Twitter: how does a loss making company get valued at $10 billion?

Apparently Twitter is currently talking to potential buyers Facebook and Google about a possible takeover bid. With the industry giants history of battles over Internet supremacy this could get quite interesting. Last year it had estimated revenues of $45m (real figures not available as it is a privately owned company)but ended the year making a loss, however this year revenues are expected to more than double to between $100-110m.

It’s not the first time that Facebook has showed interest in a takeover. Facebook founder Mark Zuckerberg is believed to have offered Twitter’s founders $500m in Facebook stock for the company in 2008, but the takeover bid collapsed. Also Twitter co-founder Evan Williams and Dick Costolo, the current chief executive, has previously sold companies to Google on behalf of Twitter.

So what makes these networking platforms worth so much? – Your personal data

It’s the beginning of a new era as these companies are all beginning to think about the value of the mind-blowing amount of data about millions of people (read consumers) that these data centers are collecting, and that we the consumers are offering for free in on a daily basis. We are on the brink of an explosion in the development of targeted online advertisements.

Investment experts around the world are discussing, debating and looking on in awe as valuations rocket skywards for companies that on paper would previously be valued at a fraction of what they are now deemed to be worth. Its about potential, and right now we are only just beginning to grasp what the potential value of personal data is worth and how marketers and advertisers will use this information.

Ethan Kurzweil of venture capital firm Bessemer Venture Partners stated, “Are these prices justifiable based on financial multiples? No.”…. “But these start-ups are building social services and have lots of data about their users and the market is valuing that mightily right now”.

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Heather Buckley is Director and co-founder of IT and business training providers Silicon Beach Training. Founded in 1999, Silicon Beach Training run public-scheduled training courses in their Brighton Training Centre as well as bespoke on-site courses worldwide. Popular courses include Social Media Training, Photoshop Training and PRINCE2 Training, which has recently been launched in Birmingham. Heather writes on the Silicon Beach Training blog with a focus on IT, Project Management and Social Media as well as offering Photoshop knowledge from her experience as a photographer.