facebook was a close second; LinkedIn trailed the others.
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