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:
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.