In 2024, revenue multiples remained consistent with 2023 levels for social media companies, indicating steady top-line growth across the industry, such as steady advertising revenues and user growth.
Companies like Meta and Tencent maintained strong engagement across platforms, supporting top-line stability.
However, EBITDA multiples declined as rising costs, including content moderation and AI investments, pressured profitability.
Increased regulatory scrutiny, particularly around data privacy and content standards, also drove up compliance expenses.
This trend suggests that while companies maintained revenue growth, they faced increasing operational costs that impacted profitability.
Social Media Company Revenue Multiples
Out of 30 social media companies, the median P/S revenue multiple in 2024 is 2.0x. The EBITDA multiple is 10.8x. The PE ratio is 17.3x.
The median gross margin for social media companies is 62%. The median EBITDA margin is 18%. The median net profit margin is 11%.
Several developments are influencing the investment outlook for the 10 largest revenue generating social media companies listed on major US exchanges:
- Meta: Meta’s stock has risen by 69% in 2024, trading at 21 times future earnings, which is a 10% discount compared to its peers. Analysts attribute this growth to the adoption of new products, AI integration, and expanded advertising. Additionally, a potential TikTok ban could further boost Meta’s stock, though this remains uncertain.
- Tencent: Tencent reported an 8.13% growth for the quarter ending September 30, 2024. The company’s involvement in developing international standards for large language model security, alongside other tech giants, indicates a commitment to AI governance.
- Baidu: Baidu is collaborating with companies like Tencent and Ant Group to establish international standards for large language model security, reflecting its focus on AI governance. Additionally, Baidu has been involved in drafting metaverse standards, indicating its interest in emerging technologies.
- Kuaishou: Kuaishou, a competitor to TikTok, has been expanding its user base and services. The company has previously prepared for an IPO in Hong Kong, indicating its growth ambitions.
- Weibo: Weibo has been downgraded by Morningstar’s ESG unit over concerns related to internet censorship in China. This highlights potential risks associated with regulatory compliance and content management.
- Reddit: Since its IPO in March 2024, Reddit’s stock has surged by 250%. The company reported a 68% increase in sales and a surprise profit in Q3 2024. Analysts are optimistic about Reddit’s growth potential in 2025, citing advancements in AI-powered features and increased user engagement.
Looking Ahead for Social Media Companies Valuation to 2025
As we move into 2025, several factors can influence the valuation landscape for social media companies:
- Operational Efficiency: Companies that effectively manage operational costs, particularly in areas like AI integration and content moderation, may see improvements in EBITDA margins.
- Regulatory Environment: Ongoing regulatory scrutiny, especially concerning data privacy and content standards, could lead to increased compliance costs, affecting profitability.
- Innovation and User Engagement: The ability to innovate and enhance user engagement will be crucial. Platforms that successfully introduce new features or services may attract more users and advertisers, positively impacting revenue.
- Competitive Dynamics: The emergence of new platforms and shifting user preferences will require established companies to adapt strategies to maintain market share.
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