Introduction
This is a first part in a series of my investment analysis on STEEM. The intent of this series is for me to learn more about the platform, learn from feedback, and ultimately make a decision to invest.
Growth Trends
How many people were active this week? How fast are we growing?
Lets find out.
| Month | Week | Total Accounts | Active Bloggers | Active Voters |
|---|---|---|---|---|
| August | Week 4 | 77,331 | 4,328 | 10,638 |
| August | Week 3 | 71,107 | 4,573 | 11,822 |
| August | Week 2 | 61,392 | 5,852 | 12,761 |
This weeks report is based on:
Start: 2016-08-21T00:00:00
End: 2016-08-28T00:00:00
Last week's report is available here.
Churn is a real problem
It looks like we not growing all that much - in fact, we are losing users.
Churn seems to be greater than the growth, which could be a consequence of any of these:
- the platform isn't sticky enough (user retention problem)
- the growth engine is broken (lack of influx of new users)
- consolidation from hype (we grew too fast, too soon)
- a deeper fundamental problem (no product-market fit, a flaw in UX/UI or incentives)
Is a Steemit blogger really worth $25,878?
As of this moment, the STEEM market cap is $112,000,140. If we divide that by the number of active bloggers, each blogger is valued at $25,878. Hmmmm?
Lets dig deeper. What if we compare Steemit to Facebook?
Steemit
STEEM/USD price: $0.87
Market Cap: $112,000,140 US
Free Float (liquid STEEM + SBD as STEEM): $6,543,000 US
Weekly Active Users (August, Week 4): 10,889
Valuations
| by Market Cap | by Free Float | |
|---|---|---|
| Per-User-Value | $10,285 | $600.88 |
Weekly Active Users are all users who posted, commented or voted at least once in the 7 day timeframe.
Counting VESTS as part of a market cap is not exactly accurate, but neither is just counting the free float. Free float however gives us a super super conservative calculations, so I will use it as a showcase of how nutty STEEM valuation is.
Notes
At this time, Steemit is NOT a revenue-generating enterprise. The virtuous cycle (whale cashouts, development, mining, dpos, content and curation rewards) are paid 100% by investors. Investors are all the people who buy the STEEM token, and are taxed with ~360% PA inflation (first year only) + risk of depreciation in price. STEEM does not generate any revenue from transaction fees, advertising, etc. at this time.
Valuation
The most valuable thing Steemit has, is the userbase.
The userbase should NOT be valued in linear fashion. Network effects are a very important factor, and thus, value of individual user should rise exponentially in proportion to the platform growth.
Example:
If a platform starts with 10,000 users and values each user at $1, when it grows to 20,000 users it might be able to justify each users value at $3.
Crossing the Chasm:
Another important point to consider is the chasm. This is the tipping point where the momentum from early adopters propels the platform into the mainstream. Steemit is NOT past the tipping point yet.
Market Cap: 358.84B (August 26th 2016) source
Daily Active Users: 1.13B source
Valuations
| by Market Cap | |
|---|---|
| Per-User-Value | $317.55 |
I couldn't find the statistics for Weekly Active users, so I picked daily Active users which is less. The monthly active users seem to be around 1.71B, so weekly might be around 1.5B. This would bring per-user-valuation to $239.22.
Notes
Facebook is a for-profit company, that generates revenue from advertising and data harvesting from its users.
It also enjoys a massive network effect, guaranteeing its position as a long-lasting monopoly in a social media space.
Assumption
If we ignore the fundamental difference between Facebook (a highly profitable monopoly) and Steemit (early stage social-experiment), all things being equal, the price of STEEM would need to drop to $0.0268 to equalize per-user valuation with Facebook.
On the bright side of things
Thanks to @jl777 for providing feedback on this idea. As it turns out, the $0.0268 valuation is highly unrealistic, as it doesn't account for Steemit's growth potential.
Facebook's growth is limited, as everyone is already on it. This is why valuating users against market cap or cashflow makes sense.
Steemit's growth potential is unlimited, and given that we only have ~10,000 active users, it is possible to have a 10x or 100x growth in the next 2 years. Perhaps, a celebrity joins us, and brings 100k new users to the platform over-night. Then another celebrity joins in, and the game is on. This is how Twitter and Blab acquired millions of users in a short period of time.
Furthermore, its worth pointing out that Steemit doesn't generate any revenue, however that doesn't mean its not capable of doing so in the future. Early stage SM startups should NOT be wasting time with monetization, but should rather focus their energy on building something cool that people want. I think the early stage investors understand this, and don't really care. They are in for the speculative ride.
Any criticism or feedback is welcome.
In the next part of the series we will be looking at wealth distribution and SP dynamics.
The fact we currently have less people blogging could be a very good thing in the long run. One of the main concerns so far has been the distribution of rewards and steem power. with less competition each blogger has a slightly better chance of being seen and getting rewards, combine this with the low price of steem it's an ideal time to power up.
This should lead to more even distribution of rewards which will help retain future users.
I decided to publish once a week or two weeks instead of once every 2-3 days, to have a time to work on increasing a quality of my posts. I think some of people are doing the same.
Someone should measure a length of posts and number of grammar mistakes in text.. maybe this could help us come to conclusion, that others are doing the same - improving a quality of posts :)
I'd be in trouble if mistakes became the measure of a quality post, being dyslexic means I usually miss some no matter how many times I go over a piece before posting.
@phoenixmaid Use grammarly it is free. I have a few issues as well and Grammarly helps me daily, not just on steemit but everywhere you type.
Thank you @cryptoiskey I'd never head of it before but have it bookmarked now.
In some ways, hearing that you are posting less is not an encouraging sign. I am not advocating posting stream of consciousness 24/7, but reducing the amount of content posted = lack of engagement, generally speaking. In the broader context, lack of engagement generally leads to abandonment and high churn rates.
I recently wrote a blog post about my thoughts on the high churn and two solutions which could be implemented to stem the tide (https://steemit.com/steemit/@lpfaust/an-open-letter-to-the-steemit-powers-that-be).
The fundamental problem I see is minnows are leaving primarily because they feel there is system which does not give them a fair opportunity at being upvoted and earning rewards. As a result, they are voting with their feet.
If the long term value of the platform is a direct result of the content generated, it stands to reason having users generate less content is a bad thing for long term value. Even more to the point, if the audience you are writing high quality content for votes with their feet and leaves the platform, the real value of the rewards you receive drops because your tokens are being sold to a shrinking group of buyers. All signs point to voting period and curation rewards rethinks are necessary.
"The most valuable thing Steemit has, is the userbase."
I agree, as well as "should NOT be wasting time with monetization, but should rather focus their energy on building something cool that people want."
The content and the people who create it are what will make Steemit a success, or not. We are the fuel for the Steemit growth.
It's up to us to increase the reputation of Steemit as a valuable platform for people to join. Build the content based on quality value.
Thanks for the short analysis. Peace.
Here's my take on The Churn Problem
Nice analysis
One way to look at this is to consider that the user base may grow by 30x and then be valued similarly to Facebook, assuming no change in market price. If the user base doesn't somehow grow by at least 30x then the site is as good as dead, so this isn't an unrealistic assumption at all. Valuing at parity with Facebook per user may or may not be valid given the enormous differences in business model and structure.
Some great analysis. If the doom sayers are right then I and others like me who keep powering up are complete idiots (which is entirely possible).
I look at the long term potential which whilst by no means certain is still huge.
It is to be expected that there will be ups and downs. No platform is without them and they tend to be more pronounced in it's infancy.
I'm continuing to support the platform by regular posting, curating and powering up and I know others are doing the same. If we keep building the community then once things do really take off it will all be worth the effort.
There are never any guarantees but it is the same for anything in life. You have to take a risk.
Many of the people we need to appeal to (and aren't) are like me -- not crypto-enthusiasts and most definitely turned off by the incessant drone of anarchist idea(l)s. I was early, I comment a lot, I try to maintain my enthusiasm, but I may become one of the churned.
Absolutely this. What need to happen is enough users need to arrive so that Steemit is broadly representative of, basicly the internet.
After 2mo in "production" the platform is very early. Crossing the chasm is key. How long did it take Facebook to get to early majority? What were the drivers there?
The full potential of Steemit is not yet known.
I am here for long term:
https://steemit.com/steemit/@steempowerwhale/who-is-powering-up-or-am-i-alone-the-steemit-power-up-club
Absolutely right!!!! There are causes:
and 3. MOST IMPORTANT - no product-market fit, a flaw in UX / UI or incentives
It is necessary to seek a solution for each item of leakage!
"should focus their energy on building something cool for the Consumer".
Lets dig deeper!!!)
This is what I call a great info for everyone, especially for new users!
Would someone who knows, tell me, without using graphics as I'm blind what's been going on in the last week or two with user growth and active users? Those are the two most important things having to do with steemit stats imo.
Its consolidating. Not really growing. We would need to either: a) Acquire a celebrity or b) Capture another community (just like we did with Anarchists).
Its too bad we didn't get ad men before anarchists.
lol. now this was funny :)
A truly awesome post man! You emphasized it, but I really need emphasize it since I've been as well tracking some of the data for the past 2 weeks:
"Churn is a real problem"
I got a sense that user interaction was down. I would love to see a chart on the overall daily payouts or budget and consider how much that would be if divided among active users. Just out of curiosity. Is there a way I can work that out?
I wrote something on where I personally think The Churn Problem is coming from.
Yeah, @beanz, I was thinking that would be a nice statistic to see as well, I'm sure someone will be able to figure it out for us :)
Great post and information!
Definitely more work has to be done.
I ain't even at $5 now.
So its just a matter of time I suppose. :)
Until then keep powering up. ;)
Price / marketcap also represents potential and future expectation. Userbase is not supposed to stay at current levels, so... if, say, users go to 7mn (which is a very small number for a social network, and a small number even compared to reddit), then the price per blogger goes down to 250$.
Great analysis - We are certainly in the early adopters phase. The user base is the key and the worth for potential growth right now. However, the fallacy of twitter is always a concern. They have a jackpot of a user base and somehow are doing nothing with it.
Interesting info. I had thought it was a more active close knit community. I poured my heart into to my initial intro post & received a few real replies. Other than that it was washed away just like FB or Twitter. That was discouraging for me to repost again.
Your work is highly appreciated...Thank you and looking forward for your next episodes...
Ever chat room I entered I have been mocked for being a Steemer. They say it is a one big elaborate ponzi scheme. Will I have the last laugh someday?
This post has been linked to from another place on Steem.
Learn more about linkback bot v0.3
Upvote if you want the bot to continue posting linkbacks for your posts. Flag if otherwise. Built by @ontofractal