A Comparative Study On Valuation Methods Of Internet Companies

Since the birth of the Internet in the 1960 s,the Internet has profoundly changed the way of life of human beings from its original decentralized military application to an indispensable part of people’s life style.With the increasing maturity of Internet technology,Internet companies have emerged as the times require,and play an important role in people’s lifestyle and socio-economic development.At the level of people’s lifestyle,clothing,food,housing,transportation and information exchange are directly connected with Taobao,meituan,58 Tongcheng,Didi,Tencent and other large enterprises;in terms of social and economic development,Internet companies account for the population According to the China Internet development report 2019,China’s digital economy will reach 31.3 trillion yuan in 2019,accounting for 34.8% of the total GDP in 2019,and has a trend of increasing year by year.With the increasing size of Internet companies,many important business activities,such as mergers and acquisitions,IPO,additional equity and creditor’s rights,have put forward theoretical requirements for the evaluation of the company’s value.Investors,management and regulators have put forward more and more demands on the value evaluation of Internet companies.In recent years,Chinese scholars have made more and more theoretical contributions to the value evaluation theory of Internet companies,especially focusing on the value evaluation models of modern Internet companies,such as Metcalf method and real option method,and have made breakthrough progress.It makes the value evaluation system of China’s Internet companies more and more perfect,but there is still room for development in some detail areas,such as the comparison of different Internet companies’ valuation systems,and comparing the results with the company’s market value,and finding the applicability of each valuation system to specific Internet companies.At the level of national strategic planning,higher requirements are also put forward for the valuation theory of Internet companies.In particular,at the key nodes of capital market reform in 2019,such reform measures as launching the scientific and technological innovation board,further liberalizing the restrictions on the growth enterprise market,and carrying out CDR pilot projects are closely around the listing of Internet companies in China’s A-share market.Therefore,it is timely to establish the value evaluation system of Internet companies Instead of necessity.Firstly,this paper introduces the background of the Internet industry from the macro level,including the definition of the Internet industry,the status quo of the Internet industry,the profit model of the Internet industry,the characteristics of Internet companies relative to traditional companies,and the valuation difficulties of Internet companies;Next,according to the characteristics of the Internet industry,the paper establishes the value evaluation methods of Internet companies,respectively introduces the background,advantages,limitations and applicability of the possible value evaluation methods,and establishes three value evaluation methods of equity cash flow discount model + real option model,relative valuation model and Metcalfe model,so as to do a good job of empirical analysis Preparation work of type I.Next,the paper sorts out the data of Tencent company from five aspects: the development history,general situation,business category,business model and valuation difficulties of Tencent company,and introduces the background of this empirical study.As Tencent is the Internet company with the highest market value in China,it has rich historical data from both financial and non-financial indicators.It is suitable to establish a good value evaluation system.By using empirical analysis,it is concluded that the Metcalfe model is the most accurate for the value evaluation of Internet companies,followed by the relative valuation model,followed by the cash flow model and real option model Conclusion.It shows that the valuation of Internet companies should pay more attention to the Matthew effect,scale,business type and other non-financial indicators of Internet companies,and the consideration of financial indicators of Internet companies should be weakened.This paper expects to provide some effective suggestions and conclusions for the management,investors and regulators in the future.