Research On The Valuation Of Social Media Companies Based On Schwartz-moon Model

As an emerging product of the information technology era,the Internet is one of the most significant and far-reaching inventions in the development of human beings.Its emergence has greatly improved the efficiency of information dissemination.The arrival of the Web2.0 era has created a new type of trust relationship with unprecedented high efficiency.Thus,a great number of social media companies have sprung up.As a member of the Internet industry,social media companies are characterized by rapid development,high risks,and significant network effects compared with traditional companies.There is a high degree of uncertainty in the process of business development.In addition,user resources play an important role in this type of companies,which is an endogenous driving factor for the value of such companies.The emergence of Metcalfe's law provides a theoretical basis for quantitative assessment of corporate value from the perspective of user resources.Based on the reasons above,this paper proposes to combine the Schwartz-Moon model with Metcalfe's law and apply it to the valuation of social media companies.Based on real options theory and modern capital budgeting,the Schwartz-Moon model can comprehensively consider the uncertainty and high risk of the companies while valuation.Metcalfe's law describes the linear relationships of the company's revenue,cost to the square of company's MAUs.It provides a new way of the prediction of revenue and cost,and can overcome the problems that the development of the industry is immature,and the reference data is less subjective.In this paper,the Schwartz-Moon model is modified by Metcalfe's law.Firstly,the scientificity of Mekav's law and its applicability to Weibo Corp are verified by regression analysis.Then,this paper bring the MAUs into the original Schwartz-Moon model,and modified the revenue and cost process in the model according to Metcalfe's law.This paper selects Weibo Corp,a representative social media company in China,as a case.Firstly,the value of Weibo Corp is evaluated by the modified Schwartz-Moon model.And this paper use the sensitivity analysis to analyze the influence of various parameters on the value of the company.Then the original Schwartz-Moon model is used to evaluate the value of Weibo Corp,and then compared with the modified Schwartz-Moon model.Subsequently,market comparison approach is used for valuation as a reference for comparison.Finally,this paper compares the evaluation results of the three methods with the market value of Weibo Corp and the predicted value of professional research institutions.Through case studies,this paper argues that for specific companies,it is reasonable to predict the revenue and cost through Metcalfe's law.On the one hand,the modified model can reflect the value of social media companies from the essence of users.On the other hand,the modified model can overcome the subjectivity of the original model due to the lack of historical data and limited industry cross-section data,and can be well applied to the valuation of social media companies.