$91 Per User Is a Little Ridiculous, But It's Not That Crazy

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(Bloomberg Gadfly) -- You'd think $91 per user is a pretty high price to put on an internet company.

Chinese news aggregator Qu Toutiao is hoping to get valued at as much as $3 billion in a possible U.S. IPO, Bloomberg News reported Wednesday. The Shanghai-based startup has 32.9 million users, giving the valuation metric I calculated above.

Compared to other big U.S. listings over the past few years however, Qu Toutiao could be relatively tame. At a valuation of $179 per user at the end of its first day of trading, Snap Inc., whose shares have fallen 27 percent since their March 2017 debut, was the most aggressively priced. Yet it's well above Line Corp. and Weibo Corp.

$91 Per User Is a Little Ridiculous, But It's Not That Crazy

Admittedly, Qu Toutiao's business model isn't the same. Not to be confused with the more famous Jinri Toutiao, Qu Toutiao's name translates as "fun headlines" and the company delivers customized news and video feeds collated from major Chinese outlets. Facebook Inc., on the other hand, is far more interactive, while Snap is, well, hip.

Ultimately, what these companies seek to do is monetize eyeballs and Qu Toutiao thinks it has a winning formula. At 3 percent of the user base of Tencent Holdings Ltd.'s WeChat messenger, there's plenty of room to grow. Yet competition for users' time is also extremely high, from WeChat, Jinri Toutiao and many others.

A $3 billion valuation for such a small company does seem a little ridiculous. But it's not entirely crazy.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

©2018 Bloomberg L.P.

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