Saturday, September 26, 2009

Twitter Valuation

How can a company that 'has yet to report any significant revenue' be valued at $1 billion?

Just because you have an audience doesn't mean they are going to be willing to spend any of their money. It could be the fact that their audience doesn't have to spend any money that gives them an audience to begin with. As soon as they start charging for services, someone else could easily come along and do it for free again and 'steal' their audience. Still, I just don't get the valuation.

That said, people pay for when OkCupid is free and arguably a more entertaining / useful service. But then again, maybe people pay for thinking they are actually getting a better product or maybe it helps weed out the people who aren't serious. Maybe that is what the investors are hoping for with Twitter.

Regardless, it will be interesting to see how all this plays out over the next few years.

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