The charm of internet companies is precisely because of unlimited possibilities, and so is the New Third Board Company. There are many dark horses brewing in NASDAQ's New Third Board, but for investors, the biggest problem is how to find dark horses from more than 3,000 new third board companies and how to correctly value these companies.
The traditional valuation system is not feasible in the New Third Board, and it is difficult to find a standardized operating system. With more and more companies listed on the New Third Board, this problem will become more and more prominent.
How should Internet companies be valued? Although this question has been widely mentioned in the circle, it seems that there is no particularly satisfactory and unified answer. With the return of registration system and vie, we believe this issue will become more important and difficult. We try to sort out some fragmented feelings and experiences so far, and throw a brick to attract jade.
What is the particularity of the valuation of Internet companies?
If today's "Internet" can be regarded as synonymous with science and technology, then the biggest feature of science and technology stocks, or the new economy, is that it changes quite quickly. This kind of quickness can be manifested in several aspects:
1. The technology iterates quickly.
It is difficult to accurately judge the development trend of technology. The former leader may soon become a laggard, and there is a so-called "curse of the forerunner", from analog cameras to digital cameras, from MP3 to music mobile phones, from electronic paper book readers to IPAD, from pagers to mobile phones ... After the arrival of new technologies, it is a devastating subversion of traditional technologies;
2. Matthew effect
It's been almost a few years since I rose from a small company to a boss. Timing is very important. No matter how good the idea is, no matter how much money there is, it will be difficult to make a comeback if you miss the wind, but it is difficult to predict this potential giant in the early days. For example, there are very few active massive players who survived after the Thousand Regiments War, such as many mobile IM, and it is difficult to copy after WeChat comes out. For example, there were many portal companies similar to Yahoo in the early years, but only a few came down in the end;
3. Edge sharpness
General technology can span many different industries, and it is difficult to define the boundaries. As a representative of many technologies, the Internet can connect almost all industries, such as Internet education, Internet manufacturing, Internet agriculture, Internet tourism, etc ... After the "internet plus" was put forward, thousands of industries were labeled as Internet enterprises. For example, Apple, is it a hardware company, a software company or an internet company? Another example is Huada Gene. Is it a biological enterprise or an internet enterprise? DJI, a consumer electronic product, the Internet or an automation enterprise?
4. National policies
For traditional enterprises, because of their growth and maturity, they will go through a long period, so there is no need to be particularly restricted by some tightening or relaxation of industrial policies. But for a technology industry that can change from 1 to 100 in just 3-5 years, this influence becomes very flexible. For example, we all know that Uber's business model is quite good, but it has been severely resisted by the government in many countries. Will a new Uber find a middle route that is not completely revolutionary but can be recognized by the government in the future, so as to go faster in some countries? For example, 3G and 4G, the issuance of licenses, the selection of standards, and the access of global suppliers will all have a lot to do with the will of the regulatory authorities.
5. Business model
The business model of Internet companies is hard to be triggered, and new attempts and considerations are made almost every year from the initial stage to the mature stage. A typical example is Qihoo 360. A few years before listing, the company tried several ways to make profits, such as considering the charging of network USB flash drives (now called cloud disks) and software download members. However, it was not until after the listing that it was determined that browser traffic was thrown out+game/intermodal dual mainline drive ... This story seems to happen in all startups.
6. Listing stage
A standard Internet company will probably go through three stages. One is the initial stage, with a large amount of R&D, server/bandwidth investment and little or negligible income. The second is the growth period, which is characterized by the rapid growth of users and the continuous maturity of business models. But at this stage, they may not make a profit, because they will use their profits to subsidize the market and end users and accelerate their Matthew effect; Third, in the mature stage, the company's user growth rate slowed down, but the revenue growth rate was faster, and it began to achieve profitability.
If all internet companies can go public in the third stage, in other words, a valuation system that we are familiar with in history, we can simply price according to some indicators such as DCF or PE, but the problem is precisely: they often go public in the first or second stage, most of them show no profit, and even some users lose a lot of money and have no income! This really makes many willing participants at a loss.
If we use absolute valuation method to price the company, you will find that it is meaningless to give the company a sustainable growth rate, 2%- 10% or even higher, and you will never know the difference between several points during the period. If we look back, among the 4000 listed companies on NASDAQ at 1999, only no more than five hit new highs in that year (Apple, Amazon, Microsoft ... welcome to add), and I don't have income statistics, but the number will not be too much (for example, Cisco's income is higher than then, but its market value is far less than before), we will realize that almost 99% of the companies actually have sustainable growth rates. But at that time, would the investment bank or the company itself, or even the market, think so?
In a word, technology stocks represent the future and are called the new economy. "Future" or "new" is uncertain, which is the biggest difference of traditional enterprises. It is precisely because of this that they will plant many dreams in the hearts of investors and interpret infinite expectations. Therefore, in addition to dreams and dreams, the biggest challenge facing the valuation of Internet companies is uncertainty.
Berkshire is at 1998. At the annual meeting of Hathaway, Buffett was asked if he had considered investing in technology companies at some point in the future. He replied, "This may be unfortunate, but the answer isno." Buffett continued: "I admire Andy very much." Grove and Bill; Gates, I also hope to turn this worship into action by investing in them. But when it comes to Microsoft and Intel stocks, I don't know what the world will be like in 10 years.
Starting from the traditional valuation method, the real way of internet companies gives investors a basic denial.
Is there a relationship between valuation and income/profit?
Amazon is the leader in the field of e-commerce, and its profitability in the past decade is negligible. However, because its revenue growth rate has always been around 30%, its market value has increased from $20 billion in 2005 to $200 billion+now. So, in this case, obviously, valuation has little to do with profitability.
Take China Mobile as an example. In 20 14 years, China Mobile's revenue nearly doubled compared with 2007, and its profit increased by about 50%, but its market value decreased by half. If it is concluded that PE is declining because of the low growth rate, then the valuation should be related to the growth rate of income or profit. Good idea. Let's move on.
After 20 1 1 year, Tencent Holdings' revenue growth rate and profit growth rate were earlier, showing a systematic decline. Platforms that used to be above 60-80% every year are basically below 50% after 20 1 1 year, and the profit growth rate drops even more, reaching 20-30%. So why is the growth rate low but the P/E ratio high? Everyone said that because of WeChat, WeChat changed the market's expectations of the company, so we don't need to look at the current price-earnings ratio, but look at the future industrial layout of WeChat. That is the user? In other words, as long as the users of Internet companies are growing rapidly, you don't have to care about income, profit, income growth rate and user growth rate?
There are many cases to verify this logic. For example, when Facebook 20 12 went public, its market value increased rapidly because of the rapid growth of users, although the price-earnings ratio was 90 times that of 20 13 and 70 times that of 20 14.
We finally talked about users.
Metcalfe's Law
Start with Metcalfe's law. Robert; Robert metcalf (1946-) was born in Brooklyn, New York, the founder of 3Com Company, and formulated Metcalfe's law, which holds that the value of a network is equal to the square of the number of network nodes, and the value of a network is directly proportional to the square of the number of users connected to the network. In a communication network with n members, each member can establish n- 1 relationships with other members. So he thinks that the network value v = the square of k * n, and k is a constant. This law, known as the Bible, mainly convinces investors that Internet companies are good as long as they have users, and their task is to acquire users.
But with the bursting of the internet bubble, Metcalfe's law also has its own shortcomings when it returns to rationality. For example, the network scale is so explosive, so why are there many isolated network companies instead of integrating them? In other words, if Metcalfe's law is correct, then no matter how big the two networks are, they should be interconnected, but this is contrary to historical development. Please refer to the article "Where is the Law of Value of the Devil Metcalfe's Communication Network Wrong".
Personally, I think that with the expansion of the network scale, the value effect brought by each additional user to the network should be attenuated. For a simple example, if we add another factor, time, and change the formula to V=K*N2*T, it will be more illustrative. T means the time we stay in the network. The longer the stay, the stronger the liquidity of e-commerce/advertising/games, and the greater the network value. In WeChat, we added a friend. Will we spend the same amount of time paying attention to his/her little bits and pieces? Obviously not. If we have 10000 friends, will we be on WeChat 24 hours a day? No , that is not possible either
People always pay attention to their closest, best and most interested friends or topics. Therefore, with the increase of network scale, the distribution of users' time occupation of individuals in the network should gradually decrease, that is, n (quantity) increases and t (time) decreases, so the value of the network should not be N2 (square), but a more linear curve with growth limit characteristics.
Ziff's law is the answer to this point, which was put forward by Ziff in the 1940s. Taking a large section of typical English text as an example, the most common word The usually accounts for nearly 7% of all the words that appear. The second word: of accounts for 3.5% of all the words that appear, and the third word and accounts for 2.8%. In other words, the order of proportions (7.0, 3.5 and 2.8, etc. ) closely corresponds to the order of 1/k (11,1/2, 1/3…). If the network has n members, this value is proportional to1+1/2+1…+1(n–1). Zipf's law explains the long tail law well, and finally, it is close to the logarithmic function Ln(n).
If the formula V=K*n*Ln(n) is used to express such a network value model in which n and the growth limit e***, it seems to be closer to the real situation than Metcalfe's law. However, this is not the key to the problem, because they are all growth models. If we don't know the network value when the number of users is X, then we don't know the network value when the number of users is X( 1+Y%). In other words, how to determine k?
As for K, in short, K is the coefficient that Internet companies change from users to profits, which is also commonly known as the monetization coefficient. We can guess that K is related to several factors: First, Internet companies have Matthew effect, so industry status or first-Mover advantage is very important. In the trend of 3-5 years, we can hardly remember that any company had a market share of more than 50% and its share was replaced by another company, so K should include the "Matthew" factor of a pioneer or industry leader; Second, the business model determines the sustainability of a company's bargaining power and profitability. So it also depends on the different bargaining power of 2B/2C. Third, user stickiness and activity. Due to the positioning of the platform itself, products, experience and other reasons, users will be active on different platforms, and the turnover rate is different. For example, the platform stickiness of SNS attributes should also be divided into an acquaintance social platform with high activity and a stranger platform with low activity.
Fourth, the profitability of ARPU individual users, needless to say, but the stability and sustainability of this figure are related to the previous factors. Also, under the premise that the number of users of a website has not increased, the income of this year and next year may be very different, because it has begun to be monetized, so can we say that the value of this website has been greatly improved? In other words, do we give ARPU the expected value or the present value? It seems not, because if the present value is given, such as ARPU=0, then the conclusion is that the V value of the website is 0. If the expected value is given, how to ensure the expected realization?
When we think we are getting closer and closer to the truth, we are getting farther and farther away from actual combat. This is my feeling about the above analysis. Because even though we seem to list all kinds of possible methods and steps that can lead to answers to questions on the metaphysical level, we still feel that this method cannot be put into practice. Because, Matthew effect, business model, user viscosity/activity, monomer ARPU, etc. It is difficult to quantify it with a set of models, not to mention the dimension of time and development, which will make the problem more complicated.
Simply put, tracking users of internet companies can judge trends, especially at the industry level. Such an attempt would be more meaningful. You can refer to the idea of "10 internet investment strategy 200 times: the power of the platform" three years ago, but it seems that it is not easy to define the value of the company. But does this mean that these methods are meaningless? I don't think so. Because this kind of thinking will make us understand the essence of the Internet and is a useful exploration of qualitative analysis methods, I have not ruled out the possibility that these qualitative analysis methods will be gradually quantified in the future.