Twitter “Worth” $ 3.7 Billion
At least that’s what its venture capital funders think:
The value of Twitter Inc., the website that allows users to send 140-character messages called “tweets,” has nearly quadrupled in the past year, according to a new investment made in the San Francisco start-up.
Twitter said Wednesday it raised a round of funding that valued it at $3.7 billion, becoming the latest young Web company in which private investors put a multibillion-dollar worth on the operation.
The rich valuation comes despite the fact Twitter is still working on ways to translate its more than 175 million registered users into a profitable business.
“There’s no question that price is well ahead of any analysis of Twitter’s business today,” said Josh Hannah, a partner at venture firm Matrix Partners
So, what exactly, is Twitter’s revenue model? Right now, it seems very limited:
Twitter will draw just under $50 million in ad revenue in 2010, according to research firm eMarketer. That figure doesn’t include fees Twitter receives annually from Google and Microsoft Corp. to show tweets to users of their search engines. People familiar with the matter say Twitter earns millions of dollars a year from such fees.
As Professor Bainbridge notes, that gives us a Price/Earnings ratio of 74, assuming every dollar of revenue went straight into earnings which, of course, it doesn’t. It is, as he says, the dotcom era all over again.