How much is a tweet worth? The question has an almost koan-like quality. And yet at a time when the ranks of billion-dollar social-media companies keep growing (Instagram being the latest), it’s a good time to ask about the value of the services they provide. That is exactly what Rob May, co-founder of Backupify, did in an entry on his tech company’s blog.
May’s calculations were straightforward and fairly back-of-the-envelope. He derived his first number, value per user, by taking the valuations of various social-media and cloud-computing companies—Path, Instagram, Yelp, Pinterest, Foursquare, Twitter, Dropbox, LinkedIn (LNKD), and Facebook—and dividing them by the number of each companies’ users. (May calculated with active users when the number was available, total users when it wasn’t.) Then, in a second calculation, he took the number of individual things the companies’ users had created (the total number of tweets, for example, or all the Yelp reviews ever written) and divided that number into the company’s valuation or, in some cases, its annual revenue.
Doing the math this way, May calculated that a Foursquare check-in was worth 40¢, a LinkedIn search 12.4¢, and a Facebook “share” 2.4¢. A Yelp review was worth $9.13. A tweet? A tenth of a cent. A penny, in other words, for 10 of your thoughts.
Again, it’s a crude measure: For one thing, tweets and Facebook shares aren’t commodities—some are clearly worth more than others. But May’s point is that even a rough estimate of the value of something like a single Foursquare check-in helps to give a sense of how much value users are providing to social-media companies. “The reason that Yelp reviews are valued so highly is that every review creates lot of value for other users,” he told me. “You can’t create a lot of value for a lot of Path users because by its nature, it’s limited.” Of course, Yelp and Facebook users are providing all that content—and all that value—to the companies for free.
There’s another interpretation, though, as May readily concedes: Some social companies are decidedly overvalued. “It definitely is a possibility if the valuations are too high, that per content prices aren’t going to hold over the long term,” he says. “If you do this again in two years, a Yelp review could be worth three dollars.”