With A Strong Monetization Platform, How Much Can Quora Be Worth?

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Quora, the question and answer website founded by Facebook’s ex Chief Technology Officer in 2009, is gaining significant traction. The company now has nearly 200 million monthly active users and was valued at $1.8 billion in its most recent funding round in 2017. The company does not have an established revenue model yet, although it opened its platform to advertisers in 2016. Quora has been focused on developing a high quality product, and now has several brands using its platform to reach consumers.

While Quora has witnessed slow and steady growth, with very little monetization, in the past eight years and does not have aggressive growth plans, our interactive dashboard looks at how much Quora could be worth if it is able to monetize its user base effectively. You can modify our assumptions and arrive at your own valuation of Quora, based on its revenue and revenue multiple.

 

Quora’s revenues are likely to come from the digital advertising budgets of marketers – a segment which is growing very rapidly. According to eMarketer, worldwide digital ad spending will reach nearly $342 billion by 2020. Facebook and Google currently get the lion’s share of this budget (both these companies together account for nearly 60% of the total digital ad spending), but many marketers have been looking for other platforms with engaged users and a specific target audience.

In order to calculate how much average revenue Quora can generate per user (ARPU), we have looked at the ARPUs of other players in the industry (Twitter, Pinterest and Snap) when they started monetization their platforms. These players are small (unlike Facebook and Google) with a user base similar to Quora. While Quora has a unique proposition, which is not comparable to any other social media company directly, the numbers of its peers can provide a benchmark of how much revenue Quora can generate in the next two years.  We have taken the ARPU numbers of Snap and Pinterest for 2015 (Snap started monetizing its platform in 2014, Pinterest in 2013) and for Twitter in 2010 when it started monetizing its platform.

You can change these assumptions here to arrive at your own estimates for Quora’s revenue potential.

We estimate that if Quora can command an ARPU of $0.50 (slightly lower than the average of what Snap and Twitter captured early on in their monetization processes) in 2018, it can generate revenues of around $112 million in this year. This number could increase slightly next year as Quora builds confidence among its advertisers. However, we do not expect an exponential increase in Quora’s revenues in the next few years, as the company is more focused on developing a strong product versus rapid revenue generation (though that may change as the company gets closer to going public).

The below charts show our estimates for Quora’s valuation.

 

While historically, Quora’s peers such as Snap and Pinterest commanded extremely high revenue multiples, we do not forecast a similar multiple for Quora, as it is not focused on exponential revenue growth in the immediate term. Based on their current market capitalizations, Snap and Twitter command revenue multiples of around 11-13, and based on its latest round of funding, Pinterest commands a revenue multiple of around 25. We estimate a revenue multiple in the 20-25 range is appropriate for Quora, which would imply a valuation of $2.8 billion – $3 billion in the near term.
Quora has a highly engaged user base and a variety of questions around career advice, medical and healthcare, life advice and several other categories being actively answered on its platform every day. Quora can also be an effective platform for content marketing, where marketers can answer specific questions and publicize their expertise in particular areas. Understanding customers through the questions they ask is another area in which marketers can benefit by leveraging Quora’s platform. Through high quality content and encouraging users to ask and answer questions which are relevant to them, Quora is building a repository which could be extremely powerful for brands to understand their customers. Quora is now building its app in different languages, with the ultimate goal of getting users to ask a question to Quora directly rather than using Google searches. Quora’s valuation in the future will largely depend on how effectively it is able to monetize this unique platform.
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