Twitter Raising Money: How Much Is It Worth?

Peter Kafka | April 25, 2008 10:47 AM

twitter.pngTwitter isn't just dealing with its well-documented tech problems (both with the service and its personnel). It's raising a Series C round. So what's the valuation?

Last summer, Twitter raised about $5 million at a $20 million valuation. This time, we hear its looking for about $15 million at about a $60 million valuation. We hear the company is talking to the "usual suspects" -- we assume this means existing investors like Union Square Ventures and Charles River Ventures, as well as players like Spark Capital -- and hopes to have a deal done soon.

Some sources are also passing along stories of Twitter attempting to seek a much higher valuation -- as much as $150 million -- but finding no takers. When we've bounced those numbers of people with first-hand knowledge of the company, however, they choke and sputter, so we wouldn't put much stock in them.

The bigger question: How do you put a value on Twitter, anyway? The company has only just started seeing a trickle of revenue, via advertising on its Japan version. But beyond that there's no money coming in, and it's not clear what the model will be.

While Twitter itself has great buzz, we hear the majority of the site's traffic comes from outside the site, via other apps like Twhirl, mobile access, etc. So traditional online advertising--a difficult prospect to begin with for a communications service (see the struggles of various IM, email platforms) may be even harder.

That said, based on Twitter's growth and brand dominance, $75 million post-money seems plausible. There must be a pony in there somewhere.

See Also: Twitter Turmoil Not Over

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64 Comments

Anon. said:
If someone could tell me what Twitter does now that will still be relevant in a years time, I'll buy it.

At the moment, I don't and I won't.
cvg said:
The $60 Million valuation is a steal if they can become the utility they aim to be. Revenue and monetization will come with enough traffic. Of course, to scale to a telecom behemoth you must have some rock-solid low level code. Or perhaps I'm wrong and ATT is recoding to take advantage of the power of ruby.
Shane said:
I totally agree with Anon.

Other minus is it's not too hard to duplicate aka rip off.

The only thing Twitter has going for it is it's high profile members! Obviously, the members are of high value but how to monetarise? Maybe charge for SMS notifications or pay high profile posters!

Pownce is Twitter plus more - allowing members to upload files, embed videos and tunes & more than 140 characters! Not sure how much Pownce is making from their Pro Accounts.
tom said:
I wouldn't underestimate the power, reach and value of twitter. It's the next big thing once you get it and the way it can connect you is unbelievable. Makes facebook and linkedin look like amateurs. And Pownce is DOA..
Ian Lamont (URL) said:
"... Based on Twitter's growth and brand dominance, $75 million post-money seems plausible."

Isn't this the type of thinking that got lots of people into trouble in the last bubble?
Matt said:
Nice write up Peter... I was simmered until I got the comments. Now, of course, I've got plenty to say... lol.

It still strikes me as funny (per a few earlier comments) that people still think Twitter lacks the ability to make money.

The opportunities are many (some obvious, some not):

* Ad's (duh. text ads in TXT Messages, on site ads, etc.) but this is old school, too easy and really not going to do the trick for a sustainable future... twitter is an explorative service so their revenue model needs to also be explorative.

* Premium API (It's a long ugly debate, but the fact is it's a smart move for Twitter to charge $$ for access to the full API... if they offered a slimmed down limited version for free and a pow-pow super version for developers willing to pay $$ then we would see a lot more progress and competition in the 3rd Party App space. It's too easy to just build a Twitter client and sell it to a french millionaire, this needs to be a much more difficult door to walk through and Twitter, having one of the more popular APIs on the market, could easily lead this movement. People have been piggy backing off of Twitter for too long, it would be one thing if Twitter were actually cash flow positive but they are not, so they are basically generating money for other people (Twhirl sold to Seesmic for example) while losing money themselves... thats not what APIs were intended to do to businesses and it's not fair.)

* Telecom partnerships/capital investments. Let's face it, Twitter encourages a LOT of text messaging across the globe. How much money must they be making for the Telecoms? It's a pity the telecoms don't come rushing to Twitter's financial side... oh, what's that? If the existence of Twitter were in danger the telecoms would be first in line to give them the cash injection they need? $15M? ... lol, that's nothing. The cell network operators love them some Twitter, and they want to see the service break into the mainstream so bad they can taste it. They will have no problem filling the bank (with a lot more than $15M measly dollars) if and when Twitter comes-a-knocking with their signing pens in hand... Twitter just has to be willing to sell a little (see: big) piece of their soul to get in bed with these nasty companies that will, between them, end up owning (see: stealing) Twitter... So, with that in mind, let's hope Biz and Co. give themselves fat FAT raises when the telecom $$ starts flowing.

* Sell to Google. Why not? (See: Dodgeball)

* Sell tweets. Ok, so we all know that would fail miserably. Buuuut... I think they could give everyone unlimited tweets BUT give them a "links limit" ... meaning you can get hyperlinks in XXX amount of tweets per month, after that you have to pay... (think of the people who swear by Twitter as a marketing tool rather than a communication tool... *ahem* calacanis *ahem* sorry jdawg... but make those yappers PAY!!!) Wanna bet we'd see less TwitSpam if people had to pay for links in their Tweets?? I see thousands of tweets a day without links... people communicating, the occasional "check this out" link... the bulk of links are from the hordes of bloggers who just use twitter to pre-empt my RSS Reader and you know what, that shit annoys me. I will get your blog post in my RSS reader soon enough, I don't need a text message from you about it. Twitter is not an RSS Reader (despite what some cracked-out idiot bloggers tend to think) Some of them will re-tweet their one daily blog post all day long... who needs that? Not me. Twitter could put the kibosh on that nonsense with a "pay to tweet too many links" plan.

* Premium Accounts. Ok... Twitter has to make money? Do you read Mashable (sorry Pete)? Then you know what it's like to suffer with more ad's on a page than content. It's almost sad in a way, like a street beggar. Annoying, but sad at the same time. Well, Twitter could make a killing off of having Premium Accounts that would pay big $$ to be able to broadcast to EVERYONE... they don't need "Followers"... they tweet, and we all see it... it's called "advertising101: the Mass Tweet". People will cry out how unjust and foul it would be for Twitter to do this... (many of them would be Twittering their complaints... for free... irony?) People: The ride is slowing down, you cannot have your cake and eat it too. You Tube has spoiled the lot of you into thinking you DESERVE awesome free services. Google has exacerbated the problem by giving you the false impression that services end up getting their dessert at the end of the day (See: Google acquires YouTube). Ungrateful rot, all of you! :) Kidding.

Anyway... the list goes on... The point is this: Twitter has shown they ARE good at making money! Just not making any for themselves (Twhirl made $$, Verizon/AT&T/Orange/etc makes $$). But they have some of the best investors in the game, and I can promise you that these people have ideas for making fist-loads of cash off one of the net's most popular services... it's almost silly, no it's damn silly to think they don't have ideas. The problem is not in "how to make money" it's "how to make money without pissing off an army of self righteous users". So when the dust settles, if Twitter is not to be found then you have yourself to blame... not the lack of a viable business model. For what it's worth, I would like to see the Twitter team take a huge cash grab and do something right for themselves for a change, instead of always trying to make sacrifice on top of sacrifice for a user-base that has never once shown an iota of appreciation or gratitude for such a bad-ass free tool. The "Twitterati" does nothing but bitch bitch bitch about everything Twitter does wrong... again, it's funny because they USE TWITTER TO COMPLAIN ABOUT TWITTER?!?!?!?!! Really really really stupid, people.

Ok, now I have to troll a little, for which I am sorry (see: not sorry):

@shane: "Other minus is it's not too hard to duplicate aka rip off." .... rubbish, complete nonsense. Have you ever written a working API? Have you scaled a jabber client to send million of IMs a day? Have you distributed an infrastructure able to deliver unified real time communications between fragmented groups across mobile networks, IM networks, Email, and a web front end? I highly doubt you've even tried ONE of these things, otherwise you'd never have made such an elementary remark. ok, perhaps you HAVE tried to make the web front end part... You are pulling a classic: "I've totally customized my WordPress installation and it only took me a few weeks, I know I could build Twitter. Easy." routine... it's about 4 degrees sadder than the street beggar (and magnitudes more annoying).
Marsello Oentoro (URL) said:
For a simple application such as this, Twitter has been getting a lot of good publicity lately, especially in the case of the student who twitter his way out of jail in Egypt. There's a guy who even manage to raise his capital via Twitter, check out his interview at:

http://www.feedbacksecrets.com/how-to-raise-20k-on-twitter-in-4-days/109/

Josh Guttman (URL) said:
Nice comment Matt (who are you, btw, no link?), glad someone chimed in who gets twitter. Too many naysayers on this topic. I was one until I gave the service a fair shot and grasped the potential of the platform. It's beauty in simplicity and I think has the chance to be be bigger than Wordpress, Typepad, etc.
Matt Shaulis said:
Josh, I never drop a link when I blog comment, I'm far too worried about people hating me and taking it out on the startup I work hard for... but I will get in touch with you via your link so I can start following you on twitter. :-D
Matt said:
Ooops. Well... so much for anonymity... damn Safari's auto fill form fields. (Peter or Henry or any moderator here, feel free to nix my real name from that previous comment... and of course you take this comment with it... lmao. ;) )
Deacon said:
I'm curious as to what your estimate is for the future growth of Twitter? How many total users and active weekly users will they have 1 year from now?
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Safari's auto fill form fields. (Peter or Henry or any moderator here, feel free to nix my real name from that previous comment... and of course you take this comment with it... lmao. ; ) )
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ev arkadaşı (URL) said:
If someone could tell me what Twitter does now that will still be relevant in a years time, I'll buy it.

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