Make it something like $400/user. Having been an insider of 3 "Internet startups" in the past, I am assuming a 1:10 ratio of real active users vs total number of accounts in the database. BTW investors always asked us about the number of active users, followed by a question of "how do you define active"? Something like "logged into his account at least once within last week" is considered a very good measure of an active user.
It's simply ridiculous. Maybe we'll soon see a return to the dotcom tactics of alladvantage,themutual etc,etc - Pay people to become your "Users" so you can get more funding.
You can't ignore growth though. In many cases it's much more important than current active users. A product with 1mil active users and a 10x growth rate is much more valuable than a product with 5mil users and a 2x growth rate. The same calculation applies to stock valuations. A stock isn't priced by current earnings, but by expected future earnings.
Twitter has got some pretty impressive growth right now. I'm sure they are pitching reasonable plans to their investors for how they are going to make money. However, Twitter does seem overly cautious with rolling out any attempts to generate revenue.
I honestly think that Twitter could become The Next Big Thing(TM), so I don't think the investors are crazy for investing at a high valuation.
IMO: It's a social networking site which means the value of it's advertising space is significantly reduced. Due to SMS it's got a high cost per user. If they find a viable business model they are going to have a lot of competitors. I can't afford to charge content producers because that would quickly drive them to a competitor.
Which is why they don't have a competitor. It still looks like a crappy businesses that's at the mercy of the wireless industry. EX: If they could make money from SMS traffic face book would take about a month before they had a system like this running.
Perhaps I'm missing something important here, but how are these companies (Facebook, Twitter, et al) being valued? I know there is "potential" value here, but who comes up with the actual numbers?
I guess running the company is more fun than doing whatever you want everyday for the rest of your life.
edit:the alley insider article implies that the deal was ALL facebook stock. I would probably turn that down too and wait for a non toilet-paper offer. I mean how much can you sell facebook stock for? Are there any buyers?
it always looks like it's peaking if your growth is hyperbolic. whether or not they're idiots or geniuses is determined by the market.
but if I was running twitter I would certainly take $150 million in cash. If you still want to run a company well now you have cash and a success under your belt. Funding should be an order of magnitude easier.
"it always looks like it's peaking if your growth is hyperbolic."
Sure, but the fact we're even discussing $250m valuation for a company whos only real worth seems to be its users and possible future profit, should be a good pointer that this is a peak. Much like Facebook peaked.
Once they start cranking out new features and hire some competent people who know how to _properly_ run a website with an accompanying API then I'll believe a 250m valuation.
