Everyone knows social media companies like Meta, Twitter, Instagram, and Snapchat, but there are many more unknown social media companies if we go by the definition of social media.
Social media companies provide a platform for users to share content, connect with others, and engage in conversations.
They create a virtual space for people to share thoughts, ideas, and experiences, as well as to discover new things.
Social media companies also provide businesses with the opportunity to market their products and services, as well as to gain insights into customer behavior.
Some companies included in this category may include the players behind the scenes who own the social media function platform, which they sell as a service to recognizable companies.
But companies I did not include in the data set are consulting firms and digital ad agencies that provide a service to social media companies.
In the original data set, there were large companies that had a social media aspect to their business but was not the primary product.
For example, Electronic Arts considers themselves a media company, but their primary business is gaming products, so I did not include companies like this.
In my opinion, although these companies have knowledge of social media, their primary service is professional services.
That all being said, let’s dive into the social media company valuations.
Social Media Company Data Set
First, let me get out a few words on the data set used in the analysis.
I screened for companies globally rather than only staying within the US, Canada, and the UK, as I typically do.
From that raw data set, I removed outliers, private companies, and unprofitable companies for the EBITDA and earnings multiples (they were included for the revenue multiples).
I scrubbed this data somewhat one by one by reading the business descriptions to remove companies that do not actually have a social media platform, whether that is directly for the users or B2B.
I started with ~2,000 companies and ended up with about ~110 companies, so yep, this analysis took me a long time to get to a reasonable data set.
But note that there may be companies that are included in the data set that do not have social media as their primary platform that may still be included.
Social Media Company Valuations
The summary of the social media company valuation multiples is shown in the following table:
Out of 110 companies, the average revenue multiple for social media company valuations is 1.9x and the median revenue multiple is 1.5x.
As I’ve mentioned in other posts, when there is a wide range of results, the median is a more reliable analytical data point to use than the average, because averages can be pulled unfairly by extremes.
Out of 52 companies, the average EBITDA multiple for social media companies is 14.2x and the median EBITDA multiple is 10.8x.
Out of 38 companies, the average PE multiple is 19.7x and the median PE multiple is 17.3x.
I do like using EV / earnings multiple more than PE, because similar to EBITDA multiples, it removes the effect of cash and adds in the debt, so it is a more accurate representation of the value of the business.
That being said, the EV / earnings multiple is somewhat similar to the PE multiple, with its average of 21.2x and the median of 20.2x.
An interesting observation is that the multiples do not vary a lot across the different sizes of companies.
But we do see that revenue multiples are slightly higher for large social media companies, which may be explained by larger companies with higher brand power being valued higher.
Another takeaway is that there were 110 social media companies in the data set but only half of them have a positive EBITDA and only a third of them are profitable (i.e. positive net income).
Social Media Company Valuations – US Only
Out of 110 social media companies in the data set, the following countries showed up the most number of times:
- United States – 50 social media companies
- China – 15 social media companies
- Japan – 10 social media companies
- Canada – 8 social media companies
- Tied between India and Sweden – 4 social media companies each
The following table shows the valuation multiples for social media companies in the US only:
For the software companies valuation analysis, see my other post here.
How To Use Valuation Multiples To Value a Company
Now that you have the valuation multiple, how do you use it to value a company?
For those who are not familiar with using valuation multiples to value companies or those who are but need a refresher, I wrote posts detailing exactly how you can do that.
Hopefully you can use them as helpful guides. Click on the link below to go to the post.
- How to value a company based on revenue
- How to value a company based on EBITDA
- How to value a company based on earnings
- How to find your own valuation multiples
- Other posts on how to value a company
Download Data Set
To download the ~110 companies data set in this analysis, enter your email address below to sign-up for the mailing list and the data set will be sent to your email directly.
(I have never sent an email to the mailing list, but I may in the future, who knows. But the reason for mailing it directly is because if you can download it with a click of a button, the internet bots go nuts.)
Thanks for reading as always and leave a comment if you found it useful!
