There is no end to speculation over Twitter and its business. Its revenues are thought to approach USD 1 billion this year, up from an estimated USD 350 million in 2012, and an IPO could be announced at the end of 2013. According to the most recent reports, Twitter has around 200 million active users worldwide.
We are not making any pronouncements on Twitter's valuation. The figure of USD 9 billion may appear high, but if Twitter can remain the standard for microblogging, as Facebook is for social networking, YouTube for (user-generated) online video, Google for search and eBay for online auctions, then this valuation could even be too low. At the same time, it's probably not a good idea to launch an IPO at too high a valuation, in order to stimulate trade and please shareholders. This led to disappointment for some Facebook investors, while Google and LinkedIn gave better examples of IPOs offering a nice exit for existing shareholders.
The value/valuation of Twitter depends on how its results develop and specifically whether it can set the standard for microblogging. While one could reasonably expect this to be the case, nothing is certain in the internet world, where everything depends on innovation. While Myspace proved a misstep after its takeover by News Corp for USD 580 million, YouTube was a roaring success for Google, even at a price tag three times higher, of USD 1.65 billion.
It's legitimate to wonder about Twitter's business model. Its number of users, space available for ads and time spent on the service are all much less than at Facebook. In addition to ads, Twitter can make money from selling data about use of its service, but Facebook can do that too. This means its valuation will be somewhat less than Facebook's, which currently has a market capitalisation of around USD 69 billion. Twitter will also need to show it can continue to innovate, if it can remain the benchmark for microblogging, and how its business model and results develop.
