How much is twitter worth (to small businesses)?

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.

See on www.slideshare.net

About Ally Greer

Ally heads up community management, social media, and customer support at Scoop.it. She loves to geek out over anything social, Internet, or tech related. When she isn't working, you'll probably find her running the streets of San Francisco. Follow Ally on Twitter @allygreer.
  • Reid Rosefelt

    Ally, thanks for this interesting piece.

    I have a personal response to all this, which doesn’t mean anything, as it is purely anecdotal. I really wanted to buy a Twitter ad, but I investigated and it was too expensive for me to buy even one. I have bought thousands of Facebook ads, and have had over a hundred million impressions. As you know well, the minimum budget for a Facebook ad is one dollar, and I once ran a successful campaign that ran for $3 a day for months. Facebook sells to millions of people who don’t have money, while at the same time selling ads to large corporations. Those small amounts add up. I’ll be looking to see if the day comes when I price out an ad on Twitter for my budget-minded self, and feel that it makes as much sense for me as an ad in Facebook or LinkedIn, or maybe someday, Pinterest. : )

    I’m no Wall Streeter, but my understanding is that the value of Twitter stock is based on the hope that they will somehow turn the large numbers of loyal users into profits. But will that happen without the small advertisers?

    • http://scoop.it Guillaume Decugis

      Hi @reidrosefelt:disqus – Totally makes sense. While Twitter only allowed larger brands with significant budgets, they opened up their system more recently to SMB’s by enabling small budget ad campaigns. Have you checked out https://ads.twitter.com ? This should help you get a campaign started with any kinds of budgets. Let us know if this link is useful.

      • Reid Rosefelt

        Yes, obviously, I’m a small business–I’m one person. That’s where I went. Of course I could have bought ads. I just didn’t think they were a good deal. But that’s just for me. There may be millions of people who find Twitter ads to be a good value as opposed to spending money on other networks.

        I don’t have anything to advertise now, but when the day comes that I’d like to use another Twitter ad, I’ll try it and see what I think.

        • http://scoop.it Guillaume Decugis

          Ah! ok. I thought you had tried them when they were asking $10k+ commitments per month. I’ve heard good things from larger brands who tried that but that was obviously beyond the reach of many SMB’s.