Not to be too flip, but because someone's prepared to pay (proportionally) that much for it.
Why are they prepared to pay that? Maybe they know something you don't, like Twitter's business plans, their current revenue, project revenue growth, those sorts of things.
It's easy for people to say that Twitter has little-to-no value because they can't think of ways to make money out of it - but that only means that they shouldn't be in charge of Twitter, not that someone else couldn't turn a profit on it.
That's an excellent point. I'm guessing that when you invest that amount of money in a company you get inside information that the rest of us are not privy to.
There are two ways to look at it. One is in terms of likelihood and projected value of an IPO. Another is in terms of Twitter's value to an acquirer; in this case, there are rumors of a $5B offer from Google.
Google in turn would be valuing it in terms of multiple assets: how much it would increase their search revenue, monetization opportunities if Twitter was in the Googleverse, employee acquisition, develoepr ecosystem, synergies with Android and Chrome, and competitive value vs. Facebook, Apple and whoever else they're concerned about.
So while on the one hand a $3B valuation is astonishing, it's certainly defensible.
Who besides Google would be willing to pay $3B+ for Twitter though? It seems like a flimsy valuation it there is only one party willing to pay that much for it. What happens when that party feels they no longer have any interest in buying Twitter? A huge devaluation?
One bona fide acquirer is enough to set the price. Ther potentially are others though. Off the top of my head: AOL. Facebook (if they could agree on the right valuation for Facebook stock). Maybe Fox (to go with MySpace and FoxNews). Baidu.
It's certainly true though that it feels like a fragile valuation. I think the same's true for Facebook: there are plausible scenarios where they're worth $100B, and plausible scenarios where they're worth $10B. We shall see.
Really one needs two bidders - and the winner would bid $1 more than the looser. Of course, for the VCs funding it are either aiming for a big buyout or prepared for the long slog to earn the revenues to pay back their investment. Google doesn't need to be in any hurry, IMHO.
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[ 3.5 ms ] story [ 43.3 ms ] threadWhy are they prepared to pay that? Maybe they know something you don't, like Twitter's business plans, their current revenue, project revenue growth, those sorts of things.
It's easy for people to say that Twitter has little-to-no value because they can't think of ways to make money out of it - but that only means that they shouldn't be in charge of Twitter, not that someone else couldn't turn a profit on it.
This is not that much money for half the 100Mtweets/day over a year... "Twitter to Sell 50% of All Tweets for $360k/Year Through Gnip" http://www.readwriteweb.com/archives/twitter_to_sell_50_of_a...
They're the most wonderful lavish invisible clothes I've ever seen.
I think the valuation is partly in response to how ingrained the twitter brand is becoming in pop culture.
Google in turn would be valuing it in terms of multiple assets: how much it would increase their search revenue, monetization opportunities if Twitter was in the Googleverse, employee acquisition, develoepr ecosystem, synergies with Android and Chrome, and competitive value vs. Facebook, Apple and whoever else they're concerned about.
So while on the one hand a $3B valuation is astonishing, it's certainly defensible.
It's certainly true though that it feels like a fragile valuation. I think the same's true for Facebook: there are plausible scenarios where they're worth $100B, and plausible scenarios where they're worth $10B. We shall see.
http://37signals.com/svn/posts/1941-press-release-37signals-...