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This was my first reaction also but making a quick google search it seems that TikTok has 500 million users. That's a lot. Doing a pretty simple calculation of

This was my first reaction also but making a quick google search it seems that TikTok has 500 million users. That's a lot. Doing a pretty simple calculation of a dollar per user per day, you arrive quickly at 180 billion dollars of advertising monetization a year. It is really just another scale. But yeah, maybe i am way off and the valuation is still absurd.

mynegation 6y ago
Where did you get that “simple calculation” from? If Average user is worth to TikTok a dollar per day that means that ad buyers are willing to give it to TikTok from their advertising and marketing budget. Which means that the average user should spend at least few grands each year on advertised products and services, which does not seem likely. Also, this is not how valuations are estimated. 180 billion _per year_ is a huge amount (for comparison Apple revenue for 2019 is 260B). One applies a revenue multiple that depends on the stage of the company and industry but for early booming social media site is in the range of 20-40. So the estimate of 105-110 probably comes from the range of 3-5 B yearly revenue estimate
- bllguo 6y ago
  let's not quibble over semantics of "simple" anyway the valuation clearly must include investor perception of their growth trajectory.
  - dsmithn 6y ago
    I think the more appropriate wording would be "completely pulled out of thin air and not relevant calculation"
- wolco 6y ago
  An averge tiktok user doesn't make a dollar a day not sure they have the most valuable userbase.
- knackfuss 6y ago
  Yes, that's correct. A dollar per day is huge, and that would bring the valuation close to a revenue multiple of one, which is madness by market standards. If you would make it 10 cents per day, which seems more reasonable according to people more informed than me, that would become simply a multiple of 10, which is still low, as you pointed it out. We can keep changing the variables, divide it by 2 even, but the point i tried to make is that it seems not that crazy of a valuation after all if you consider 500mi users as an average
nelaboras 6y ago
180b/0.5 = each user (including inactive ones) worth 1$/day?
pjc50 6y ago
$1/user/day is a huge overestimate. Facebook manage a fraction of that.
FanaHOVA 6y ago
200M DAU so way above 500M users
vikramkr 6y ago
One dollar per day!? That's an obscenely high level. Facebook is one of the highest revenue per user social media companies by orders if magnitude and they made worldwide an average of 7.26 per user in an entire financial quarter, which is like 8 or 9 cents per day. If tiktok is outdoing facebook by a full order of magnitude, and has 1/5th the users, even with identical growth expectations they'd be twice the valuation at like 1.2 trillion dollars. A couple billion in revenues plus investor belief in growth potential is more than enough to justify a 105 billion dollar valuation (nobody said investors can't overvalue companies either, look at wework). I dont think they're anywhere near as obscenely profitable as making a dollar per day across all international users, they're going to be orders of magnitude removed from that.
- harrisonjackson 6y ago
  I wonder what the amount spent by users on advertised products per quarter is... presumably more but that seems like a lot especially if that is worldwide.

mynegation 6y ago

Where did you get that “simple calculation” from? If Average user is worth to TikTok a dollar per day that means that ad buyers are willing to give it to TikTok from their advertising and marketing budget. Which means that the average user should spend at least few grands each year on advertised products and services, which does not seem likely. Also, this is not how valuations are estimated. 180 billion _per year_ is a huge amount (for comparison Apple revenue for 2019 is 260B). One applies a revenue multiple that depends on the stage of the company and industry but for early booming social media site is in the range of 20-40. So the estimate of 105-110 probably comes from the range of 3-5 B yearly revenue estimate

bllguo 6y ago
let's not quibble over semantics of "simple" anyway the valuation clearly must include investor perception of their growth trajectory.
- dsmithn 6y ago
  I think the more appropriate wording would be "completely pulled out of thin air and not relevant calculation"
wolco 6y ago
An averge tiktok user doesn't make a dollar a day not sure they have the most valuable userbase.
knackfuss 6y ago
Yes, that's correct. A dollar per day is huge, and that would bring the valuation close to a revenue multiple of one, which is madness by market standards. If you would make it 10 cents per day, which seems more reasonable according to people more informed than me, that would become simply a multiple of 10, which is still low, as you pointed it out. We can keep changing the variables, divide it by 2 even, but the point i tried to make is that it seems not that crazy of a valuation after all if you consider 500mi users as an average

nelaboras 6y ago

180b/0.5 = each user (including inactive ones) worth 1$/day?

pjc50 6y ago

$1/user/day is a huge overestimate. Facebook manage a fraction of that.

FanaHOVA 6y ago

200M DAU so way above 500M users

vikramkr 6y ago

One dollar per day!? That's an obscenely high level. Facebook is one of the highest revenue per user social media companies by orders if magnitude and they made worldwide an average of 7.26 per user in an entire financial quarter, which is like 8 or 9 cents per day. If tiktok is outdoing facebook by a full order of magnitude, and has 1/5th the users, even with identical growth expectations they'd be twice the valuation at like 1.2 trillion dollars. A couple billion in revenues plus investor belief in growth potential is more than enough to justify a 105 billion dollar valuation (nobody said investors can't overvalue companies either, look at wework). I dont think they're anywhere near as obscenely profitable as making a dollar per day across all international users, they're going to be orders of magnitude removed from that.

harrisonjackson 6y ago
I wonder what the amount spent by users on advertised products per quarter is... presumably more but that seems like a lot especially if that is worldwide.