Social Media Brand Value

Social networking is a huge market. There are millions upon millions of people who use social media daily. We have various types available to us, with some of the most well known being Facebook, Twitter, Instagram, Snapchat, Whatsapp and the more professional LinkedIn. Some of these platforms use advertising to make money, others have premium membership fees but others such as Snapchat don’t make money in these ways. Yet they all still have massive values, so how is it possible to value a brand which does not have a regular source of income such as sales.

These social media platforms are difficult to value as they don’t particularly have tangible assets, this makes it difficult to estimate a true value. A valuation can be useful to attract investors. On November 5, 2015, Facebook had valuations of $306 billion, according to CNBC, which is an incredible amount for a website with a low asset portfolio. There are a total of 1,440,000,000 active monthly users of Facebook which is a 12% increase from 2014.

There are various ways in which to value a company, with one of the most basic being Stock Market Valuation where the value is simply calculated as the share price x the number of shares. A social networking site, at present, is a good industry to invest in as it generates great returns. But looking to the future, can the social media platforms continue to generate such large amounts of profit without generally charging membership fees. I believe that if membership fees were introduced to the likes of Facebook, Twitter and Snapchat that the usage would decrease greatly, I know I would not pay for them! I can appreciate this is a stingey way to look at this as it would maybe cost up to £5 per month, but after being used to these sites being free, I know I would not be impressed if I was then asked to pay to use the site.

If people will be unwilling to pay for their memberships on these sites, the companies still need to ensure that they are generating revenues to survive and grow. Probably the best way to do this is through advertising, Facebook have now introduced advertising on the side of their news feed which is linked to what you search. I, for one, do not see a major problem in this, I am expecting to use Facebook for free so I understand that they need to make money somehow since that money is not coming from me! I have also seen how good advertising can be for companies on Facebook as they will reach a larger group of people so it seems to me a win-win situation.

It remains to be seen whether other social media platforms add in advertising, it would probably be more difficult for the likes of Snapchat to add advertising given the context of the site. So in order to gain value, they need to continue to add new features and update their app accordingly which will also ensure that they keep a high brand value!