Exactly How Much Is Each Facebook / LinkedIn User Worth?

The buzz in the tech world right now is almost entirely focused on Facebook IPO and their enormous valuation, which climbed to $102B based on recent purchases on the secondary market.

Facebook is garnering so much attention because they are poised to break the record for largest Internet IPO ever, as the company seeks to raise $5B in cash from their offering.

According to Bloomberg, the final trade of Facebook stock over a private secondary market occurred on March 31, 2012.  In all likelihood, this will be the final stock sale that takes place until the company goes public during the May 2012.

So now that we have some final numbers on valuation, it’s somewhat helpful to take a look at Facebook’s valuation from a user perspective.

Per Facebook’s S1 with the SEC, the company has approximately 845,000,000 users, which implies that each user is worth approximately ~$121.

To take it one step further, it also helps if you take a look at the valuation metrics for another popular social networking site:  LinkedIn.

Based on the current value of the company ($10.45B) and their most recent user count (147M as of January 2012), each LinkedIn user is valued at ~$71.

Though this analysis was pulled together to understand these lofty valuations on a per user basis, it does provide a glimpse into just how powerful these platforms are.

In Facebook’s / LinkedIn’s business models, the user is the product and their massive valuations are a result of having so many people on a single social platform.

Facebook is capitlizing with social games like Zynga, Facebook currency, and aggressive advertising approaches.

LinkedIn already has a premium product (which starts at $19.95/month) and is rapidly expanding into the job posting / career-development side.

The question for investors remains… can each of these companies monetize each user so that it justifies the lofty valuations?

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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