How much are tech companies really worth?
The Twitter homepage appears on a screen in Washington.
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Kai Ryssdal: What I'm about to say will take way less than 140 characters, but carries with it a message that speaks volumes. Here you go:
Twitter could conceivably be worth almost $4 billion.
That's the extrapolation from a $150 million dollar chunk of the company that was just sold to a big name Silicon Valley venture capital firm. Marketplace's Steve Henn does the math.
Steve Henn: A couple weeks ago, the legendary venture capitalist John Doerr from Kliener Perkins was asked about Twitter at a conference in San Francisco.
Question: How'd you miss that one?
John Doerr: We turned down Twitter when it had no traction and the idea wasn't clear. We were wrong.
Today Doerr's firm rectified that mistake, making a big investment in Twitter that set the value of the company at $3.7 billion. That's almost twice the current value of the New York Times.
Lou Kerner is an analyst at Wedbush Securities.
Lou Kerner: If you think of Twitter as being a media company, what media companies are really all about is aggregating an audience. And Twitter is successfully aggregating a massive audience.
Kerner's confident the money will come. And right now in Silicon Valley, this is how they are doing the math: big social networking companies like Twitter and Facebook trade at close to 40 times their current revenue -- that's revenue not profits.
Apply that equation to Apple and that company's suddenly worth $2.4 trillion, instead of its current market cap of $290 billion. Do Twitter math on Exxon -- $11 trillion instead of the paltry $390 billion it's actually worth today.
O.K., I know there are probably 3.7 billion reasons you can't compare Twitter to Exxon Mobile. But let's just say for Kliener Perkins' $150 million investment to pay off, Twitter will have to grow exponentially for years.
In Silicon Valley, I'm Steve Henn for Marketplace.