How much are tech companies really worth?

The Twitter homepage appears on a screen in Washington.


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.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.


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