So what if Twitter only generated revenues of $45 million last year? That hasn’t discouraged the likes of Google (NSDQ: GOOG) or Facebook from having “low-level talks” in recent months to acquire the microblogging service for $8-10 billion, according to The Wall Street Journal.
If that valuation seems as disconnected from the reality of Twitter’s finances, consider that WSJ reports the company has ambitions of growing into a $100 billion operation. Venture capital firm Andreessen Horowitz just pumped $80 million into Twitter on Wednesday to acquire private company stock.
Twitter is apparently riding a tide of highly generous valuations for social-media companies that could prompt IPOs this year from the likes of Pandora Media and LinkedIn. But the company hasn’t exactly proven how it plans to convert its swelling ranks–more than 200 million registered users–to profits aside from modest efforts on the advertising side such as the Promoted Tweets initiative it launched last year.
While Twitter brought in former Fox Interactive Media (NSDQ: NWS) president Adam Bain last year to lead a team of more than 20 sales executives, eMarketer analyst Debra Aho Williamson characterizes marketer interest as purely experimental at this juncture. Apparently that hasn’t discouraged some pretty big potential buyers.
The eye-popping valuation is sparking some interesting debate, with Reuters’ Felix Salmon taking issue with WSJ’s own Shira Ovide over how best to calculate Twitter’s potential. While Ovide wonders if the valuation is “insanity,” Salmon does some basic math: “If Twitter is 20% the size of Facebook, and Facebook is worth $50 billion, then Twitter can be worth $10 billion, no?”
Salmon will be interviewing Gawker founder Nick Denton at the paidContent2011 conference on March 3.