Prior to Facebook’s IPO, I published a piece in the Wall Street Journal suggesting what the economic value of one of its active users was at the time: To Facebook You’re Worth $80.95. So why not reprise the concept by exploring the infonomics of Twitter?
Twitter’s S1 IPO filing reports that there are over 500 million tweets per day from 215 million active users. That’s about 900-some tweets per user per year. (Over 1000 tweets per year? Consider yourself above average!) Twitter’s S1 balance sheet identifies $964 million in assets, and as of this writing, TWTR’s market cap is $22.83 billion
As I argued in the WSJ piece, since companies like Facebook and Twitter are nearly pure information-based businesses, the difference between their market cap and reported assets represents the value of their information assets. Or more precisely: current investor expectations of Twitter’s ability to monetize its data, expressed in net present dollars. This means the value of Twitter’s data is $21.86 billion, assuming a year-long valuable life expectancy of a tweet. True, tweets are not easily searchable after a few days on the wire, but this doesn’t mean they’re not without value to Twitter.
Note: Due to arcane and archaic accounting practices dating back to the Great Depression, then reinforced in the aftermath of the 9/11 terrorist attacks, information assets are not considered corporate assets and therefore are nowhere to be found on balance sheets of any company. For more on this see my piece, Infonomics: The New Economics of Information in the Financial Times, or my Gartner research note, The Birth of Infonomics and the New Economics of Information.
So, with 215 million active users, this means that each one of us, as of this writing, is worth $101.70 to Twitter. In terms of revenue however, we generate a scant $1.47 per year for Twitter. Each measly tweet itself is worth 12 cents and generates 17 one-thousandths of a cent ($0.0017) in revenue.
How does Twitter monetize its data? Today mostly via advertising revenue (85-87% according to its S1). It delivers 2 billion tweets per day to desktops and mobile devices, so there’s plenty of room to slip in some ads. Twitter also has special deals with others to provide access to the Twitter Firehose (full data stream) and resell its content. As I suggested in my previous Gartner Blog Network piece, Twitter’s Secret Nest Egg is in Plain Sight, ultimately Twitter will shift to syndicating its data, over advertising, as a primary source of revenue.
Sure, Twitter and Facebook are extreme cases with extreme numbers to go along with them. Still, consider the vast amount of data your organization collects, that if sanitized, packaged and marketed effectively could introduce an entire new revenue stream for you—perhaps even self-funding your ongoing enterprise data warehouse or nascent big data initiative as some of our clients have done.
Yes, of course you can follow Doug on Twitter @Doug_Laney
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