The Billion Dollar Twitter Question

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September 25, 2009 – In a move that has shocked many in the industry, capital firm Insight Venture Partners and mutual find company T. Rowe Price might join the existing backers of Twitter to create a $1 Billion evaluation for the social media network.

This is an incredibly high number by any comparison, but it is especially impressive for a company that has yet to produce significant monetization or even an actual cash flow. According to reports inMediapost:

The basis of all valuation is the discounted cash-flow analysis. It has two parts: cash flow for some period of time, and terminal value, explains Jordan Rohan, founder and managing partner at Clearmeadow Partners. “To value a company at more than $1 billion, in the absence of current cash flows, one would have to think you could sell the company for much more than $1 billion someday soon,” he says.

While we here at We Do Web Content are big Twitter fans and totally believe in the power of Twitter to boost brands, expand web presences, and connect people around the world in real-time, this leap of faith will have major repercussions for Twitter and the entire social media industry, whether it succeeds or fails.

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