Is Twitter Worth $1 Billion?

Twitter

Twitter is on track to raise $100 Million dollars in financing, which would make the micro-blogging site, which currently doesn't have much of a revenue stream, valued at $1 Billion.

The company is set to complete a round of financing from some of its current investors including Spark Capital and Institutional Venture Partners, as well as new investors T. Rowe Price (an unusual investment from the mutual fund company) and Insight Venture Partners.

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The company has become a source for celebrity gossip with a direct line to stars themselves, the next generation broadcaster, with millions of users signing up for instant headlines from the likes of CNN and CNBC, and a next-generation communication tool. Everyone from Google to Microsoft to Facebook has acknowledged the site's value and pursued investment in the site. For now, Twitter is going alone and certainly won't have a hard time building a war chest to do so.

What would make Twitter worth a billion dollars? It all comes down to Twitter's incredibly fast-growing audience: though Twitter won't release users numbers, its website alone has over 30 million unique monthly users, plus more of its mobile and smart phone services. Last week I blogged about Twitter's new terms of servicethat indicate what we can expect from its new business model. The company is already working with companies to help them track user comments on Twitter and use the site as the ultimate direct-marketing to reach out to interested fans. And then of course there's the potential advertising business that seems just around the corner for the site.

Facebook has also attracted sky-high valuations; an investment from Digital Sky Technologies in May puts the social networking site at $10 Billion, while Microsoft's 2007 investment in the site valued it at $15 Billion. Of course Facebook is now cash flow positive with an estimated $500 Million in annual revenue.

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As ad dollars shift away from newspapers and even traditional TV broadcasting everyone is looking for the silver bullet of how to reach consumers. And not just any consumers – they need those consumers who care about a product and are likely to buy it. Twitter hasn't proven that it can do that, but it certainly has the tools, which is enough for investors to jump on board. It's notable that Twitter doesn't feel any pressure to rush to generate revenues; they're too busy building out their capabilities and securing their relationships with users. As frustrating as it is to wait for the company to launch its businesses, they're right to be careful; in this fast-paced social media space you never know when something new will come along.

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