Is Twitter worth $10bn?
Twitter, the hugely popular micro-blogging site, has been the subject of takeover speculation this week, with reports that preliminary talks have been held with Google.
The figure knocking around in the press has been $10 billion, which even by the standards of Web 2.0 valuations looks pretty high.
Twitter isn't a public company so doesn't have to publish its accounts, but it is widely understood to be loss-making, though its revenues are growing rapidly.
Facebook's recent round of funding valued the company at $50 billion on annual revenues thought to be around $2 billion.
According e-marketer, a provider of stats and market intelligence, Twitter's revenue last year was $45 million and will rise to $150 million this year.
The 25-times-current-revenue that Goldman Sachs and Digital Sky Technologies were happy to pay for Facebook stock last month is dwarfed by Twitter's valuation.
A valuation of $10 billion is 66 times its projected revenue for this year. e-marketer reckons revenue in 2012 will hit $250 million, but that still requires a 40-times-revenue multiple to get to $10 billion.
Google is of course awash with cash and has a market capitalisation of around $200 billion. A $10 billion deal to buy Twitter would though dwarf its previous acquisitions. Only DoubleClick and YouTube have topped the $1 billion-mark in Google's run of 80 plus buy-outs.
The world's largest search engine was prepared to pay $6 billion for Groupon, the discount voucher website, if reports are to be believed. Twitter is second only to Facebook in the social media space, an area where Google is desperate to beef-up its presence, which may help explain the lofty price tag.