Last week, Facebook took a $200 million investment that valued the company at $10 billion. So if Facebook is worth $10 billion, how much is Twitter worth? After all, Twitter turned down $500 million from Facebook late last year, and founder Evan Williams might not even sell it for $1 billion. But how about for $1.7 billion?
That is the valuation we come up with when we run Twitter’s numbers through our new social network valuation model. The model takes into account the size of each social network’s audience in different countries and the average online spending per capita in those countries. Using Facebook’s $10 billion valuation as a baseline, Twitter would be the fourth most valuable social network after MySpace ($6.5 billion) and Bebo ($1.8 billion).
Of course, that $10 billion valuation was for preferred shares, so $1.7 billion might be a valuation a strategic investor or acquirer would be willing to place on Twitter. If you use the $4 billion to $6 billion range Facebook’s common stock is being valued at in private sales, then Twitter’s valuation would come down to $671 million to $1 billion. And if you use Bebo’s 2008 valuation of $850 million as a benchmark instead, Twitter would be worth $781 million.
So there is your range: roughly $700 million to $1.7 billion. And remember, Twitter may still have scaling issues, but it doesn’t have all the costs that Facebook has in terms of storage and other capital expenditures. For one thing,Twitter isn’t keeping everyone’s photos on its servers—that is what TwitPic and Yfrog are for. On the flip side, there is also the question of revenues, which remains an open question for Twitter (and for Facebook, for that matter). Is Twitter going to make money from real-time search, corporate accounts, or maybe even figuring out a way to sell followers? Given how engaged a large portion of Twitter’s users are already and how it is becoming a hot testbed for opt-in marketing, it is not inconceivable that Twitter’s users will be worth more to advertisers than Facebook’s. But before we can find out, Twitter needs to pick a business model.