Twitter’s Valuation, $73.52 an Active User?

This is just an educated guess, as we don’t have confirmation from Twitter, nor has the funding closed.

Rumors are coming in that Twitter may raise another round of capital at valuation of $250mm, quick calculations from my archive of social networking stats show many sources indicate they range from 4-6mm registered users.

Last week, when I visited the smooth Twitter offices in SF, I asked them about official registered users and they commented “they don’t give out those numbers”, as it would benefit others more than them. So, I’ll average it around 5mm total registered users. I trust the HP labs research on Twitter (met with Bernardo two weeks ago) and their data from a significant sample size shows that only 68% of users return.

This would suggest that 3,400,000 actual users, which if you diveded into the supposed valuation of $250mm would result in the active (people who actually return) users actual worth $73.52. Scobleizer suggests it’s $42 but I think it’s near double that –as you have to take into account those that won’t participate.

Could a Twitter user generate this type of value for it’s users over it’s lifetime? Perhaps if they went the consumer route with eCommerce, advertising, or some type of location based marketing. Or, they could supplement this with revenues from the corporate side by supplying brands with services to ethically, delivering services to them that wouldn’t shy away consumers.

This isn’t even close to being correct, as if we truly wanted to be analysts over the valuation, we would have to factor in future growth, market conditions, and whichever monetization routes they intend to go, since we don’t have that data, we’ll leave it at current size of an estimated 3.5mm active users.

  • http://www.RonaldWilsher.com Ronald Earl Wilsher

    Good post, Mr. J!

    Makes one wonder what direction the T-party execs will finally take towards their cash flow dreams.

    Thanks again.

    Keep the faith and keep being you!

    ~Ronald
    TrueBeliever & HopeDealer

  • http://www.web-strategist.com/blog/ jeremiah_owyang

    Monetization isn’t in their immediate plans, they told me building a great product is their first priority, and that means growth.

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  • http://www.qlubb.com Qlubb-Andy

    Your last sentence says it all, which is that valuation is also comprised of “future growth”. Looking at growth rates (with probably super low user acquisition cost), looking at the ecosystem of vendors building on top of their platform and looking at the multitude of different ways that different people are using Twitter, a reasonable addressable market space is much much larger.

  • http://adrielhampton.wordpress.com Adriel Hampton

    This is an interesting take, and one that almost makes a $250m valuation look small. However, I still doubt the numbers for active users. Perhaps it is just my circle, but the number of bots and multiple accounts per user is high.
    Plus, skimming through the previous research you’ve linked to, it appears that the average user who posts a single tweet a day is going to be minimally exposed to any monetizing strategy.

  • http://jobshouts.com Mike

    Take a breather, that is very high valuation per user. Not sure if its entirely accurate, as some type of monetization will be necessary. we are implementing a feature at our site that depends on the twitter API very heavily. Hopefully it will stay around and not change drastically as to knock our model out of the water.

    Good article nonetheless\

    Mike

  • http://thefuturebuzz.com Adam Singer

    Interesting numbers Jeremiah, thanks for sharing. I’m worth 73.52 to them, sure – but they have given me far more value than that. I feel way ahead in the deal.

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  • http://blog.nullvariable.com Doug from Nullvariable Web Consulting

    If you are defining active users as those who merely visit the site more than once I think a lot of data will end up missing. Also what about all the non-registered users who end up on linked status messages or browsing around from time to time but don’t register? I think rounding out how you and others are defining “active” users/registered users is very important for trying to understand any of this data.

  • http://www.lithium.com Dan Ziman

    And, despite an amazing start, doesn’t necessarily mean something better comes along and twitter sputters. In this one-click-away, who knows where the masses will land. Until then…

    @lostintheflog

  • http://twitter.com/socialmedia411 Julie @SocialMedia411

    As we all know, value per “average” user is a highly misleading metric. The revenue generating potential of many users is quite low, although there are probably many ways to increase that figure over time.

    The real value will come from corporate/media/entertainment users that will end up paying Twitter as they would any other “utility” company. That is, paying for volume through the Twitter pipe.

    Many other revenue sources will emerge for Twitter. In the meantime, let the naysayers and the doubters pontificate.

    Twitter remains the service that they hate to love, and love to hate!

  • http://mattwilson.tv @MattWilsontv

    #

    Twitter’s business model?

    If they want to go after big money, they’ve got to get less social and more business focused. LinkedIN has got a revenue model b/c they take advantage of big time business people who use their premium services to do research for their businesses.

    With Twitter being open source, I bet they’ll be a lot of premium services that aren’t necessarily owned by twitter, but will allow companies do better research on themselves, competitors and do market analysis on their customers.

    There could be a lot of interesting tools that search all the past tweets and see what was said, constantly monitor and organize this information…

  • Ricardo

    Taking a different approach, lets say that the business is valued at 7 times year potential earnings. That leaves a valuation of about 10$ per user or less than 1 per month.

    So in a mixed model of ads, plus premium usage for a fee, or special services for brands, and further potential revenue from apps, maybe its not so much.

    Great discussion!

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  • http://startupcfo.ca Mark MacLeod

    Jeremiah,

    Here’s my analysis: http://startupcfo.ca/2009/01/is-twitter-overvalued.html

    Hope you’re enjoying Maui.

    Mark

  • http://emailmarketingjournal.com Nick Stamoulis

    Now twitter has to figure out exactly how to make it turn a profit. So many social networking sites out there heavily used but profit models are still a mystery.

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  • http://www.allez118.fr Foreign Rate

    Hahaha, I worth also $73.52 for twitter.

    In fact, the thing is, we can’t calculate the value of one user this way. When the investor give his money,it’s for the future. How large can see an investor? The same size as facebook? or as Allez118?

  • http://www.twitterthoughts.com Roger

    Good post, Jeremiah.

    Consider the value to a company of Twitter users’ activities beyond Twitter, and the true value may go much higher. That is, I suspect there may be a hidden value, as well as specific value based on the company’s valuation.

    For example, 60 percent of top Twitter users (by number of followers) are bloggers. Doesn’t their value seep beyond Twitter’s borders to the wider Web? I’m not sure how to quantify that, or to formalize it in a model, but it seems an interesting thought to follow.

    FYI I did some back of the envelope calculations a while back and estimated Facebook’s value about $100 per user if the $15Bn valuation was on target (which is unlikely at a 100x price-to-sales ratio).

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  • http://www.seojobsfinder.com/ OR Hillel

    Nice nice, but you can’t calculate the value of one user. There are alot of other thnigs :-)

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  • http://www.qlubb.com/ Qlubb-Andy

    Your last sentence says it all, which is that valuation is also comprised of “future growth”. Looking at growth rates (with probably super low user acquisition cost), looking at the ecosystem of vendors building on top of their platform and looking at the multitude of different ways that different people are using Twitter, a reasonable addressable market space is much much larger.

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  • http://www.zacharylipton.com/ Zacháriah

    Ridiculous post. The only redeeming point was that you partly recognized what makes it so absurd. You do need to consider future growth and it's easy to put together a reasonable estimate, extrapolating from past growth. Because twitter is still relatively small, there's no reason to believe that growth patterns will change drastically, especially given twitter's immunity from economic conditions.

  • http://www.zacharylipton.com/ Zacháriah

    Ridiculous post. The only redeeming point was that you partly recognized what makes it so absurd. You do need to consider future growth and it's easy to put together a reasonable estimate, extrapolating from past growth. Because twitter is still relatively small, there's no reason to believe that growth patterns will change drastically, especially given twitter's immunity from economic conditions.

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  • http://ultimatemailinglist.com/ Shaun Mailing

    Very interesting prediction, I wonder how much that has changed now more people have got a Twitter. I think Twitter is one of those things where a lot of people are hesitant about it initially, but when they get on it they see the real benefit and become long term customers. So maybe each person is worth this amount…

  • http://ultimatemailinglist.com/mailing-list/mailing-list-companies/ Mailing Companies

    An updated version of the post would be greatly appreciated Jeremiah, do you think Facebok or Twitter put more into their customers?

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  • http://www.followerstobuy.com Followers To Buy

    Interesting post but the estimation of 73.53 per user is vastly exaggerated. There are some many factors involved it would be near impossible to calculate a per user value.

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  • http://twitter.com/stevesampson11 Steve Sampson

    how do you think he feels now……

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