
TikTok’s potential $588 per user valuation in Microsoft deal - dig6x
https://4thquadrant.io/snippets/business-model2/snippet-tiktoks-potential-588-per-user-valuation/
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propter_hoc
I can't believe I'm the first to point this out, but this article is kind of
obviously wrong.

The analysis in the article is like looking at Tesla on an earnings per share
basis, when it's actually heavily priced on forward projected earning
potential.

Like Tesla, Tiktok is a growth stock. This valuation doesn't reflect its
current value per user - it's baking in an implied doubling or trebling of its
user base in some short time span.

I'm not saying that the assumption that Tiktok will meet its projections (and
justify this valuation) is warranted, but I am saying that comparing Tiktok's
$/user to Facebook, a mature/somewhat stagnant social network, is the wrong
way to look at this.

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oefrha
You're not the first to point this out ;)

[https://news.ycombinator.com/item?id=24081449](https://news.ycombinator.com/item?id=24081449)

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propter_hoc
Haha I saw that after I refreshed the page! You beat me to hitting post by a
couple of minutes, because I wrote a longer post than you did :)

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dasudasu
Could anyone in the 90s and early 00s have imagined that the internet would
end up being one big competition for who can monitor and track their users
best, just to run the most efficient ads, and that this value would be in the
hundreds of dollars per user?

~~~
soared
That’s not even a good take. Clearly it’s not one big competition for that -
you’re on HN right now which is not competing.

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simplertms
The most interesting thing about this deal outside the obvious political drama
in my opinion is that this will change Big Tech landscape overnight.

Microsoft has done enterprise so well for so long but has always struggled on
'consumer tech' outside of its Windows OS. Acquiring a social media platform
is going to catapault it into the heart of consumer tech.

Question is will TikTok be a parallell arm or will it help Microsoft's
consumer tech ambitions for One Drive, Xbox etc?

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jjirsa
Who created this lie that Microsoft struggled with consumer?

Xbox was always consumer and is massive. A huge chunk of the Windows line was
always about consumers. The office line straddled both. Hotmail was consumer
first.

~~~
spideymans
Not a lie. Any modern-day "success" with consumers from Microsoft has been
limited to them riding the coattails of the well-established and decades old
Xbox and Windows platforms. Every other Microsoft foray into consumer
computing since Xbox has largely flopped (Windows Phone, Windows tablets,
Zune, smartwatches, wearables, Skype, Bing, Cortana, etc...)

Even with Windows, which is their most successful consumer product, its
success can arguably be attributed to the fact that Microsoft essentially has
a 100% market dominance on computers sold under $1,000. Would that product be
as successful if it faced competent competition? We really can't say for
certain.

Office has historically seen consumer success (however I suspect the rise of G
Suite has significantly curtailed that), but that's only because Office has
been a necessity if you want to interact with business documents (which are
typically .docx and MS Office files).

The common theme here is that, with the exception of Xbox, Microsoft's
consumer products only seem to see success when consumers have no other
options.

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jariel
This will be Nadella's Albatross.

He's been given far too much credit for being a 'nice guy' whilst most
operationalising the foundations left for him. He has not done anything
fundamental for the company, other than changed the tone of the leadership of
the company. He's a good steward.

TikTok is completely out of MS cultural reach, and in that way it's a poor
fit. Remember Skype? How about IE that ruled the world and MS couldn't figure
it out either.

To boot, TikTok is a _fad_. It's just a bigger vine, and teenager will quickly
move on to something more substantial over time.

FB is truly a social network and has a degree of lock-in and therefore staying
power, but younger people have largely fled it as well. Snapchat and Twitter
both have baseline utility for communicating.

I'm not sure TikTok is any of that - it has the faddish appeal, but none of
the underlying utility.

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AlanYx
Amen. I don't even really understand why most of the commentary surrounding
this potential acquisition refers to TikTok as a social network.

TikTok is much closer to a video playback/sharing platform (somewhere between
YouTube and Vine) than a social communication platform. Direct messaging isn't
even enabled by default, and even in direct messaging you're very limited in
what you can send. You can't even send images unless they're already in the
TikTok universe.

It just doesn't seem to be any more of a social network than YouTube is. I can
perhaps see some possible value in Microsoft acquiring a fulsome social
network of some kind, but a faddish YouTube-like platform? It's baffling.

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seven4
_“At a market cap of $755 billion (at point of writing) Facebook’s per user
value is around $288. If Facebook is some leading indicator for the pinnacle
of per user value for social media, then at $50 billion for the roughly 85
million American users, TikTok’s per user value would be $588.”_

I think facebook would pay a hefty premium even above that; handing Microsoft
a buzzing social media platform on a silver platter - with the weight of
Microsoft's resources behind it. Surely Zuckerberg's nightmare manifest...and
he has no real chance of trying to outbid - what with all the anti-trust
press.

~~~
robjan
Microsoft are one of Facebook's investors, although a relatively small one.

~~~
seven4
Yeah, i guess full ownership gives them all the upside/control/ability to
integrate with their other projects/ambitions.

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onetimemanytime
The value is in "it will be the next FB". But we already have a FB and plenty
of other existing social apps. They will not go down with a whimper and they
will clone features, advertise etc etc. Plus, there's a limit on how many
socials a person can really use.

So, sure there is value, but feet to the ground

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Someone
I think the valuation depends on there being multiple buyers because, if
Bytedance doesn’t sell, they’ll lose those valuable customers.

So, are there multiple suitors? If so, who? Facebook and Google probably are
out because of fear the sale will be disallowed because of their market
dominance.

~~~
Abishek_Muthian
>Facebook and Google probably are out because of fear the sale will be
disallowed because of their market dominance.

Facebook okay, Google is not even a player in social networking unless you are
referring to YouTube, since it is a video platform.

But I feel, fear of competition laws is not the major delimiter in the whole
Tik-Tok sale fiasco; This is state initiated after all.

~~~
oefrha
Player or not I hope YouTube take a page from TikTok. Their recommendation
algorithm is abysmal (my opinion of course, and the opinion of many people
I've talked to; anecdata, but given that I've never heard anyone saying
they're hooked on YouTube recommendations, while I've heard tons of people
hooked on TikTok's, I'd say there's at least some truth in this claim) and
hasn't seemed to improve at all for the past, I don't know, five years? And
they seem to only care about pushing their subscription increasingly more
aggressively, while shoving more mid-roll ads into non-subscribers' streams
(these days there are sometimes ten ad breaks in a twenty-minute video, think
about it). Sad really.

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michaelmior
I think part of what makes TikTok recommendations addictive is that since the
content is so short, it's harder to get fatigued by bad recommendations. If I
get recommended just a couple bad YouTube videos that are several minutes long
even if I abandon partway through, it's easier to give up.

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simion314
YT recommendations are just dumb, I was listening a music video and it always
recommended me some song I disliked, so I hit dislike on the video but YT
ignored it. I have no idea why the AI would recommend that video, it was not
same genre of music maybe the visuals were similar so maybe their algorithm is
biased for visuals and not for genre/content.

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afrojack123
Where can we bet against this. The prices are unbelievable.

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ergwwrt
2 people become $1200. 3 people $2100..

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downrightmike
Seriously, how the hell was this deal handed, gift wrapped to Microsoft? There
are better suitors.

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bearjaws
The only thing is, TikTok will be an amazing advertising platform for the up
and coming Gen Z.

I do believe its an absurd price though, Facebook is around $288 per user vs
$588 here. If a platform that is very good at making money from Millenials,
Gen X and even Boomers (all of these generations are established in their
careers, and have far more money than Gen Z) is $288 per user how is this ever
going to pay off?

~~~
oefrha
I guess one thing to consider is that Facebook MAU is declining while TikTok
is on the growth track.

Also, the 85m users of TikTok considered here are all U.S. users, who on
average must be (potentially) more valuable than the average Facebook user.

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missedthecue
Facebook MAU grew from 2.3B to 2.6B monthly active users between 2019 and
2020. What do you mean by 'declining'?

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oefrha
I was thinking about [https://www.theverge.com/2019/3/6/18253274/facebook-
users-de...](https://www.theverge.com/2019/3/6/18253274/facebook-users-
decline-15-million-people-united-states-privacy-scandals)

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jcsnv
Does $588/user include _future growth of new users_?

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vernie
Depends on how popular LinkedIn for Teens will be.

