Is Twitter worth $1 billion?

TechCrunch reports that Twitter is about to sign a contract to take an investment of $50 million that would value the company at $1 billion. On a per-user basis, that valuation would make Twitter worth 1.5 times more than Facebook. And that would be a nice payday for the earlier Twitter investors.

It's particularly attractive for a company that, unlike Facebook, currently has no revenues. Yet it is amazing how much Twitter has penetrated the national psyche since February when I interviewed co-founder Biz Stone. Back then, Twitter had a total of $55 million in venture capital and claimed that it had grown at 900 percent since early 2008.

Is there any logic for valuing Twitter at $1 billion? The short answer is that if Twitter can find a way to generate revenues, its rapid growth would surely be worth something. No official numbers are available on the number of Twitter users -- although TechCrunch estimated 25 million -- which would place Twitter's value at $40 a user.

This compares to Facebook's value of $26.67 for each of its 300 million active users -- based on an $8-billion valuation this May as TechCrunch reported. Of course, Facebook estimates that it will generate $550 million in revenues this year while Twitter does not have any revenues.

While Twitter has not yet figured out how to get users or advertisers -- or anyone else besides investors -- to pay for it -- with a $1-billion valuation it may be able to hire someone who can.

Peter Cohan is amanagement consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.

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