Private Investors Overvalue Twitter at $8 Billion

Paul Lilly

For now at least, Twitter isn't in a mad rush to go public and watch its stock price soar in what some are calling the second coming of the dot-com bubble. But that doesn't mean the microblogging service is hard up for cash, either. On the contrary, Twitter is trying to finalize an additional $400 million in funding that, if successful, would value the company at around $8 billion, the New York Times reports. What is Twitter really worth?

That's not an easy question to answer, so let's instead look at some of the other numbers. There are currently more than 200 million registered Twitter users, everyone from average Joes tweeting about their weekend plans, to celebrities and politicians posting updates on all matter of things. Even the Pope isn't immune from Twitter .

Analysts believe Twitter pulls in about $200 million a year from online advertising, putting the company close to profitability, NYT reports. A valuation of $8 billion is about 40 times Twitter's sales, and according to Rory Mayer of Hudson Square Research, that's a bit much.

"It's a small business," Maher said. "The ad volume isn't there. They're going to have to come up with products that drive more volume for them, and they need to increase the number of users."

The most recent high-profile online company to file for an IPO is Zynga, which recorded nearly $600 million in revenue last year with a profit of $90.6 million. Zynga is expected to offer shares at a valuation of at least $20 billion, or 33 times its sales.

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