Today the third major social network is becoming a public company. As with all major IPO's, we will read a lot of diverse and conflicting opinions on its valuation: to some Twitter will be an overpriced money-losing startup, to others it will be the next major player of the Web and undervalued.
To add a data point to the debate, the Scoop.it team decided to study the value of social networks to small and mid-size businesses. The price of a stock depends of course on a lot of complicated parameters but Facebook, LinkedIn and Twitter alike are all planning to derive a significant part of their revenue from small and mid-size businesses. While TV largely remained accessible to brands only, the promise of social networks advertising is however to make targeted advertising an affordable reality to all kinds of businesses. By using targeting techniques social network developed based on the data they collect, businesses can now precisely target specific demographic segments in precise locations - sometimes running ads for just a few hundred people for a reasonable performance-based cost. So as hundreds of thousands of small/mid-size businesses use the Scoop.it platform to discover and publish content on all social networks, we asked them which of these social networks was going to be the most valuable to them over the next 12 months.
Would there be a correlation between the answer to this question and the market capitalization of the social media giants?
With more than half of the US population on Facebook, it's no surprise the leading social network came out first with 52% of US SMB's seeing it as the most valuable social network for them over the next year. That's 4.8 times the corresponding answer for LinkedIn which has more value for b2b businesses. Interestingly, this 4.8 to 1 ratio is exactly how Facebook and LinkedIn valuations compared yesterday, just before the Twitter IPO: with $120B, Facebook is valued close to five times $25B-worth LinkedIn.
So what does it mean for Twitter?
Potential good news as 26% of SMB's see Twitter as the most valuable social network for them in the next 12 months. That's only half (47%) of Facebook and 2.3 times over LinkedIn. If value to these businesses is any proxy of future valuation, this means Twitter's IPO valuation of $14B is a good deal.