Hands-up if you’d like to sell your company for 100 times your projected earnings for 2011?
Sorry, it will…take a little…longer to…type this sentence…with just one hand.
Both Google and Facebook have discussed buying Twitter in the past and have kept their lines of communication open, people familiar with the matter said. One of these people said companies including Facebook and Google have expressed “latent interest” in an acquisition.
When it raised the $200m in December, Twitter’s valuation was only $3.7 billion. Now it appears that Google and Facebook are kicking around valuations anywhere between $8 billion and $10 billion.
Twitter’s estimated revenue for 2010 was just $45 million and this year it is rumored have around $100 million in revenue.
10,000,000,000 ÷ 100,000,000 = a multiple not seen since the dot com heyday.
It’s no wonder the WSJ says Twitter is a “tech bubble barometer” – 100 times revenues sure looks like a bubble. Then again, Twitter is not going away anytime soon and this valuation is not based on this year’s revenue–or even the next 2 years–but the company’s future revenues. Remember, its ad platform has not yet opened up to the general public–which that in itself should see Twitter’s revenues hit the $500m range in a just a couple of years.
Still, 100x is a multiple that would surely ignite a mini-dot com boom (or bust).