News Analysis: Is Twitter worth it?
The Wall Street Journal has reported that both Facebook and Google, along with 'other' major technology companies, are each looking to acquire micro-blogging website Twitter, apparently worth between $8-$10 billion dollars. But is the site worth it? Noel Young, reporting from Boston, considers just that.
Can Twitter really be worth $8 - $10 billion? The Wall Street Journal ran the rule over what it called an "increasingly frothy tech market" in Silicon Valley yesterday and took a keen look at Twitter, which the paper called a " particularly desirable, if still enigmatic, target."
Low-level talks with Twitter have reportedly taken place in the past few months to explore the prospect of buying the messaging service. Facebook and Google and other companies are said to have been in there. But insiders tell the WSJ, "The talks have so far gone nowhere."
The estimated valuation of $8 billion to $10 billion has certainly raised eyebrows .
The company had 2010 revenue of $45 million—"but lost money as it spent on hiring and data centers and estimates its revenue this year at between $100 million and $110 million, " said the WSJ writers.
Ethan Kurzweil of venture capital firm Bessemer Venture Partners thought the $8 - $10 billion tag was not justifiable based on financial multiples.
But start-ups building social services have lots of data about their users and "the market is valuing that mightily right now," he said.
From Twitter , Google and Facebook there was no comment.
Twitter only started selling ads last spring. In December it raised $200 million in venture capital and was valued then at $3.7 billion.
But other developments may have upped the ante. Facebook raised $1.5 billion , valuing the the social network at $50 billion, compared with $10 billion in mid 2009. Groupon , the online coupon firm, turned down a $6 billion bid from Google, looking instead at a public offering later in 2011. This week we learned AOL is to shell out $315 million for the Huffington Post—"about 10 times the news and commentary website's 2010 revenue," the WSJ pointed out.
Also: Pandora , the internet music service plans a $100 million public offering,; the business-networking website LinkedIn is planning to go to public. Value: possibly $2 billion.
Some entrepreneurs are opting to remain independent and grow their businesses instead of selling early for a quick return. The Journal noted: " Twitter's executives and board are continuing to work on building a large, independent company."