A financial writer who set out to prove that Twitter isn't worth an estimated $10 billion initial public offering was stopped in his tracks when "the facts intervened" and he discovered it could be worth even more.
Wall Street Journal writer Dennis K. Berman said he spent a week trying to disprove the assumption that Twitter was worth the large sum. Instead, Berman said, he found the value of the company to be closer to $12.5 billion
, a remarkable feat considering the seven-year-old company has only been trying to make money for the last three years.
Twitter's main source of revenue has been "promoted" tweets, sponsored tweets that jump to the top of newsfeeds for Twitter's 500 million-plus users. Berman said that because advertising on Twitter and Facebook is becoming more appealing to businesses, in 2014 he expects Twitter will exceed $800 million in profits.
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If Berman is correct, Twitter will have to increase the worth of each of its users from $4 to $7, in order to reach the vaunted $10 billion IPO. Berman estimates that the value shift could come as early as 2016, which is a conservative estimate, compared to Facebook's growth rate.
If Twitter continues growing on a 33 percent upward trend, as the micro-blogging website has in the last few years, the social network will add 500 million users by 2016. They will then match Facebook's one billion users.
If the growth increases this way, the company will earn $3.5 billion a year in revenue by 2016. Berman notes this is the same number Google achieved in 2004. Based on those numbers, Berman estimates Twitter's worth will be $12.5 billion.
In January, analysts surmised for a number of reasons that Twitter was gearing up to make a public offering. Twitter hired a set of new top-level managers, refined its photo-sharing app, and has improved its promoted tweets.
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