The social networking service that keeps the world at 140 characters or less has doubled its valuation in seven months. Twitter is now worth $7 billion, according to The Wall Street Journal, following a financing deal totaling hundreds of millions of dollars.
Unlike its social brethren Zynga and LinkedIn, Twitter appears to favor staying private for the time being. Zynga, the social gaming firm responsible for FarmVille, filed a $1 billion IPO last week that valued that company at $20 billion. And LinkedIn debuted on the public market in May, raising $352 million and now worth $8.5 billion. Meanwhile, Twitter previously lured $200 million in private financing from the likes of Kleiner Perkins Caufield & Byers and others that valued it at $3.7 billion. Its latest cash infusion nearly doubles that and suggests the company is less interested in tapping into the buzz of rabid investor enthusiasm for social media IPOs.
“While a potential $7 billion price tag only underscores the valuations of social media companies pondering such public offerings, Twitter’s strategy likely stems from its relatively immature advertising model,” writes the Journal‘s Amir Efrati and Spencer Ante. “Though Twitter has a growing user base, its ad system remains fledgling and it isn’t generating as much revenue as Groupon or Zynga,” they add. “Twitter is also much smaller than some of its peers, counting just over 500 employees, and until recently its executive ranks were thin.”
Twitter’s bread and butter is its “promoted tweet,” a tweet that appears when a user searches a topic. The company is exploring how it can diversify its ad offerings to elevate it into the same playing field as Groupon and Facebook. Meanwhile, Twitter stands to earn $150 million in ad revenue this year, up from $45 million in 2010, according to eMarketer.
Some may chalk up Twitter’s refusal to go public as insane, but others suggest it indicates a more thoughtful approach to building out a solid business plan. In the late 1990s, a slew of tech companies went public on a ghost of a business plan, only to tank as the proverbial bubble burst. Twitter appears to be keenly aware of that lesson, as it curates a knowledgeable executive team and develops an ad model that can sustain the company for years to come.
Once Groupon, and the like, start using twitter to promote and sell ON twitter they should see a lot more $$ being able to track real sales and not just hits. Or are they doing this already?….I know facbook is.
That’s a very good question. A quick search suggests that Groupon is in fact utilizing Twitter for promotion and sales. Check it out: http://twitter.com/#!/search/groupon.