last four years, every timeyou’ve had a big IPO come up, the week before the IPO,I’ve tried to value the IPO.The reason I do it the week before the IPOis, if you wait until the IPO is priced,that number starts gnawing away at your brain.So when you do a valuation, your numberstarts to wander toward that number.So this is actually a valuation I did of Twitter, the weekbefore their IPO.
So what triggered this was, I was on CNBC. Property Valuation Brisbane So once in awhile, I end up in that insanity.And I was actually– we were talking about Twitter.And there’s an analyst there who was very optimisticabout Twitter.So I said, why do you think Twitter is worth so much?He thought it was about $ or $ per share.He said, because the online advertising business is huge.So I said, how big is the online advertising business?He said, I don’t know, but it’s huge.This is exactly what gets us into trouble.People don’t want to talk– it’s like China.Online, it’s huge.And because it’s huge, I can pay whatever I want.So I said, you know what?If I want to value Twitter, that’s where I need to start.I need to figure out how big this business is.
Doesn’t take a whole lot of research to figure this out.But the entire online advertising business in was about $ billion.That’s the whole global online advertising business.The biggest player, by far, is Google.And if you look at the breakdown, you can see,Google is about % of the global online advertising.The next biggest is Facebook, and then youhave a splintered business.So that’s the business right now.I do know that online advertisingis becoming a larger and larger portion of overall advertising.Print media is going out of style.So here’s what I had to do first, to value Twitter.I had to figure out how big this market was going to be.Because before I talk about what the revenues for Twitterare going to be, I need to figure outwhat they’re aiming for.So I make some assumptions.I assume that the overall advertisingmarket is about $ billion.So about % of all advertising is online right now.But the overall advertising market can growing about %a year, because it’s an expense to companies.They can’t grow at % a year.But online advertising would increaseas a percentage of that to become about % of the market.That gave me my endgame.It give me my online advertising market a decade from now.It’s about $ billion.AUDIENCE How did you figure %?
ASWATH DOMODARAN I made it up.And I made it up on the following basis–I looked at how quickly existing advertising mediarevenues are dropping.Print advertising is falling through the floor.But TV advertising has actually been surprisingly robust.So there are certain kinds of advertisingwhere I think you’re going to see other advertising.Billboard advertising is not going to go away.Because if you’re driving, it’s tough to have online ads.Maybe you’ll figure something out.But you’ll have a lot of accidents.So I made that assumption.Clearly,