A new analyst report from private secondary market SharesPost values Twitter at around $750 million, which is less than the $1 billion valuation it got in its last round of funding and less than the $1.5 billion valuation private shares of Twitter are trading for on SharesPost itself. The report notes that the $1 billion valuation was based on preferred shares, whereas it is looking at common shares.
The analyst report, which you can access here, comes up with an enterprise value for Twitter based on projected revenues, margins, and comparisons to other companies. Depending on the method, it comes up with a range of valuations from $656 million (by comparing Twitter’s estimated enterprise value to comparable companies) to $751 million (by estimating revenues, margins, and a discount rate).
It is all pretty much guesswork since Twitter still doesn’t know where the bulk of its revenues will come from. But the report makes a stab at projecting revenues of $45 million in 2010 going to $170 million in 2014. It notes various sources of potential revenue in order of decreasing likelihood, starting with licensing its data feed to search engines (which is where most of its revenue is coming from today) and creating premium accounts for businesses (something else it has already dabbled in). Other options for making money: charging third party apps based on how much API data they use, premium accounts for heavy individual users (limited potential), Web ads on user profiles, or ads in Tweets (these could alienate users).
The best bet for Twitter to make money, says the report, is to continue to become a marketing channel for businesses and start charging for leads. The opt-in model of people following businesses and brands should result in much higher sales per lead than other marketing channels such as email marketing, telemarketing, or bulk SMS marketing. Businesses who use Twitter for social media marketing purposes tend to have many more followers than normal users and also Tweet more often.
Another nice chart in the report show how Twitter’s uptime has improved since its early days (other than when it is under a denial of service attack),
And the report confirms that most Twitter users are passive readers rather than active posters. As I’ve long suspected, people on Twitter tend to consume more than they Tweet. About 68 percent of users login at least once a month, but only 17 percent Tweet. (Although, they do tend to start Tweeting more once they’ve been on the service for 9 months or longer).