Last week, Facebook took a $200 million investment that valued the company at $10 billion. So if Facebook is worth $10 billion, how much is Twitter worth? After all, Twitter turned down $500 million from Facebook late last year, and founder Evan Williams might not even sell it for $1 billion. But how about for $1.7 billion?
That is the valuation we come up with when we run Twitter’s numbers through our new social network valuation model. The model takes into account the size of each social network’s audience in different countries and the average online spending per capita in those countries. Using Facebook’s $10 billion valuation as a baseline, Twitter would be the fourth most valuable social network after MySpace ($6.5 billion) and Bebo ($1.8 billion).
Of course, that $10 billion valuation was for preferred shares, so $1.7 billion might be a valuation a strategic investor or acquirer would be willing to place on Twitter. If you use the $4 billion to $6 billion range Facebook’s common stock is being valued at in private sales, then Twitter’s valuation would come down to $671 million to $1 billion. And if you use Bebo’s 2008 valuation of $850 million as a benchmark instead, Twitter would be worth $781 million.
So there is your range: roughly $700 million to $1.7 billion. And remember, Twitter may still have scaling issues, but it doesn’t have all the costs that Facebook has in terms of storage and other capital expenditures. For one thing,Twitter isn’t keeping everyone’s photos on its servers—that is what TwitPic and Yfrog are for. On the flip side, there is also the question of revenues, which remains an open question for Twitter (and for Facebook, for that matter). Is Twitter going to make money from real-time search, corporate accounts, or maybe even figuring out a way to sell followers? Given how engaged a large portion of Twitter’s users are already and how it is becoming a hot testbed for opt-in marketing, it is not inconceivable that Twitter’s users will be worth more to advertisers than Facebook’s. But before we can find out, Twitter needs to pick a business model.
I don’t understand the valuation methodology. So you “invest” $200m, for a “share” of the company, with the expectation (and realization) of nothing in return?
Your “shares” allow you to get a certain percentage of dividends of the companies revenue. Also, the shares, if they are common, allow you to vote in any matter of the business.
You are not in touch with reality, if you believe that Twitter offers anywhere near what Facebook provides. User numbers are not everything.
agreed
1.7 billion for a chat site? lmao
to put this ridiculous “value” into perspective, Sun Microsystems, Inc has a marketcap of $6.5 bill.
I can tell you right now Sun Microsystems is not worth 3 chat sites that dont make a cent of revenue.
The only thing twitter has is techcrunch making 20 articles about it a day. Wouldnt be suprised if tc was an investor trying to milk tc’s reach with twitter news every day.
also, facebook actually has a business model.
agreed
1.7 billion for a chat site? lmao
to put this ridiculous “value” into perspective, Sun Microsystems, Inc has a marketcap of $6.5 bill.
I can tell you right now Sun Microsystems is not worth 3 chat sites that dont make a cent of revenue.
The only thing twitter has is techcrunch making 20 articles about it a day. Wouldnt be suprised if tc was an investor trying to milk tc’s reach with twitter news every day.
also, facebook actually has a business model.
I have no interest in joining facebook, despite requests from my friends. I am on twitter and am gaining friends (read: followers) who like what I say without having to know me – although some do.
As I see it, from facebook’s point of view, Twitter is just another tool widget to place on your profile, and its influencing them and others because of the “status updates” thing which while that’s all twitter is, its the genius of it that makes it the best.
$1 billion for Twitter, Yes, maybe.
I thought Web 2.0 is gone and now it’s time, again, for services with real biz models to thrive…or, maybe I’m just wrong.
Bullshit. Twitter would sell for $1 Billion cash. Guaranteed.
What exactly would that purchaser stand to gain?
An incredibly far-reaching and malleable realtime multi-platform content distribution network with a rabid userbase.
That alone is worth the money to someone like Google who is looking to corner realtime search market.
Hate to say the truth, but I believe email started with the same “potential”. But look where it ended up. (Think SPAM). Twitter will become noting more than SPAM when they come in. Like what is happening in facebook.
Absolutely nothing. No revenue model, no market (recent data shows only 10% of users make up all tweets), nothing.
Twitter is a bloated pile of horse shit.
So you’re saying I should buy Twitter stocks?
Just a fact, you could buy a company that makes a lot more money for less than $1 billion.
Traffic numbers aside, you are not looking at traffic quality. For instance a real estate site that brokers deals online can pull in millions a year off 1% of the traffic that twitter has.
It is the classic quality over quantity scenario. Twitter and facebook have what we in the industry call garbage traffic. It is worthless, and converts at very small percentages. Thus making yours and everyone elses valueations irrelavent. You might as well say Twitter is worth more than bank of america because soo many people use it. It’s just dumb, and I don’t see why no one at TechCrunch GETS IT.
Because no one that writes articles for TC has any technical or analytical knowledge. That’s why they are writers for a blog, and not out doing something technical or analytical.
The money isn’t in exploiting Twitter’s userbase, it’s in its future as a realtime content delivery and communication platform.
If you control the platform, you can build virtually *anything* on top of it.
Yes, the article is smart enough to recognize that online spend varies across countries. It should also recognize that people who have time to kill on twitter may not be the biggest spenders.
You talk as if it’s a big deal to spend time on Twitter. I haven’t used my account in a few weeks, but when I do use it, it’s as simple as opening up my TwitterBerry application, check out tweets that interest me, type out a short message, and I’m done.
Twitter is not nearly as close to the timesink that Facebook is. Not like I’m opposed to either of them or anything, just saying.
You can’t do a valuation like that. The true amount Twitter is worth is what people are willing to pay to own the company.
We can not determine an intrinsic value until we have the names of a reasonable amount of the private equity holders and what they paid for each piece of equity.
Otherwise TC could hold an online dutch auction for shares of Twitter in a mock auction to determine the price.
Actually, all you would have to do is have a poll in another blog post with 4-5 different share prices.
100M outstanding shares
A. $1 a share
B. $10 a share
C. $25 a share
D. $50 a share
Tally the votes, add them up and divide them by the number of votes and you will have a psuedo dutch auction valuation that holds far more water than simple math.
Valuations are based on sampled supply and demand, not some abstract model.
100M shares. The options would be more like.
A. $1 a share
B. $3.50 a share
C. $7 a share
D. $10 a share
E. $20 a share
That would be more realistic and resemble Rackspace’s IPO. They finally made it close to $10 after a 4-5 months.
You obviously don’t understand the IPO process like most TC readers. You need to find large institutional investors willing to buy tens of millions worth of Twitter–not a happenstance of blog readers who would buy a share or two.
This is an absurd analysis. Just the mere fact that Facebook makes hundreds of millions in revenue per year off their existing users, and Twitter doesn’t even know how it might make money is enough to discredit this. This is way too naive a model to apply to billion dollar valuations.
NO WAY!!!
Facebook is at 20x revenues (actual real tangible revenue)
Twitter at 20x revenues is worth a McDonald’s Happy Meal (hold the cheese) and $26.95 in cash and not a penny more.
It hasn’t been acquired because no CEO is going to sign off on that deal and lose his job.
I’ll be a believer when I see them crack $50M in revenue.
facebook actually has revenue
the only thing twitter has is techcrunch making 20 articles about it a day. Wouldnt be suprised if tc was an investor trying to milk tc’s reach with twitter news every day.
Your social network valuation model may be tuned to perfection, but here’s the problem.
Garbage in, garbage out.
the model is flawed. A company is always worth it’s market capital + other equity. Whether that’s private or public capital doesn’t matter.
Otherwise Facebook would have had to pay taxes on 15B 2-3 years ago when Scoble & A list bloggers were broadcasting their air-valuation of 15B.
Do you see my point?
Should they do a capital gains tax on what bloggers think companies are worth?
I think that if they did, it would quiet down quite a bit.
I think you missed my point Chris.
I like the breakdown here and I agree with the Twitter assessment. Once it becomes a standard utility (as @Jack seems to want) we may see that number go up.
Still waiting for Facebook’s valuation to dip. How much longer can they stay that high while not generating enough cash to be profitable?
This seems fundamentally flawed for numerous reasons. For example: aren’t those valuations based on the fundamental principle that the social network would make every dollar of the ad spend targeted towards every user that visits their site? When in actuality the spend per user is an aggregate of all the sites that user visits (not just that one social networking site)? That is, Facebook shouldn’t get the whole piece of that pie.
Again, it’s not the service or technology that companies are paying for should one buy Twitter, it’s the user base, which is huge and growing every day. There are many ways to exploit and profit from access to such a user base without Twitter itself making a dime. THAT is the value of Twitter.
it’s that thinking that created the bubble back in the mid to late 90s.
you think users will stay on Twitter once they start getting exploited? Nope, someone will be left holding a very expensive bag with very few users.
This whole, “get the users and then figure out the revenue model” is ridiculous. If you can’t simultaneously build user base and meaningful revenue streams then you’re gonna be in trouble…
Also consider this fun fact.
NO social network has EVER publicly released a quarterly earnings report. Social networking has been around since 2003 with Friendster.
NONE. Not one. I challenge anybody reading TC to find a published quarterly earnings report from ANY social network, ever.
That would also need to be published in order to get a realistic valuation.
I stand corrected, Intermix did before they were merged.
http://quicktak...&Symbol=MIX
But they were making most of their money by spamming products and with spyware.
lockergnome.com/net/2005/04/30/new-york-ag-spitzer-labels-intermix-spyware-in-lawsuit/
So that’s not fair. Find me a social network that posted their reported based on the SOCIAL NETWORK’s revenue and debit only.
stfu about twitter already. fuckwits.
Someone should probably tell Piczo that they’re worth a few hundred million too, so that they can stop laying a bunch of people off.
The only way to make money on the internet is by creating a popular site and then selling it to someone else for a lot of money before the site starts to fall apart and people lose interest. It’s a suckers game.
If you delay selling your site, you are an idiot. Wait too long and nobody will want to buy it and you’ll be a has-been.
If you buy a popular site, you are an idiot. You just paid a billion dollars for a site that will slowly decay. Some sites quicker than others. People will find other things. More interesting things will develop. People will move on. You will have spent a billion dollars for something to throw advertisements on, but then the eyeballs will be moving on. Sucker.
I can’t wait until people stop falling for all this idiocy and the internet goes back to a bunch of people doing cool stuff without NEEDING to throw a bunch of advertisements on every damn page. What ever happened to running a service or site (or BBS) because you enjoyed providing the service? Even if it cost you money each month out of your own pocket? Now people can’t even be bothered to keep a fucking personal website without plastering it with ads thinking they’re going to get internet-rich.
Idiots.
you have to make money before you can actually say your worth money.
Not really, valuations always account for good will around potential revenue. If a business can convince someone of realistic ways they’ll monetize, it’s almost as good as real revenue.
I don’t expect that kind of price for Twitter.
Interesting comment on social network marketing ie, twitter, facebook, myspace etc….
I don’t know. I think we’re dealing with a very different beast here. Facebook is a social networking site with lots of options, add-ons and bling. Twitter is more of a baseline communication application like email or AIM.
To me, the closest comparison is the original IM & accompanying buddy list started by AOL in the mid-90’s.
There’s defintitely a difference but, at it’s heart, twitter is essentially a way to broadcast a message to your buddy list without necessarily having to communicate individually with each person on it (you have the option with direct tweets if you wish but Ashton K alone would probably develop a major repetitive stress disorder if he chose to do so)
I find it to be a personal–yet standoffish-if-you-want-it alternative to AIM or Facebook–and I think it should be valued accordingly. They’re not comparable in my book.
I’ll have to disagree, though of course share prices are only worth as much as someone is willing to pay.
The big differentiators: revenue and content. Facebook has revenues, Twitter does not. Twitter may have users, but it doesn’t have anywhere close to the amount of personal data on a user as Facebook (no pictures, no profile history, no known relationships/friends, no web usage data, no purchasing habits, etc.).
That said, I don’t visit Facebook much anymore, and find the content on Twitter to be much more intelligent and useful. That’s because I have the ability to listen only to those I deem appropriate. Whether that makes a better business or not remains to be seen.
You guys make me sick. Twitter Revenues=$0. Facebook revenues=$300M or so? By this ratio, Twitter’s valuation would be $0.
We live in a sad world where people actually a)think that Techcrunch is a news site staffed by real journalists, and b)attention starved losers tweet until someone pays attention.
Has anybody here besides me heard of earnings estimates?
Here are google’s
http://finance....com/q/ae?s=GOOG
Earnings estimate project what a company WILL sell, or it’s futures.
So I will whip up some earnings estimates for Twitter on the fly.
Earnings Est Current Qtr
Jun-09 Next Qtr
Sep-09 Current Year
Dec-09 Next Year
Dec-10
Avg. Estimate 0 0 0 0
No. of Analysts 1 1 1 1
Low Estimate -9.99 -9.99 -9.99 -9.99
High Estimate 0.01 0.01 0.01 0.01
Year Ago EPS -5 -5 -5 -5
Oh the reality show, Maybe do +0.001 to those earnings.
My esimates are purely speculative, but far less speculative than the formula used to calculate the valuation in the original post.
negative earnings are tough to come by, but no mountain is high enough for Twitter to climb.
that’s the thing about valuing these web 2.0 companies you don’t have the right data to plug into your models.
I see twitter worth way less than $1.7 billion, unless they get their act together. Their value is based on traffic, users, and a story.
traffic and users the bulk of their valuation does not look to be worth as much as it appears.
10%
The percentage of users that account for 90% of all Twitter messages, according to the Harvard Business Review.
60%
The percentage of Twitter users that quit the site after a month, according to Nielsen estimates. The stat may be skewed by people who use Twitter via SMS or desktop clients like TweetDeck.
74
The number of days the average Twitter user goes between sending a Twitter message, according to the Harvard Business Review.
6
The number of days since Oprah last updated her Twitter account.
270,000
The difference between 5.60 million, the number of unique visitors to Twitter in the week after Oprah signed up for the service, and 5.33 million, the number of unique visitors to Twitter the next week, according to ComScore.
100
Things more popular than Twitter as of mid-March, including Kenny G’s album Breathless and the forgotten Batman spin-off Catwoman.
51%
The percentage of people with Twitter accounts don’t use the service at all even once a month, according to All Things D.
19%
The number of Twitter account-holders who use the service once a day or more, according to All Things D.
I don’t get the point of this exercise. Facebook makes a ton of money, Twitter makes none.
Twitter is worth:
Revenue x 9
Twitter’s worth isn’t tied to current revenue, but rather future revenue. They could instantly monetize if they choose, but want to scale first. It’s no different from how Google started. They had zero revenue when they were starting and only monetized once they scaled. Revenue will come, maybe not Google revenue, but it will come.
Twitter is a feature, Facebook is much more. In fact, Facebook status updates could be a Twitter killer, IMHO (or at least a Twitter dampener).
Facebook status update = Twitter for the masses. They are actually better than Twitter, again IMHO. They are Twitter 2.0.
Twitter obviously has enormous potential, but do you not feel that any such valuation will be far from accurate as long as twitter fails to both stabilise and find an appropriate business model ?
These things obviously take time, and the real time search has shown huge potential, perhaps it will replace the conventional press one day….. http://bit.ly/SM77V
But, facebook has enormous reach, and the potential for contextual and targeted adrvetising there demands a higher valuation. Twitter is still in its infancy, and we have to ask, is it worth $50 million MORE than Youtube when it was sold (granted, youtube is YET to make money, but it still a huge success story) ?
I don’t know.
It amazes me how common sense business practices go out the window when valuing online sites. Twitter is a great site but it makes no income, someone would have to be crazy to shell out that kind of money for it.
Twitter could easily be monetized, my suggestion would be to make it a paid members site. A small fee of $10 a year probably wouldn’t scare anyone off and not going the invasive ad route would make most users happy.
There could be higher fees for very active users and free accounts for people who only want to follow others (not send tweets). Maybe give the first year free so new users could learn the ropes and see the value of the service.
I think that is tooo much 1.7b for twitter and 10b – facebook… What about financial crisis???
Techcrunch is officially a lead gen for spammers! Thanks for turning thousands onto TAGGED.COM which wipe thier ass with CAN-SPAM rules upon sign-up. A signup click loop and unending invite emails to my gmail users-horrible. No wonder they claim 70M users. Add a WARNING to the graph – don’t signup for tagged.com!
For all their valuation – facebook customer support is a joke. Any other company would be absolutely slaughtered if they treated their customers the way facebook does. My latest issue is that for some reason I have been unable to login into my account, or reset my password, for almost two weeks. I am getting 0 response from their helpdesk, with the exception of an automated message. IMHO, if a company tries to become such an important part of somebody’s life, then they should treat that trust respectfully… /end of rant
Simple way for Twitter to make money RIGHT NOW:
Charge $1.00 to sign-up. That’s it. One stinking, measly dollar and they could have made hundreds of millions.
Of course, that doesn’t help with ongoing expenses – so they might have to charge a yearly fee or something.
The millions of people who see twitter on CNN or the countless other mainstream media outlets who are constantly going on about twitter would not pay a dollar to sign up for the service.
Your assumption is essentially “Completely ignoring their ability to monetize traffic, a social network is worth x% of $10b whereby x = % of Facebook traffic, scaled for location.”
How much would you have valued Geocites at before they shut down a week ago?
>But before we can find out, Twitter needs to pick a business model.
LMAO!!!!
LinkedIn has to be worth more than Twitter!!! Average audience age 40+, Income $100k+, professionals, active user base, a lot more people that are connected, etc. I would put my money on LinkedIn over Twitter any day!
Dave Williams
BLiNQ Media
http://www.blinqmedia.com
What Facebook has that Twitter does not is context and an understanding of relationships.
FB knows who I’m married to, they know who I went to school with, they know who I used to date. They know who my wife’s college roomate was. They know who I work with, they know who I used to work with. They know who I inter-relate with and how often.
And we’re not even getting into the fact that they have the largest crowd sourced facial identification library in the world.
Twitter doesn’t know shit in comparison.
some friend calls that twitter is “garing”, mean too ‘dry’ while facebook is “hot” and ‘wet’ on social communication. also confusing to use twitter and how to get friend.. i think, for both site, number of people joint are not parallel with company’s values.
Ask RJ Garbowicz
Advertisers can get more out of twitter then facebook cos of way these two social networks work..
It’s way too simplistic to only factor in a website’s userbase. Every application will monetize differently — a user on froogle, for example, is going to be worth orders of magnitude more than a user on facebook, for obvious reasons.
F no it’s not worth $10B. They barely have $300M in revenue… a 34 multiple… how stupid are these investors.
Techcrunch every article you write is about twitter do you guys have anything else to write about? its really getting annoying
well that i really nice that the facebook worth is keep going up nice news for facebook fan.