Snapchat value is 1 billion USD,Why Microsoft so much interested and TikTok’s global business value is approximately
According to sources, Microsoft has six weeks to negotiate the details of the acquisition of TikTok’s US business. But there are still some thorny issues to be solved. The most important one is: how much is the short video sharing app worth?
Analysts and bankers set the value of TikTok’s U.S. business in the range of US$20 billion to US$50 billion. The larger range reflects the complexity of divesting TikTok’s US and global businesses, such as determining the number of reliable users and Revenue is targeted at specific market segment revenue in the transaction, etc. Microsoft’s acquisition proposal also includes TikTok’s operations in Canada, Australia and New Zealand.
TikTok’s parent company is Chinese Internet giant ByteDance. ByteDance has a series of popular entertainment applications. According to reports, last year, Bytedance’s total revenue was US$17 billion and net profit exceeded US$3 billion. Based on this, ByteDance has a valuation of more than US$100 billion in the private equity market and is one of the most valuable startups in the world.
However, venture capital investors hold Bytedance shares, not TikTok shares, so TikTok’s valuation is not yet clear. More importantly, since Microsoft only considers acquiring TikTok’s business in four countries, it is necessary to further differentiate TikTok’s business. Wedbush Securities analyst Daniel Ives estimates that TikTok’s US business can account for 40% of Bytedance’s valuation, or about $40 billion.
According to Evers’ estimates, TikTok has approximately 100 million active users in the United States and has already achieved approximately US$2 billion in revenue. If all goes well, Microsoft can develop TikTok into a $200 billion business on this basis. The application may refer to the development path of Facebook, which chooses to go public first and then gradually improve its advertising business. Although TikTok has begun to display ads in the app, it has not yet achieved real profitability.
Microsoft previously confirmed in a blog post that the company is negotiating to acquire certain assets of TikTok, but did not mention the potential purchase price in the article. TikTok declined to comment on its valuation.
An insider familiar with the White House’s research on TikTok revealed that TikTok’s global business value is approximately US$50 billion , while the value of its US business is slightly lower. On Monday, after the news of the acquisition negotiation was released, Microsoft’s stock price rose by 5.6%, which means that the company’s market value has increased by $87 billion, more than enough to complete the transaction.
Several other analysts use rival Snapchat as the basis for TikTok’s comparison. In the most recent earnings report, Snapchat’s parent company Snap said that the daily active users of the app increased by 17% to 238 million. The company’s revenue in 2019 was $1.72 billion. A banker said that TikTok should be more valuable than Snap because TikTok has more influencers and a more active community. The market value of Snap is approximately $32 billion.
TikTok’s valuation may be based on the growth rate of its users, but user growth does not explain the specific problem. Research firm Sensor Tower estimates that the TikTok app has been downloaded about 165 million times in the United States, but bankers, analysts and venture capitalists are still trying to figure out the gap between the number of active users on the platform and 165 million downloads. In contrast, Snap had 161 million daily active users before going public in 2017; Facebook had 526 million daily active users before going public in March 2012. According to Bloomberg analyst Jitendra Waral, after the listing, each user of Snap contributed $138 to the company’s market value; each user of Facebook contributed $198. If Facebook’s unit user market value contribution is used as the category, and if TikTok has 100 million users, then TikTok’s valuation can be close to 20 billion US dollars.
“The biggest unknown here is’users,’” Walla said. “The user growth of Snap and TikTok is different. In the US, TikTok’s user growth is faster than when Snap was launched. Therefore, TikTok’s valuation should be higher. .”
However, in order to acquire part of TikTok’s business, Microsoft has to overcome some other difficulties. Some hawks in the Trump administration are not optimistic about Microsoft’s acquisition of TikTok. For example, White House consultant Peter Navarro mentioned in an interview that before acquiring TikTok, Microsoft may need to divest its assets in China.
The purchase price of TikTok also depends on whether Microsoft will lower the price during the acquisition. Because if it is not acquired, TikTok may not be able to continue operations in the United States. But at least another big company has expressed interest in acquiring TikTok, and other American investors may also buy a minority stake in TikTok. However, Microsoft is currently the only company that has publicly confirmed that it is negotiating an acquisition. If no other suitable bidders appear, Microsoft may have more bargaining chips.