Is Twitter Really Worth What They Say?

Amid serious expectation that social media site Twitter will follow Facebook into IPO status by next year the question is, how much is the company worth? Well, this is apparently a bone of contention with experts throwing around many figures. The most common valuation, however, seems to be in the region of $10 billion. Is this accurate? Certain experts are skeptical because this number is based on what could be described as extremely speculative figures.

Among the many reasons some experts doubt this figure is the fact that it is in part based on projected user growth. This projected growth, however, is dependent on an increase in users along the same levels as already recorded. Between late 2011 and late 2012 Twitters active users doubled from 100k to 200k. The expectation is that the trend continue so that by 2014 the site could have 500k users. This is very speculative though, as in the company’s main market, the United States, growth has already begun to slow.

Projections are also being made the the ad revenue for the site will massively increase. This is in part based on the estimated user growth and an as yet unsubstantiated per user revenue earnings. Currently with $350 million in revenue the site makes $1.75 per user. With estimated revenue of $3.5 billion by 2014 even with the projected user increase that means $7 per user in earnings. This is a massive jump, which does not seem to have any valid supporting evidence.

So, essentially there seems to be a lot of speculation regarding the potential earning power that has little support. It therefore might be prudent for potential IPO investors to do a whole lot of research because some folks seem to be inflating numbers.