How Much Is A Unique User Actually Worth?

If you’re involved with a consumer facing website, you’re probably tracking how many unique users visit your site every month.

But do you know how much each additional user contributes to your company’s valuation? I thought it would be interesting to look at the data for the top 20 sites:

Here are the highlights:

1. Commerce and search are the most valuable categories. For a good reason.

The top half of the list is dominated by commerce (Amazon, Ebay, Expedia) and Google (search). Not surprising, since users in commerce and search are generally only a few clicks away from buying something or signing up to be sold something – and thus very valuable.

2. Users on social media are perceived as very valuable. But the data doesn’t support it.

What is surprising is to see so many social media companies at the top of the list. While Facebook has a fairly decent ad business (estimated to be $3-4B this year), its actually a fairly modest amount given the colossal number of users on the site – and the colossal amount of time users spend on the site.

LinkedIn and Twitter also currently have very modest revenues (2011 estimates are $400M for LinkedIn, $100M for Twitter) to be valued so highly.

By contrast, Google and Amazon both generate 10x as much money with fewer users and less time spent.

3. Users on standard media sites are the least valuable.

Aside from MySpace, The lower half of the list is almost exclusively made up of sites that have been around since Web 1.0 and who predominantly sell banner ads (aka “standard media”). It stands to reason that these users are less valuable than those in search and commerce but you have to wonder why they are less valuable than users in social media sites.

The stark difference between the top and bottom halves of the chart also explains why Twitter, Facebook and LinkedIn are trying so hard to find ways to be perceived as monetizing other than with standard banner ads.

 

Notes on methodology:

The valuation data came from two sources; Yahoo Finance (for publicly traded companies) and reputable blogs like Techcrunch and AllThingsD (for privately traded companies). For publicly traded companies I took the company’s value on October 1st, 2011. For private companies I took the company’s value at the last round of funding.

The unique user data came from Comscore’s Media Metrix ranking of the top 50 websites in the US for August 2011, which is the most up to date ranking at time of writing. I excluded any companies which have a significant offline business (such as Apple, Walmart, Gannett etc) or which are not-for-profits (such as Wikipedia).

Before you stats purists slam me, yes I agree there’s a flaw in using US unique user data instead of worldwide unique user data, which will tend to penalize companies that have a better businesses overseas, however Comscore does not make the worldwide data freely available and for companies of this size I had to assume that the overseas skew is similar across the board.

Posted in Fundamentals