What Twitter worth? I'm talking cash here...

I just read an article by @marshallk (thanks to @turoczy for the link) asking how much you would pay for Twitter. Mr. Kirkpatrick seems to think Twitter is pretty darn valuable and would be willing to pay $50 per month. Included in this article is a poll asking people how much they would pay for the service. I found that pretty interesting.

Based on when I filled out the poll (at 169 votes) the breakdown was:

53% Nothing
25% Less than $5 per month
12% Between $5 and $10 per month
6% Between $10 and $20 per month
2% Up to $50 per month
1% More than $50 per month

Assuming three things:

  • That these percentages hold
  • That this is roughly representative of the Twitterverse as a whole
  • And that this represents what people would actually do

You get a rough valuation of what Twitter in terms of revenue it could generate. Assuming there are 3,400,000 Twitter users here's the revenue they could do per month:

$5/month -> $7,990,000 ($5 * 47% * total users)
$10/month -> $7,480,000 ($10 * 22% * total users)
$20/month -> $6,120,000 ($20 * 9% * total users)
$50/month -> $5,100,000 ($50 * 3% * total users)

NOTE: These numbers were corrected as per the comment below.

Obviously if these numbers are accurate, Twitter would have the most success at a lower price point. You'd also get less of a drop in growth.

So let's assume that lowest price point of $5/month. At that price point Twitter could potentially generate almost $95 million dollars annually. Let me say that again: $95 million dollars per year in revenue. And that's not accounting for any continued growth.

Based on my calculations, I'd say the latest valuation of $250mm was pretty darn conservative.

Comments

They could actually enhance that revenue stream by having levels of membership. If the 1% that would pay $50 use features on Twitter that the free ones don't, they could justify a premium membership. Or, they could do bandwidth/message count limiting. Free Twits could get 200 twits a month maybe. For the commercial ventures, they could have an unlimited account for $50/mo.

Based on that, and assuming you could put value or restrictions in place to keep your same distribution table, you would have (assuming the 1% for "more than $50" was $75 and the "up tos" were at their upper limits) $18,360,000/mo or $220mm/yr.

As for valuations, since this is probably a VERY high margin business, if you assume a 90% margin and a P/E of just 10 (very low for a high margin, high growth company), you're looking at $2 billion value.

And what's better is that it is membership based, not ad based. Ad rev seems to be declining both in $/eyeball and total $ spent. Imagine if Twitter somehow added ad revenue...perhaps for the free twits.

Now my counterpoint. Personally, I think Twitter is a fad at large and perhaps has a good, but narrow, application. I don't buy the "I always need to know when you urinate because I find that fascinating and now know more about you" premise that Twitter was based on. But, I could see it for real time sports play by play, financing news, some hollywood stalker fan base thing, review releases like for new movies, merchant sales (e.g. every Tuesday I get an email from LostGolfBalls.com with this week's deals). I could even see it for commercial applications for private groups like job status reports, patient information updates, etc., but it would have to be less "cute" and more of an app.

Of course, for most of these types of applications, I could see text messaging evolving. There was a pager you could buy about 10 years ago that would alert you to the hot stock of the day. You could have text messaging blasts that are basically twitter message alternatives. You subscribe to the text service and get the same twitter type info but it truly is anywhere because you always have your phone; you don't always have a computer or twitter access.

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About the Author

Joaquin Lippincott, CEO

Joaquin is a 20+ year technology veteran helping to lead businesses in the move to the Cloud. He frequently speaks on panels about the future of tech ranging from IoT and Machine Learning to the latest innovation in the entertainment industry.  He has helped to modernize software for industry leaders like Sony, Daimler, Intel, the Golden Globes, Siemens Wind Power, ABC, NBC, DC Comics, Warner Brothers & the Linux Foundation.

As the CEO and Founder of Metal Toad, an AWS Advanced Consulting Partner, his primary job is to "get the right people in the room".  This one responsibility is cross-functional and includes both external business development functions as well as internal delegation and leadership development.

A UCLA alumni, he also serves in the community as a Board Member for the Los Angeles Area Chamber of Commerce, the Beverly Hills Chamber of Commerce, and Stand for Children Oregon - a public education political advocacy group. As an outspoken advocate for entry-level job creation in tech he helped found the non-profit, P4TH, an organization dedicated to increasing the number of entry-level jobs in the tech industry, and is in the process of organizing an Advisory Board for the Bixel Exchange, a Los Angeles non-profit that provides almost 200 tech internships every year.

 

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