Wow, a $250 valuation with 6 million users? That's $41.66 per user. It is ridiculously high, especially with no business model in sight.

Make it something like $400/user. Having been an insider of 3 "Internet startups" in the past, I am assuming a 1:10 ratio of real active users vs total number of accounts in the database. BTW investors always asked us about the number of active users, followed by a question of "how do you define active"? Something like "logged into his account at least once within last week" is considered a very good measure of an active user.

It's simply ridiculous. Maybe we'll soon see a return to the dotcom tactics of alladvantage,themutual etc,etc - Pay people to become your "Users" so you can get more funding.

You can't ignore growth though. In many cases it's much more important than current active users. A product with 1mil active users and a 10x growth rate is much more valuable than a product with 5mil users and a 2x growth rate. The same calculation applies to stock valuations. A stock isn't priced by current earnings, but by expected future earnings.

Twitter has got some pretty impressive growth right now. I'm sure they are pitching reasonable plans to their investors for how they are going to make money. However, Twitter does seem overly cautious with rolling out any attempts to generate revenue.

I honestly think that Twitter could become The Next Big Thing(TM), so I don't think the investors are crazy for investing at a high valuation.

I think it's more likely investors have believed the hype rather than actually do any rigorous business analysis based on potential profit.

Can you elaborate on what leads you to that belief?

IMO: It's a social networking site which means the value of it's advertising space is significantly reduced. Due to SMS it's got a high cost per user. If they find a viable business model they are going to have a lot of competitors. I can't afford to charge content producers because that would quickly drive them to a competitor.

Which is why they don't have a competitor. It still looks like a crappy businesses that's at the mercy of the wireless industry. EX: If they could make money from SMS traffic face book would take about a month before they had a system like this running.

Or they can just do an SMS subscription plan, based on usage. First 10 are free, thereafter it's $5/month.

Perhaps I'm missing something important here, but how are these companies (Facebook, Twitter, et al) being valued? I know there is "potential" value here, but who comes up with the actual numbers?

Everybody guesses and whoever guesses too high by the largest error, gets his bid accepted.

http://en.wikipedia.org/wiki/Winner's_curse

Poorly.

With many assumptions and the ignoring of many variables combined with one (or more) of these business valuation methods:

http://en.wikipedia.org/wiki/Valuation_(finance)

what was the facebook offer assuming that their stock is toilet paper?

It was $500 million total including $100m in cash -- http://www.alleyinsider.com/2008/11/twitter-rejects-500-mill...

$100 million in cash? Passing that up looks pretty dumb right now.

I guess running the company is more fun than doing whatever you want everyday for the rest of your life.

edit:the alley insider article implies that the deal was ALL facebook stock. I would probably turn that down too and wait for a non toilet-paper offer. I mean how much can you sell facebook stock for? Are there any buyers?

Actually that article has an update from thedeal.com saying that $100 million of the offer was cash. It's right at the top.

Evan Williams already sold Blogger to Google pre-IPO, so I don't blame him for seeing how big he can make Twitter now that he has breathing room.

You normally don't create another startup after becoming wealthy just to become more wealthy.

You'd be surprised, because thats exactly what serial entrepreneurs do.

There's a difference, though, between doing it just for the money and doing it for the love of the game which could also lead to more money.

How does that look dumb if they're raising at a $250m valuation? Seems smart to me.

That article made it seem like it was about $150m (at the more sane $5b Facebook valuation) stock only. I wouldn't take that if I owned Twitter.

Surely a valuation is meaningless until you are able to actually have a liquidity event.

If it was me, I'd recognize that the Twitter hype is probably peaking about now, and it's a good time to quit and take some cash.

it always looks like it's peaking if your growth is hyperbolic. whether or not they're idiots or geniuses is determined by the market.

but if I was running twitter I would certainly take $150 million in cash. If you still want to run a company well now you have cash and a success under your belt. Funding should be an order of magnitude easier.

"it always looks like it's peaking if your growth is hyperbolic."

Sure, but the fact we're even discussing $250m valuation for a company whos only real worth seems to be its users and possible future profit, should be a good pointer that this is a peak. Much like Facebook peaked.

Twitter's founders have already had a prior success. Funding is already easy for them.

And if you would sell a company with that sort of traffic and growth for $150m, then I'm glad I'm not invested in it.

a. It's a rumor.

b. Even as a rumor, the deal isn't closed.

c. The article mentions that they got a lot of "no"'s from people. If someone said "yes" it's likely the terms are going to be harsh.

Once they start cranking out new features and hire some competent people who know how to _properly_ run a website with an accompanying API then I'll believe a 250m valuation.

Have you run a website with that many users? Harder than it looks...

I worked at AmateurMatch.com until June of 08.

http://siteanalytics.compete.com/amateurmatch.com+twitter.co...

His website is clearly up: http://jon.ursenba.ch/

Oh dear, my personal website isn't up yet because I'm waiting for a graphic designer to get back to me. What will I do!?

Remove it from your profile so people don't think it's broken? Point it at a server with a holding page?

So, you think that the people there are not competitive enough?

Competitive? I said that they aren't competent enough.