On Monday, Twitter announced that it had received a "significant" round of funding, led by Russian dotcom mogul Yuri Milner and his Digital Sky Technologies. It's estimated that the micro-blogging site raised a fresh $800 million in capital, and that the cash injection pushes the company's value to more than $8 billion — more than twice the $3.7 billion at which the company was valued last December. Could all those 140-character missives really be worth that much?
No. Twitter could crash like MySpace: Twitter "has still yet to show it can be profitable long-term," says John Talty at the International Business Times. Sure, it has 200 million users and generates 350 million tweets each day, but where are the real assets and robust revenue? Social networking is a fickle, highly competitive business — just look at MySpace. It was valued at $12 billion in 2006, and recently sold for just $35 million. If Twitter doesn't figure out a business model, it could share MySpace's fate.
"Why Twitter isn't worth $8 billion"
And this tech bubble just keeps inflating: Twitter may boast of its many users and rapid growth, but "it is still only expected to generate revenue of a $100 to $150 million this year," says Management Today. That does not come close to justifying an $8 billion valuation. Bottom line: We are indeed in an internet bubble, and we can all credit (or blame) Twitter for inflating it.
"Dear Twitter, from Russia with love"
There's no bubble. Twitter is valuable: The strong business performance of a number of the major tech players — Facebook, Twitter, LinkedIn, Zynga — suggests that we're not in the midst of a bubble, says venture capitalist Chi-Hua Chien, in a TechCrunch video quoted by Britain's Guardian. These companies are generating "unprecedented" revenue and profits, and the potential for social media to continue expanding into untapped markets is vast.
"Is Twitter really worth $8bn?"
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