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The Deal Journal’s Michael Corkery asked Jeff Horing, co-founder of Insight Venture Partners, how his firm decided to value Twitter at $1 billion in its most recent round.
Because Jeff couldn’t say “Are you kidding me? We agreed to whatever would get us in the round,” he answered:
When we modelled it, we were looking at revenue somewhere between Google and Facebook. Google monetizes at $30 a user and Facebook is about $2 a user. If you look at Twitter’s user community and make some fairly conservative assumptions about revenue, we thought you could make a healthy exit at a multiple of a $1 billion.
- So far, Twitter has no revenue-generating products. But the fact that its investors modelled its worth comparing it to Facebook and Google suggest Twitter plans to offer something similar to what those companies offer — advertising.
- Jeff’s revenue estimate for Facebook — about $2 per user — suggest the social network’s revenues will hit about $600 million per year. That’s a higher estimate than we’ve heard anywhere else.
Update: PeHUB also spoke to Jeff. In that interview he sounded less eager to compare Twitter to Facebook and Google.
“We look at Twitter as almost an island onto itself. To compare it to anything else other than Facebook, or possibly Google, doesn’t make much sense to us when you look at what it’s accomplished in such a short amount of time.”
Our takeaway? Insight wanted in on this deal and if it took giving Twitter a $1 billion valuation, then so be it.