Two separate antitrust cases against Facebook have been brought by the Federal Trade Commission (FTC) and state antitrust authorities. Both suits claim that there is a possibility of a monopoly role in the social networking industry, and Instagram and WhatsApp are segregated from Facebook by the most serious steps proposed. The idea of separating Facebook and other giants is not fresh, but currently the low likelihood of this scenario is not clear, as competition in the social media segment has risen dramatically in recent years. In the United States and most European countries, Snapchat encompasses 90 percent of generation Z (those born after 1997), as well as 75 percent of generation Z and Millennials (born in 1980 – 1996).
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The average time the app has to be used is 30 minutes. YouTube has 2 billion users worldwide, and in just a few years, TikTok has gained nearly 700 million users, of which 50 million are active users in the United States every day who at least once a day use the app. As for Facebook shareholders, even in the event of a split, they can benefit. The company has 1.82 billion active Facebook app users a day. Complete unique users who have used one of the Facebook’s applications including Yahoo, Facebook Messenger, Instagram and WhatsApp at least once were 2.5 billion in the US in the 3rd quarter of 2020, while that of Facebook were 196 million users. Facebook is used by 60% of the US population (assuming one account per person) on a daily basis. 77 percent use the application at least once a month. This high coverage, in our view, significantly limits further user base growth in the US and growth is now anticipated primarily from the emerging markets.
The active user base of Facebook is expected to rise by just 22% by 2026, and we expect the user base of Instagram to double from the current 1.1 billion to 2.3 billion in that span. In terms of revenue, we estimate that in 2019, Instagram accounted for $16.3 billion, which is 23% of overall revenue. Due to both faster user base growth and higher revenue growth per user, we expect Instagram’s share of revenue to be 54 percent by 2026.
Facebook is currently trading at a P/S multiplier of roughly 10, offering a rough estimate of $250 billion based on expected revenue from Instagram for 2020. But that’s a multiplier that refers to Facebook as a whole. In the event of a split, Instagram is likely to trade at a higher multiplier than the remaining Facebook as its fast-growing peers (Snap and Pinterest) trade at a P/S multiplier of more than 30. In our opinion, they are significantly overrated, so to assess Instagram as a separate business, it is easier to concentrate on level 15. The value of Instagram would be at the level of $375 billion with a P/S multiplier of 15 (traded by Match, which owns many social networks, including Tinder).
The remaining Facebook should be selling at a lower multiplier than it is now, but the closest equivalent of comparable growth rates of Twitter is trading at P/S 10, so we assume the business would continue to sell at P/S 10, and Facebook’s valuation would be at $565 billion, giving the overall company an approximate amount of $940 billion or $329 per share, which is obvious. In particular, there is no point in considering the WhatsApp branch in depth because the organization has not yet discovered the possibility of secure user monetization and in the absence of accurate data on its users and potential methods of monetization, it is not possible to determine a in depth evaluation of this social network.
