Is Twitter worth $7 billion?

Posted by Radu Tyrsina

Even though Twitter hasn't made any declarations about a potential IPO or even hinted of the possibility of going public any time soon, our favorite micro-blogging client may soon be valued at around $7 billion.



As other Internet companies such as Zynga and Groupon are filing to go public, Twitter is taking the opposite route: it will continue using private investments.

According to the Wall Street Journal, the San Francisco-based company is "currently in discussions to raise a new round of private financing," in order to "raise hundreds of millions of dollars in a round valuing Twitter as high as $7 billion."
 
Obviously, this should be taken with many grains of coarse salt as it is all based on reports from unnamed "people familiar with the matter," and we also don't know which investors and venture capitalists could (potentially) be involved in this deal.
 
By trying to raise such a large sum of money, Twitter is just buying more time for itself to develop a proper advertising-based business, a much needed improvement to its currently immature plan, especially compared to its peers.

Indeed, even though Twitter has a growing user base, its ad system doesn't generate as much revenue as say Groupon or Zynga.
 
Twitter is also a much smaller company compared to some other sites, with just over 500 employees and somewhat anemic executive ranks.

Chief Executive Dick Costolo - who assumed command of the company last fall - has been working on building out its executive team, advertising business and trying to find new partnerships, like the one announced last month with Apple. 



Costolo has also made several key hires, some from Facebook and News Corp., and is also close to hiring a chief marketing officer. As expected, most, if not all, are familiar with the matter of ad revenue.
 
It is therefore little surprise that there is so much buzz circulating about the possibility of Twitter going public. Though I could say that $7 billion does seem a bit too high - especially for the more skeptics and realists among us who are not completely tempted by the sweet siren song of Silicon Valley.
 
Personally, I don't see Twitter going public any time soon, as it still hasn't gotten its fill of private investment and VC funding.