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 
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.