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Social networks have value but are difficult to value. How do you place a value on Facebook? Or Twitter? These sites have little or no monetization and yet they are worth millions for having a highly engaged a…

I’m very curious to know what progress you made on this theory.

How do you factor in contributions from members (active or not) on other sites than your own with your site being the subject? I’m thinking of links, fansites, blogs, video’s,…

To give you an example: I’ve been a lurker on Worth for some time and recently due to lack of time don’t even visit it on a monthly basis anymore. But I’ve made ‘offline’ publicity for it which brought new (active, contributing) members and I have some links towards it which could bring some visitors. When I use a Worth image somewhere on a forum or blog that displays the Worth logo, I make publicity for it at the same time.

Your Theory: Keep like items in your presentation:

An introduction to Orbital Theory: Understanding and putting value on Web 2.0 “Galaxies?” The only reason I suggest this is because to make it a theory it should show that it can be represented in like terms.

If you are a blog site, your Star is the center of the galaxy (Your Thoughts and Ideas) and the other items will be influenced directly. (Planets-big user, Asteroids-small user, comets-smaller user) Also, remember – Small Star, Small Galaxy and visa-versa.

I like your theory on placing a value on a customer and how to measure such a unique item. Placing weight or gravity on a user can be daunting.

Your measures seem to have inherent flaws in them:

1 User STARTS at 1 unit and is adjusted accordingly

This might not be true at all because of what they bring to the table.

If a user comes to your site and you assign a value it must be updated accordingly. Actions related to the user should adjust the weight of the unit. So:

USER * (Actions) = Weight

Now you have to classify Actions:

Depending on what you determine are “caused” by this user will determine the weight. Now, applying my personal fundamentals of consumerism, a user can attract, consume, or withdraw.

Attract = How much other activity user produces
Consume = How much revenue a user generates
Withdraw = How much a user takes away

Adjusting for such in the formula:

User * (Attract +, Consume 2+, or Withdraw -1) = Weight

Applying any measure to those three items can be adjusted to track the metrics you wish to track. I could go on and on about each individual item but I hope this represents a synopsis of my ideas.

do I smell a 2.0 company brewing?

So we now have gravity influence on others (depicted in terms of size of the planetary body), frequency of visits/interest (depicted in terms of speed of the orbit), and loyalty (distance from the object it’s orbiting, which widens with age).

I think it’s enough to base a flash visual off of for now. We started working on one inhouse, but if anyone knows of an action-script based flash that depict planetary bodies, that’d be great to work off of.

user A is introduced to the site in whatever way, then frequency of repeat visits is introduced as a metric then mass is built up by freq. and time- the user may be in a learning curve or just has not signed up yet- and then the user starts posting or generating content and then the user is assigned a exponential or add on metric to account for the mass and gravity.

So basically, any site that does not have a strong user gen. cont. ingredient is worth nothing even if they have a good idea and a decent user base because everything is so cheap to develop? And valuation of these sites will be dismal. Is this the consensus?

Because if that is true, you will not see any financial sites become popular because of the private nature of them. Also any stock sites like stockpick, gradr.com, socialpicks.com will never become popular because the sharing/ user gen. model is flawed.

exclusive to the stock market;
* the people who do well on the market take money from other people.
* the majority is always wrong.
* don’t take tips from the cab driver. the online equivalent are the sites above.

Feel free to interject.

Trying to pin down users solely in terms of their value to the website misses the factor that the users accumulate value as attractors themselves. If a certain power user were to up and quit, fans of his might stop coming. If a particular artist stopped creating for Worth1000, we might see users stop viewing or viewing less often. Those users’ “mass” is cross-site. There are users on Worth1000 who are well established on Fark and SomethingAwful, and carry that reputation with them from site to site. The user creates content valuable not just as comments and “eyeballs” for advertisers, but in their own personal circle of users.

We must be careful to avoid thinking of this model with the site in the middle attracting people and all these things whizzing around it with no value other than their value to the site. The users themselves are micro-environments of their own, with gravity and satellites. This also occurs on the macro level, as Worth1000 is one of many sites in orbit around a larger “borough” of the internet.

But I think Worth1000 needs a revamp, even after using it for a few years I still find it difficult to navigate. Make worth1000 2.0 and it will go from amazing to incredible!

And riffing on your theory some more, maybe it would make sense for webmasters to spend more time trying to retain their “heavy users” (aka junkies, lol), instead of trying to attract new users, as the heavy users are pulling in the new users already.

Anyway, I’m looking forward to the next installment – very cool stuff, Jax.

http://spreadsheets.google.com/pub?key=pllJ9ixSOdKb_B59g3z9hWw

I’ve been trying to answer the Web 2.0 valuation answer in a novel way: by collecting as much data as possible. This spreadsheet only accomplishes a little (you can already see a trend that prices registered users at about $20 a head), but if anyone wants to collaborate on it with me, send me an email with your Gmail address, and I’ll share it with you.

With that said, I hope web 2.0 sites will learn from your theory in evaluating their business model as oppose to “build and flip” mentality.

Avi Muchnick writes some interesting ideas on the Worth1000 blog about Orbital Theory which states that the value of users of web 2.0 sites is related to their interaction with the site AND the frequency of their visits. As Orbital

Entropy fails comment about time is a very good point indeed. A user has a half life and keeping them in orbit over a long period of time is tough. That’s why 3d space is such a good representation of the system. Solar systems pass each other and grab entities out of each other’s orbit. Once someone loses interest in a web site and their orbit begins to get wider and slower, they are more likely to get pulled into another site’s orbit. Their mass may not change, but their return frequency lessons, and so their overall value using the formula does go down over time.

My focus for the next post so far is on Facebook’s stalkeresque feature debut from a couple months ago and how that *greatly* increased their userbase’ return frequency to the site (or tightened their orbit) and thus increased their members’ value, under the theory. I’d also like to present some flash-based visuals, and I’ll hopefully work with David from the Photogami team (a spinoff project of Worth1000) to generate animated examples of orbital theory in action.

Of course its how much money you make off ads – but in order to increase your traffic, and thus you CPC and CPM values you need to have a site that people want to use. Thus your traffic will drive of the money you make.

Although this started from a theory on sellable valuation – it applies also to the overall valuation (CPM etc) as if you understand how to increase the sites value to the users, you can translate that to your CPM and CPC revenues…