What's Worth A Billion Dollars?

by Cory Treffiletti, Sep 29, 2009, 1:30 PM

• Comment
• Recommend (12)
• Tweet
• 

A billion dollars is a lot of money.  Last week Twitter raised more than just some eyebrows by raising money based on a $1 billion valuation -- it also raised expectations for digital businesses, along with the hopes of thousands of entrepreneurs everywhere who are looking to make a splash.  The news was somewhat expected -- rumors had been flying for a couple of weeks now -- but still shocking.  I for one thought those days of high valuations were gone, or at least on hold for a bit, so I feel I need to be the person to ask the simple question: What could possibly be worth a billion dollars?  What could one do with a billion dollars -- and how does that compare to the eventual worth of a company like Twitter?

I understand that Twitter is an important company effectively changing the Internet landscape due to the impact it's made on communication, conversational media and real-time search, but I have trouble with that valuation.  For $1 billion, you could buy 37 million copies of the book "How to Make Money Online with eBay, Yahoo and Google" in paperback on Amazon.  With a billion dollars, you could teach 37 million people how to make money, but Twitter still doesn't have a revenue model. 

For $1 billion, you could also buy...

 Approximately 5 million iPhones.  These devices allow you to communicate with anyone anywhere in the world, and they are not limited to 140 characters.  Plus, as a bonus, you can actually use Twitter on them, so that could increase the user volume quickly!

 

 You could rent office space in downtown San Francisco to house about 30 people for about 14,000 months.  That is far longer than the life expectancy of any company that I can think of, regardless of what area of technology they're in.  I wonder if Twitter will be in business that long?

I could build a site and sign up for an affiliate program, most likely turn that billion dollars into something more positive, possibly with as much as a 30% positive ROI.  As the saying goes, "It takes money to make money," and with a billion dollars I think I could make a lot of money!  Maybe Twitter should just sign up for a bunch of affiliate programs and start promoting the ads in 140-character ad units throughout the platform!

You could give 33 million people a foot massage.  That would translate to a lot of very relaxed, really happy people.  I don't know if you can truly put a dollar value on that, but I think it would surpass giving $1 billion to Twitter.  At least all of those people would be happy -- and maybe that would translate to them doing better jobs at work!

All in all, for a number of reasons, I hope this valuation holds up. Then we could continue to see value in technology, which may even drive the economy further out of the depths of recession.  Also, for more selfish reasons, if Twitter becomes as valuable as its principals would like it to be, then more people will need to know how to use the platform as a marketing tool, which means I get to keep working!

So, a toast to Twitter -- may its future be as bright as the dollar signs on those checks!

 

• Comment
• Recommend (12)
• Tweet
• 

0 comments on "What's Worth A Billion Dollars?".

1. Michelle Cubas from Positive Potentials LLC
   

   commented on: September 29, 2009 at 1:44 p.m.

   I like your approach of "what else you could buy . . ." Like the Pet Rock, value is in the eye of the beholder. That's my take-away lesson on this information.

2. Richard Monihan
   

   commented on: September 29, 2009 at 2:06 p.m.

   I'm no fan of Twitter. I'm stunned at the valuation. There's not much that can be said beyond a few cliches:
   "One man's trash is another man's treasure."
   "There's no accounting for taste."
   "Beauty is in the eye of the beholder."

   I suppose I could go on and on. I don't get it. Even if this was the peak years for internet valuation, I wouldn't get it. $1BB value for an intermediary site that allows people to tell others they are sunning themselves at the beach?

3. Paula Lynn from Who Else Unlimited
   

   commented on: September 29, 2009 at 2:39 p.m.

   One billion could pay for an easy 1/900 of a national health care problem. A another simple 899 valuations and whaalaa!

4. Maxine Grossman from Twist Image
   

   commented on: September 29, 2009 at 2:45 p.m.

   I would hope the VCs are doing their math, but at some point you wonder if it's just easier to toss around these un-graspable numbers. In other words, is it easier to commit "a billion" than it is to say "let's spend a million dollars... a thousand times over".

5. Greg Alvarez from iMeil
   

   commented on: September 29, 2009 at 4:35 p.m.

   Finance anyway... they don't understand and try to create bubbles again, and again, and again, and again...

6. Steve Goldberg from USC
   

   commented on: September 29, 2009 at 6:49 p.m.

   Cory: $1B is the Valuation not the capital raised ($100M/10% = $1B.) So they could buy a lot of stuff but not all the stuff in your post! In this case -- actually in every case -- the Valuation is a reflection of the return that the investors expect. With the exception of T.Rowe (who looks for lower returns) the investors expect the company to be worth a lot more than $1B so that their $100M is worth a lot more in the future.

7. William Wong
   

   commented on: October 7, 2009 at 12:28 p.m.

   I would assume there's a standard formula to calculate the valuation per daily active users, the same way as using P/E. Though the facebook valuation was somewhat a mystery to me when they sold shares to Microsoft.

Leave a Comment