Twitter’s low-value users hurt sale hopes

Monthly active users worth $45 (U.S.), nearly the lowest of all social media platforms

Twitter may be up for sale and collecting multi-billion-dollar bids, but your tweets still aren’t nearly as valuable as you think they are.

And that might explain why some suitors are less interested, according to reports.

Each monthly active user of the microblogging site is valued at just $45.10 (U.S.) each, which is nearly the lowest among all the major social media players. Twitter users aren’t valued anywhere near what Facebook users are, despite several bidders reportedly mulling to buy the company.

The price per user took a 20-percent beating Thursday after shares dropped when technology news outlet Recode said Google and Disney would not pursue Twitter, and that Apple was unlikely to buy it either.

Marc Benioff, CEO of Salesforce.com, considered one of the more likely suitors for Twitter, also downplayed his interest during an analyst meeting at his company’s annual Dreamforce event in San Francisco. Twitter shares are down 14 per cent this year.

“We see diminishing prospects for a takeout,” said Monness, Crespi, Hardt & Co. analyst James Cakmak.

The most valuable social network users are on LinkedIn. These users are valued at $243 each, thanks to the $29.4-billion buyout from Microsoft announced in June.

Close behind are Facebook users at $216 each. Twitter users are also valued well below the $171 investors are paying for the smaller user groups on Angie’s List.

The relatively low value on Twitter quantifies the difficulty the company has had since selling shares to the public back in late 2013. Shares of Twitter nearly tripled in their first months as a public company on great enthusiasm the company could be the next great social network.

But since then, shares have crashed 66 per cent from their highest levels in 2013.

“I think the market has struggled to pin a value on Twitter, although it appears to be on the way to get sorted out,” said Colin Sebastian, analyst at research firm Robert W. Baird.

Twitter shares have crashed 66 per cent from their highest levels in 2013

There are several factors as to why Twitter’s users are so much less valuable than those using rival services, including:

Weaker monetization. Users aren’t much use to investors unless the company is making money off them. Twitter drove less than $8 in revenue from each users the past 12 months. That pales next to the $32 in revenue per user at LinkedIn. The number of members of Angie’s List is just 1 per cent of Twitter’s monthly active users. But thanks to its annual subscription model, Angie’s List generated $103 in revenue per user over the past 12 months.

Lower user growth. Twitter’s 313 million monthly active users in the second quarter was up just 3 per cent from the same period a year ago, which is the lowest user growth among all the social media companies.

Lack of profitability. LinkedIn hasn’t found a way to turn its users into profit, either.

Given these factors, potential buyers will need to be more creative in finding ways to unlock value that have eluded the company so far, Sebastian said.

“The data being captured by Twitter, the real-time aspect, and the broadcast platform are what would likely attract an acquirer,” he said.