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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Valuation of Listed OSNs: Are Facebook, LinkedIn and Twitter Still Worth a "Like"? |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 94 |
| Date | 2015 |
| Abstract Text | This thesis investigates the online social network market and its underlying value generation mechanisms. The fundamental research question it tries to answer is whether such networks are currently being assessed at a fair value or not. To do so, the analysis focuses on established Western-listed online social networks. By valuing these networks, as well as identifying their sustainable competitive advantages, this study seeks to set their fair trading price through a DCF approach. The first part links the description of the eco-system as a whole to the analysis of Facebook, Inc., the world’s largest broad-audience network. Important drivers such as network effects, lock-in effects, switching costs, and the ability to imitate complete the analysis. The fundamental value of the leading online social network is found to be slightly undervalued. As of July 10, 2015, I assess a target value of USD 111.00 per share, representing an upside potential of 26% compared to its USD 87.95 closing price. Next, the business world is considered by way of the leading professional online network; LinkedIn Corp. Important current issues regarding the online job market as well as forward-looking dynamics are examined. Its successful “freemium” system may suggest Customer Equity as a suitable valuation method. Having unfortunately not produced satisfying results, a discussion about its challenges and reasons why it does not fit the networking platform is provided. Turning to a classic DCF framework, the fundamental value of LinkedIn is found to be overvalued. As of July 10, 2015, I assess a target value of USD 182.00 per share, representing a downside of 13% compared to its USD 209.95 closing price. An analysis of Twitter, Inc. constitutes the last part of this study. Being one of the leading microblogging platforms, especially active in the news area, the question is asked whether such a company can be considered one of the true online social networks, which are more profile-centered. Key findings suggest that Twitter should rather be seen as a broadcast and live-commentary platform, centered on news. Its fundamental value is then assessed, and found to be well in line with its current trading price: for a closing price of USD 34.91 on July 10, 2015, its fair price is found to be neutrally targeted at USD 34.50 a share. |
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