How Much is Twitter Worth?

Twitter has finally made its first step towards an IPO, with its revenues growing at a pace. In the meantime, painful memories of Facebook’s IPO are fading, with the social network finally worth more than its $104 billion float price.
Financial analysts predict that if Twitter comes to market at the end of 2013, its valuation will be nowhere near that claimed by Facebook. According to experts’ estimation, it will be worth somewhere $15 billion. Unlike Facebook, the micro blogging platform will IPO while revenue grows in triple digits.

In most cases, companies are valued according to their underlying profit, but Twitter admits it is still loss-making while investing to grow. Since Twitter has filed for a confidential IPO, financial details are unknown to the public, so the experts can only use revenues to measure how much the company will worth. If the float will be conservatively priced at 20 to 30 times revenue, then Twitter will be worth up to $15 billion.

Indeed, the company’s early forays into advertising have been a success, especially on mobile platforms, where much of its traffic comes from. The researchers point out that Twitter’s revenues have almost doubled to $583 million since 2012, and are expected to reach $950 million in 2014.

The company’s userbase consists of 200 million users sending 2 messages a day on average, so Twitter may not have Facebook’s scale but people are on the platform do use it intensely. In the meanwhile, the heady mix of politicians, business leaders, celebrities and journalists dominating the service makes Twitter an important destination for advertisers seeking to influence the influencers.

Talking about digital advertising, Google and Facebook dominate in this area – the former has 1/3 share of global spending, while the latter accounts for 5%. As for Twitter, it ranks 8th with less than 0.5%. However, if you focus on pure mobile advertising, Twitter boasts 2% share and is in the 4th place. Thus far, Twitter shares on the secondary market have been priced at $26 for small lots and $28 for larger lots.

It should be noted that Google floated when demand for technology stocks was weak. The company was forced to lower its offer price from $135 to $85 per just a few days before the float, but the very next day the shares had popped, reaching $100. So, Twitter’s CEO would be wise to opt for a Google pop rather than risk a Facebook-style flop.