What I’m missing in the valuation of Twitter
This week I read this article on the amount of active users on Twitter. As with all articles regarding Twitter these days it sheds a light on how this will either hurt or favor the valuation of the site. But with all this talk about Twitter’s value I’m always missing one word.
Potential.
Twitter is an interesting service (one which I use on a daily basis) and it has potential to be even bigger than it already is. But that’s what it is: potential. Twitter’s management has yet to come up, at least publicly, with a strategy to monetize it. There are third parties already making money from it (Dell comes to mind, so do app developers), yet the site itself makes just a little compared to its valuation.
Whatever method (advertising, location-related, mobile/desktop applications, premium accounts, etc.) they will come up with, it remains to be seen how its users react to it. It’s implementation and success or failure with users will have a strong impact in how investors will view and value the company. So when you talk about its worth you can only do so in an abstract manner. Until we know what strategy Twitter will use to make money and how its users react to it, all talk about its worth is purely speculation.
