Cue the bubble-bubble talk. Cue the Twitter-doesn't-have-a-business-model talk.
Please.
We estimate that Twitter is doing around $100 million in revenues through its emerging ad business, and selling access to its firehose.
"So freaking what?" we hear the naysayers say. "A $7 billion valuation on $100 million in revenues is insane!"
Really?
Look at it this way: in 2001, Google earned $7 million in profits on $86 million in revenue.
Anyone who had invested in Google at a $7 billion valuation in 2001 would have been called the world's biggest moron. (Especially considering the fact that an actual bubble had recently popped.) A 1000X profit multiple!
And anyone who had invested in Google at a $7 billion valuation in 2001 would also have tripled her money in three years, when Google went public in 2004 at a valuation above $20 billion. (And if she'd held on to her stake, made a 20X return over 7 years.)
Of course, not every company making $7 million in profits is worth billions. But every once in a while, a few of them are. And it's investors' job to invest in several of those that might look like the next Google, be mercilessly mocked by the armchair quarterbacks, and have enough winners out of the lot that they can laugh all the way to the bank.
Here's what Twitter has in common with 2001-era Google:
- A simple, beautiful product that users love and that's growing like wildfire
- A professional CEO and a visionary, involved co-founder.
- Twitter also has network effects that Google doesn't have, but these aren't as important as most people think.
But that's not the thing that makes Google and Twitter worth billions, as opposed to hundreds of millions.
The thing that makes you worth billions is a revenue-generating product with huge momentum.
It doesn't matter the absolute numbers of your revenue, whether it's $100 million or $10 billion or $10 million. What matters is the slope of the curve. Whether customers can't get enough of your product, as was the case with Google when they launched search advertising and couldn't believe just how many people were buying.
(The reason the absolute value of the numbers don't matter, by the way, is that the value of an asset is the net present value of its future cash flows. In an early stage business, growth rates are more important to estimate future cash flows.)
From 2001 to 2004, Google's revenue grew from $86 million to $1.5 billion. That's staggering.
Is Twitter going to achieve similarly stunning revenue (and profit) growth?
Nobody knows, but stranger things have happened.
If we had to guess, we'd say Twitter insiders, including Google board member John Doerr, see Twitter's revenue growth and it makes them think Twitter could grow revenue that fast.
We wouldn't be surprised if it did.
Don't Miss: The Next Twitter Trend (We Hope): #Twintros
Bow Wow is growing up fast. The 24-year-old rapper has revealed that he is the father of a young girl. In an open letter to his fans, he confirmed rumors that he has a daughter (“God gave me the illest gift of my life”) that he previously didn’t tell the public about. Over the last three years, he has been “battling life” and even contemplated suicide. But after the birth of his daughter, whom he calls “Shai Shai,” his perspective changed.
“My lil girl is getting BIG fast. i love every minute of it. She inspires me to go harder.Even made me treat my mother better, its like it made me into a man over night,” wrote a reflective Bow Wow. The baby lives with her mother, but he makes the five-hour flight to visit her and wishes that she could live with him.
The Cash Money signee has taken on daddy duties, including changing diapers. “Sometimes i tear up cuz i just cant believe it brotha be emotional,” added the protective father, who wants his daughter to have everything he didn’t.
In closing, he asked for his fans’ understanding and hopes they will continue to support him. Read the full letter below.
Let me start off by saying i love my fans. With out yall i wudda been left the game. For the past 3 years i been batteling life. Even thought about taking my own. I felt like as a kid i did everything and saw everything too fast which spoiled my adult years. I felt as if i had no purpose to live(Thinking selfishly) until god gave me the illest gift of my life. No lambo, no blk card nuffn ammounts to my lil girl. I waited so long to tell yall the truth because i was nervous on how yall would look at me. Yall know everyone makes a big deal out of everything i do. I wanted to be 1st n let yall know the real. My lil girl is getting BIG fast. i love every minute of it. She inspires me to go harder.Even made me treat my mother better, its like it made me into a man over night. Never been a fan of posting pix of my daughter. Reason is because i want my boo boo to have everything i didnt. Want her to be able to cheerlead with her lil friends with out some asshole sticking his camera all in my lil girl face. I know how fame is. I missed out on so much that i now know how important it is to cherish and have those things in your life. Yes! I change diapers. Aint as bad as i thought hahaha. I want her to live with me so bad. Jus us 2. Thats my dream man but fellas yall know how it go. Baby gotta stay with they momma and all dat bull. I hate that! So i have to fly 5 hrs away to see her. I find myself going into my i phone book jus lookn at pix of her. Sometimes i tear up cuz i just cant believe it brotha be emotional. All in all im good. This is my 1st. I know all my fans gone support me and ride for her like yall been doin my whole career. To the ones that say “Im heart broken how can he do that to us” well i do have a life thats not all about movies or making albums. Im 24 now. I cant wait 4eva. Im happy and if your a fan then ud be happy too cuz yall gone be with me every step of the way. The bs that comes with having a baby momma is expected. So i neva trip. Jus gotta suck it up keep chin high and try not let her get the best of my feelings by playin them stupid games. Ima stay positive and keep maintaining long as i got yall i cant lose. I love yall. And shai shai daddy love u too! Wizzle!!!!
Boweezy
Cash Money/Young Money
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