Twitter is reportedly in talks with private investors for another round of investment, one that would value the company at $3 billion. My first thought was: Only $3 billion? In this time of irrational web 2.0 valuations?
After all, Facebook’s reported value is $41 billion, according to Bloomberg. As fast as even Facebook is growing, that figure—up from $30 billion a few weeks ago—is hard to justify, given that the company’s revenue will be between $1.5 billion and $2 billion this year. But even so, at Facebook’s $30 billion valuation, it’s ten times bigger than Twitter. So why would Facebook be worth ten Twitters?
For one thing, Facebook has worked out a solid business model, targeting ads to its members in an effective way. Twitter is at an earlier stage in the process of developing a business plan. It recently hired a new CEO, Dick Costolo, to ramp things up. Since then, it’s announced a few initiatives aimed at exploring new revenue streams.
Twitter has stumbled in its efforts to monetize its popular information network. The company has close to 200 million accounts pumping out a 100 million tweets a day. But it’s had mixed results in making all that traffic pay. New features like sponsored tweets and trends are generating revenue without alienating users. But other endeavors are rubbing software developers the wrong way.
Twitter co-founder Evan Williams acknowledged the company’s sometimes ham-fisted actions with developers at the Web 2.0 conference. Developers of apps that allow people to access Twitter feeds on smartphones were unhappy with Twitter’s move this spring to buy the maker of Tweetie, allowing Twitter to offer its own app. “We’ve learned a lot about having an ecosystem and working with third-party developers and we’ve screwed up a lot of that,” Williams said, even as Twitter announced a couple of new changes that may not sit well with developers.