Valuation in Empire Avenue. Or How to make money in Empire Avenue.

In case you haven't seen it yet Empire Avenue is a game, played like a stock market.  Check out my first impressions of the game.  Each stocks value is derived from two things.  The number of your shares other people purchased, which I mention first because in this post I'm paying less attention to.  Second the activity of the social media accounts attached to your ticker symbol.  When you sign up you tie your twitter account, Facebook account, YouTube account, and other social media into your EA account.  The game measures your activity on those accounts, and bases your stocks value on that activity.

This game is a neat tool which has been helping me get better at social media.  It just so happens that I'm a bit new to twitter (see below), and am not in the habit of tweeting regularly.  But I have real world goals that I want to meet, and being better at social media helps me reach those goals.  For example getting people to read this blog and click on ads.

A real world company derives its value from the Balance Sheet Equation.  It's really way more complicated then that, but this is a generalization for folks who are not Business Majors, or Chief Financial Officers.  A ticker symbol on Empire Avenue however is valued by the sum activity of the various accounts you attach to it.  Here we have a pretty picture of my Twitter activity.  You can clearly see how my twitter activity adds into my overall valuation.  You can also clearly see that I do not have many followers on twitter.  ;)

Retweets btw are other people retweeting my stuff.  Not me retweeting other peoples tweets.  Took me a good week to figure that out, during which I was doing a lot of retweeting.

I use a Twitter account as a starting point for determining the value for one very important reason.  EA tracks twitter activity for people who have not joined the game yet.  It does not track information for Youtube, Facebook, Flicker, etc unless the owner of those accounts joins the game, and attachs them to their EA account.  This represents a tremendous advantage to twitter accounts.  As well as a huge opportunity.

The calculation seen above is run on every twitter account Empire Avenue see's.  Which appears to be all of them.  Once you join the game EA displays a list of all your followed twitter feeds.  At the moment far more of them are going to state they they are not playing EA, then are playing EA.  The game ranks and values the twitter accounts.

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With one exception that I just discovered.  If you use the Facebook Empire Avenue app, you can purchase shares in Facebook accounts before they start playing Empire Avenue.
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Once a player joins EA, then others can buy and sell shares of the twitter account, plus other social media.  This brings the irrationality of humans attempting to buy good deals and sell bad deals.  In other words their share price is no longer a measurement of how active they are on social media.  It becomes subject to the whims of humans.  Which brings volatility.  There are many people on EA who are making Eaves by capitalizing on this volatility.  Or using buy back strategies.  Which are both good strategies, just not one that I want to add to the conversation.  I want to add another tactic to the arsenal.

I'm going to use the term "Fundamental Value" in future blog posts to refer to the portion of someone share price which comes from just their social media activity.  Your "Total Value" is the Fundamental Value plus every share bought by your shareholders on EA.  The Total Value is going to be subject to the whims of the market (ie the opinions of the people out there) while your Fundamental Value is not.  Hence the neat sounding name I have coined for it.

When making your first purchases on Empire Avenue I recommend finding the twitter accounts of people that you know who are not playing EA.  You are buying them for the fundamental value of their twitter activity.  If they happen to start playing, their share price will go up simply by adding additional accounts to the game.  Initially you should buy those twitter accounts who you know have a vested interest in continuing to tweet.  Those who rely on social media, or have built their own business on it, for example.  Avoid purchasing those people who just lurk on twitter.

This should give you a solid base of dividends with which to branch out into people whos' behavior is riskier.  If you give this strategy a try, let me know how it work for you!  I would love the feedback especially if we can put some numbers on this idea.  See you on EA!