Title

Valuation of online social networks - An economic model and its application using the case of Xing.com

Abstract

Online social networks are gaining increasing economic importance in light of the rising number of

members. The numerous recent acquisitions priced at enormous amounts illustrate this development.

Therefore, the growing relevance of online social networks in science as well as in practise revealed

the need for adequate valuation models, which take into account the networks’ specific

characteristics. Thus, this article develops an economic model for valuation of online social networks.

The model allows the evaluation of whether the purchase prices on the market, which recently

amounted to millions, are justifiable. Finally, the practical application of the model is illustrated by an

example of the major European online social network XING.com.

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