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| Sweet tweets |
| Aliza Rosenbaum / Sep 26, 2009, 00:53 IST |
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Twitter: Talk about irrational exuberance. Twitter, the revenue-free micro-blogging site is said to have raised $100 million at an implied $1 billion valuation. There have been a slew of opportunistic initial public offerings and surprisingly robust issues of high-yield debt for troubled companies. But Twitter’s valuation , if true, would be the most insistent example of a market gone wild on the rebound.
Twitter, an outlet for 140-character thoughts, reactions or rants, had previously been rumoured to be a target for larger rivals Facebook and Google at prices in the $250 million to $500 million range. Now the Wall Street Journal says it’s drawing new money at four times the valuation of its last fund-raising in February. Granted, the site’s unique visitor traffic has tripled since then as Twitter gained a foothold in pop culture. But the company still has no revenue and needs to prove it is more than the latest tech fad.
Even Facebook, which recently crossed into the realm of profitability, can claim to be undervalued in the face of Twitter’s mooted price tag. The social-networking site, which board member Mark Andreessen recently said could generate $500 million in revenue this year, is worth about $6.5 billion, based on the price at which its shares were trading in a recent private placement. With 250 million users at the time, that’s $26 a head, or less than half the implied $55 that Twitter’s new investors are paying per tweeter, which eMarketer numbers at 18 million.
Twitter may one day figure out how to monetise those tweets. And cash-flush Google may simply decide - like it did with YouTube - that the service is too critical to Internet search to let it pass. But when investors appear to be placing their bets based on such hypotheticals, it’s time to question whether things have gotten too frothy for comfort.
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