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WSJ Tried To Prove Twitter Wasn't Worth $10 Billion, But 'Facts Intervened'
WSJ Tried To Prove Twitter Wasn't Worth $10 Billion, But 'Facts Intervened'
Alyson ShontellFeb 28, 2013, 02:36 IST
Ian SchaferThe Wall Street Journal's Corporate News Editor, Dennis Berman, spent ten days trying to prove that Twitter was over-hyped at a $10 billion valuation.But "fact intervened," he says. Berman now believes Twitter is going to be the next Google.Twitter has only generated revenue for the past three years, mostly via sponsored tweets — paid promotional placements that get pushed to relevant users' Twitter streams. But the efforts have been fruitful; eMarketer predicts Twitter will rake in $808 million during 2014. Investors think that number will be even higher. They think Twitter could be pulling in $1 billion by then. And the social network already has 200 million active accounts. Twitter users increased 40 percent during the last three quarters of 2012. It's already making about $4 per active user.If that growth continues and Twitter is able to make $7 from 500 million users, that's revenue of $3.5 billion, which is reminiscent of Google's 2004 revenue. Margins are reportedly high for Twitter than they were for Google, at 30-40 percent."For simplicity's sake, let's reduce Twitter's net margins to Google's, which are a gusher-like 21 percent," Berman writes. "Value all those earnings at Google's 17-times-trading multiple, and, voilÀ, Twitter has a value of $12.5 billion. And you needn't tweak conditions much to get a higher number."So is Twitter a $10 billion company right now? "Twitter isn't worth $10 billion if you benchmark it to its current financials," Berman writes. "But the prime question is just how big Twitter can get—and how profitable."
