The Study On The Relationship Between Attention Economy And Internet Companies’ Valuation

The paper studies the internet company from the perspective of the attention economy.It puts that instead of the massive information,strong peoples’ attention is scarce resources in information society.The importance of peoples’ attention is not only lies on the amount of the crowds,but also on the limitation of individual’s attention resources.With the infinite increase of information and the rigid limitation of peoples’ attention,the internet companies will face the higher and higher marginal cost of converting attention to money in the future.For a long time,how to judge the value and development of Internet companies correctly has been a problem with multiple standards.It is becoming more and more difficult to conduct accurate valuation for internet companies in traditional ways of corporate valuation.The traditional methods of corporate valuation are becoming totally malfunctioned in the Internet industry.In addition,the phenomenon of high valuations of venture capital market and capital market has become a puzzle which is difficult to explain.Is there any innovative idea which can provide attemptable path for more reasonable solutions to these problems?The valuation methods which are commonly used in the Internet industry all have clear logical chains.Based on the user number,registration number and visitors’ volume,the market value of a certain Internet company can be deduced directly.However,the fact may not the case.Different internet enterprise has different ability to appeal users’ attention and loyalty even if they share the same user number and visitors’ volume.Meanwhile,there is gap and different matching rate between company’s intention of attracting users and the content that the company provides,so the following characteristics including classification,monopolies,price control and competitive alternative are obvious among internet companies.And their ability to convert attention economy into marketing income also differs.This transformation has obvious trend and rules which can be observed.This paper attempts to observe the internet subsectors in a same logic structure and coordinate system,the writer hopes to gain the relatively united judgment capability based on attention — visitors volume —cash conversion rates,and then get the basic features of internet companies in thename of attention economy mode.The mode will be helpful and instructional for observing the future trend of internet industry and making the correct judgment.The paper also puts clearly that the internet companies featured with attention economy is in line with the micro economics’ definition for natural monopoly.The internet sub-industries will gradually show the trend and characters of natural monopoly in the process of getting mature from initial completion.With the formation of business monopoly,the market will get an inevitable result—the phenomenon of price discrimination.To make clear how does natural monopoly occur in internet companies and the causes of its formation,it will help us to find some reasonable explanation for the surging internet mergers and acquisitions.These studies will help us get a clear understanding of development direction of internet companies in the future,and strengthen venture capitalist and stock investors’ judge ability in investment,as well as help them discover the possible traps in the process of internet companies’ mergers and acquisitions.The innovation of the paper also contains the following aspects:To get crowd’s attention which is embodied by the internet flow,Internet companies need to consume a lot of capital.Meanwhile,companies’ profit and earning power are also derived from the attention-internet flow.But in the internet companies’ financial statements,the capital consumed by gaining attention was processed with those methods of billing adopted by traditional companies.Namely,the logic chain of assets producing income,income generating profit and profit increasing equity in internet companies’ financial statement is broken.So the internet companies’ financial statement usually has characteristics of light assets company,but the expressing ways which is suitable for traditional companies’ financial statements would be an error if they were adopted by internet companies.In order to rationalize the logic of internet companies’ financial statement and make it established rationally,we need to create new financial statement that could embody the capitalization of attention economy.On that basis,we need to establish a new financial statement mechanism which would better adapt to the new economic era.Meanwhile,we also need to establish valuation models which could be matching and more adapting to the new internet companies.At last,the paper attempts to launch Facebook’s 2014 annual report ROE,ROAand P/E,which introduced attention capitalization,and the writer also makes a comparative analysis with the unadjusted annual report which doesn’t introduce attention economy concept.We could find that,after adopting attention capitalization concept,Facebook’s total assets increase in its new financial statement.With the long-term accumulation,the internet companies may have some characters of heavy assets enterprise.Meanwhile,due to the decrease of company’s cost and expense and the increase of net income,companies’ ROE and ROA will have a significant increase,while P/E ratio will decrease obviously.The writer hopes these new innovation and attempts could be able to provide a more reasonable explanation for the phenomenon of high valuation.