CALCULATING THE VALUE OF SOCIAL MEDIA USER-GENERATED WALL POSTS, TWEETS AND CHECK-INS

What is the value of a tweet? How much does Yelp value a review? As a participant in the social media economy, how much value does your participation create for companies like Facebook and LinkedIn?

These questions came to mind recently as we had a deep discussion at Backupify about the value of data in the cloud. Sometimes people ask me why they should backup their cloud data. The answer that I give comes from asking thousands of Backupify customers why they do it –because the data is valuable, and it is always important to protect valuable assets.

Quantifying the value of data to a business is relatively easy. For customers who use our Backup for Google Apps or Backup for Salesforce products to protect their corporate data, it boils down to three basic concerns:

1. How difficult it would be to recreate that data
2. How much revenue would be lost if the data was lost
3. How much productivity would be lost if important data could not be accessed

The value of social data (for both consumers and businesses) is a little bit harder to quantify. We decided to take a shot at it by building off some publicly available information to figure out what social data, which social media companies, and what social media actions are the most valuable. The results are in posted in the Backupify Social Data Value Infographic below.

Click Image To Enlarge

We plotted the data in two different ways. The first is by average per-user value, which of course has Facebook as king of the hill. The second plot shows how many users a service would require to reach a $10 billion valuation. As you can see, most of the companies are unlikely to ever get that big.

So take a look, and let us know what you think. Are Yelp reviews really worth more than tweets? Who should we have put on the graph that didn’t make it? Which pieces of social media are over or under valued? Leave a comment, write a post, or just tweet @backupify with your thoughts.

COMMENTARY:    I've never totally subscribed to the theory that social networks should be valued based on the number of users they have times a value per user.  It's a bit too simplistic to believe that this formula works for all social networks.   Social networks are not created equal. This is true of social networks that earn the majority of their revenues from the ad-supported revenue model.  

In a blog post dated March 20, 2011, I hypothesized that the ad-supported revenue model is highly flawed, that Facebook had reached a critical inflection point, and growth in the number of users was no longer exponential, and that user growth would continue to slowdown (and it has), and that ad revenues would also slowdown and eventually peak.  Essentially, social networks or sites relying on an ad-supported revenue model are fighting for a fixed number of ad dollars, and that once the number of users in the aggregate peaks, it would be difficult to grow advertising revenues without resorting to predatory marketing tactics, and stealing market share from each other--the classic zero-sum game.  

Sites like MySpace, Yahoo and AOL, sites which rely on the ad-supported revenue model have lost tremendous market share to Facebook and Google.  The verdict is still out on Twitter.   LinkedIn has achieved profitability because of its unique niche and lack of strong competition.  Sites relying on the ad-supported revenue model operate in a "survival of the fittest," mode, and right now Facebook, Google and LinkedIn are winning that game.  Sites like Yelp and Angie's List may have revenues, but both are unprofitable and I question whether they can attain sufficient growth in users to generate profitability.

Traditional business valuations are generally computed on the basis of revenue generating potential of the business.  Revenues for businesses with the most sustainable business models and predictable revenue streams are much easier to forecast.  The same thing cannot be said about social networks and sites relying on the ad-supported revenue model,  the vast majority of them operating in the red.      

In a blog article dated April 7, 2011, I told you how some social media marketing firms have concentrated on determining the value of fan generated content and brand loyalty instead of how much revenue a brand's social media programs contribute due to problems determing ROI.       

Courtesy of an article dated April 5, 2012 appearing in the Backtify Blog

 

Comments

[Hyip Monitor]

Very nice article thanks for sharing your great ideas.

[Connie C. Khan]

Love what you are doing with the blog man!