While Facebook and Google have quietly tried to buy Twitter, for sums as high as $10 billion, some are wondering if the Silicon Valley giants have gone as crazy as investors. How can Twitter, a private company that only made $45 million last year, possibly be worth $10 billion?
That's a question several analysts are trying to figure out, and their answers probably won't make anyone in the tech industry comfortable.
"Are these prices justifiable based on financial multiples? No," Ethan Kurzweil of Bessemer Venture Partners told the Wall Street Journal. However, many social media start-ups do have data that advertisers value -- it just may not be valued as high as some tech companies believe it should be.
Twitter is on track to make around $100 million this year, but even a doubling of its revenue still makes a valuation of $10 billion a little shaky.
"The company is having great ad-sales momentum right now, but we still think they need to do something big to increase usage and get more people seeing and interacting with tweets," Debra Aho Williamson, an eMarketer analyst said. "Most of their advertisers are just experimenting at this point; the challenge will be to get those advertisers to come back and buy more."
Does this mean we're headed for a tech bubble ? For those of you who remember 2000, it may start seeming a little too familiar.
