The Digital Skeptic: 'Per Capita' Look at Web Makes Fools of Investors
NEW YORK ( TheStreet) -- With April 1 already taken up by rank-and-file foolishness, here's my big idea for April 2: Let's make it Web Fool's Day, the day investors set aside for a skeptical look at what's really worth what in the digital economy.
Take the so-called "per capita" -- or by-head -- perspective. In other words: What each and every one of us spends, makes or loses online on a person-by-person basis.
Looking at the Web through the per-capita lens hearkens back to the core one-to-one nature of a real-time, global information exchange. Be aware: They are strictly rated M, for mature investors only. It's grim stuff.
But understanding what is lost has helped me make the most value of what remains.Devaluing the electricity the Web runs on
For reasons I have never understood, the Web takes a certain swagger in being worth basically nothing to any single person who uses it. Take last week's breathless buzz on Twitter's revenue doubling by 2014. "The company will earn $582.8 million in global ad revenue in 2013 before nearing $1 billion next year," is what New York-based eMarketer reported. The "logic" here is that with 200 million active Twitter users as of March, the whole shebang has to be worth something, right? Except of course when you divide that $1 billion of expected Twitter revenue by even the current 200 million active Twitter users you wind up with average revenue per user of just $5 per year -- less than what that active Twitter user actively spends on, say, toothpaste. And Twitter is no anomaly. When I gross up the annual revenue per user of Google (GOOG), Facebook (FB), LinkedIn (LNKD), eBay (EBAY) and Amazon (AMZN) it takes real work to get to just $50 in total spent by any single user over 12 months. These annual numbers are so low that for many Americans, there is an argument the Web devalues the electricity it takes to run it. Think about it. In 2010, for example, the U.S. Information Energy Administration estimated that power companies -- which do nothing but sell dumb old electrons to dumb old Americans -- still manage to get said Americans to fork over about $104 a month for power. That's $1,248 in average revenue per user per year. Considering that level of spend, what does the $50 the Web makes mean either way? Probably not much.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts