LinkedIn’s Valuation: How Are LinkedIn’s Users Valued Relative To Twitter?

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LinkedIn (NYSE:LNKD) and Twitter (NASDAQ:TWTR) generally cater to different social networking needs of the online community, but they still are often compared in terms of valuation, user growth, user engagement and profitability. This is natural, considering the companies went public within two years of each other (2011-2013), both compete for user attention, and both had similar blockbuster initial growth trajectories in the internet/social networking domain. Below we take a look at how the two companies compare in terms of key valuation metrics. 

The market values LinkedIn’s users at almost five times the value of a Twitter user. Although LinkedIn’s active user base (105 million) is around one-third of Twitter’s base of 310 million, its market cap is over 60% higher than Twitter’s. Additionally, despite the smaller monthly active user base (reported as unique visiting members), LinkedIn’s total revenue in 2015 was 35% higher than Twitter’s. Owing to LinkedIn’s better user addition growth, improving user engagement and cash flow generation, it is valued at 158x of its user base compared to Twitter’s 33x (Facebook is valued at 201x). Meanwhile, LinkedIn’s market capitalization to revenue multiple is 5.6x, compared to Twitter’s 4.6x.

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 The major factors driving this valuation difference are LinkedIn’s relatively faster user growth and significantly higher free cash flow generation compared to Twitter.

lnkd-31Have more questions about LinkedIn? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for LinkedIn
3) Please provide your valuable feedback at content@trefis.com.

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