In his article Aswath Damodaran correlates key metrics of different listed social media companies.
Strongest correlation of EV/MaCap is with Nr. of users of service.
Value per user in terms of EV also depends of kind of service offered by company. Compare Netflix EV/user of USD576 for instance with Twitter (USD77).
However he has difficulties of justifying the valuations based on traditional fundamentals (earnings/cashflows, growth and risk). For now however its more a pricing (based on nr of users) than a value view.
I always enjoy Damodarans articles, since his approaches are very resourceful yet always based on data. Furthermore his techniques are seldom rocket-science and can always be understood, an advantage in my point of view since it reduces potential errors being made during the computations. I wished this kind of thinking would also come so easy to me. Until then i will continue reading his blog and trying to learn.
Edit 1/22.02.2014:
Make sure you also read mmi's comment on the Whatsapp takeover.
Very insightful about a) the network effect creating stickiness regarding the user of Whatsapp and b) Whatsapp is not a social media company.
Both points are very much true and ought to be considered.
