Twitter’s Valuation: How Are Twitter’s Users Valued Relative To Facebook?
Social networking giants Twitter (NASDAQ:TWTR) and Facebook (NASDAQ:FB) are often compared in terms of user engagement, user base and their rate of growth. This is natural, considering the companies were established within two years of each other, both compete for user attention, and both had similar blockbuster initial growth trajectories.
However, Facebook has leaped far ahead of Twitter over the past few years on several counts, including user growth, user engagement, active advertisers and ad revenue generation. For example, Twitter’s monthly active user base is less than one-fifth the size of Facebook’s and its total revenue is less than one-eighth of Facebook’s. Twitter also significantly lags behind Facebook in terms of user additions and user addition growth rate, profit margins and cash flow generation. Consequently, Twitter is valued at a comparatively low 33x of its user base compared to Facebook’s 201x. Twitter’s market capitalization to revenue multiple of 4.6 is also very low compared to Facebook’s 18.6.
Going forward, Twitter will need to turn around its slowing user growth trend and improve its engagement with users as well as advertisers to improve its future cash flows.
Have more questions about Twitter? See the links below.
- Why We Lowered Our Twitter Price Estimate By 10%
- Can Periscope Become The Pillar of Twitter’s Growth?
- What Is Twitter’s Ad Revenue Opportunity From Passive Users?
- The Key Downside Scenarios For Twitter’s Stock
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