Twitter worth half a billion, says report

Thu Jul 30 2009, 17:54 PM

A recent report claims Twitter is worth between USD441m and USD589m based on revenues that could be as much as USD148m a year by 2014. The valuation is twice as high as the one Twitter received when Benchmark Capital and Institutional Venture Partners invested USD35m in the firm in February, at a valuation of between USD200m and USD250m.

The report author, analysis group NeXt Up Research, admits that because Twitter “has not publicly announced a business model”, its estimates may be unreliable. The report discusses a number of monetisation strategies, suggesting the most promising is to charge companies for sending out targeted advertising messages to users that have opted in to receive such content. NeXt Up speculates that Twitter could charge between USD0.14 and USD0.50 per message, based on the fact that the messages are targeted and users have opted to receive them.

The report also suggests Twitter could earn money by providing companies with “analytical tools and services” to help them use the site more effectively. The report does not say how much Twitter could expect to charge for these services or how many firms would be likely to pay for them. Twitter co-founder Biz Stone has said he hopes to begin selling corporate tools by the end of the year but has only given sketchy details. Stone has talked about charging for brand verification or “lightweight analytics”, but the company has yet to announce trials of either service.

NeXt Up estimates that Twitter will make between USD126m and USD148m in annual revenues by 2014. The report does not explain how its proposed business model will provide these sums. Assuming Twitter can convince companies to pay USD0.50 per message, it will still need to sell 252m a year just to reach the conservative USD126m figure, and recent comScore figures suggest the network has just 32m users worldwide. Selling tools and services to companies could fill the gap, but it is not clear how much Twitter could charge for these or how much demand is available.

NeXt Up’s report is available on Sharespost, a forum aimed at connecting buyers and sellers of private equity. The site lists a number of users who are said to be interested in buying shares in Twitter, although the current offers are to buy shares at a price of USD14 or USD15. NeXt Up’s estimate gives Twitter a higher share price of between USD19 and USD26.