Twitter Finalizing $800 Million Funding Deal- $8 Billion Valuation

Twitter is looking to get bigger by injecting its wings with a chunky $800 million funding round. The popular microblogging service is steadily growing but is still way behind Facebook, with Google+ even coming in now to stir up some serious social competition. Facebook received a similar investment back in 2009, to the one that Twitter are currently thrashing out.

According to Mashable, the deal is split in to 2 parts. Firstly the $800 million will be split in half, $400 million for the company itself, while the second $400 million will be saved to cash out employees and existing investors. Despite the deal nearing the end, it is a complex one that could take up to 2 weeks to complete. Back in January, Twitter had a funding round of $200 million, giving it a $3.7 billion valuation.

This next investment should bolster Twitter’s company valuation to somewhere in the region of $8 billion. In just 6 months Twitter’s valuation has doubled, showing some very promising growth signs, but their business model is the problem. Twitter is a fantastic service but it has been criticized time and time again for its revenue streams. Reports from Cnet say that annually Twitter generates $200 million which is low considering they are an established social site used by millions.

Many of Twitter’s executives have ideas on how to boost income, but they are largely based on promoted tweets and advertising. Advertising is a huge money maker on the internet and it generates huge amounts of revenue for some of the biggest companies. Although it is not cool to plague a site with adverts and pop ups, if Twitter can implement them in the right way then they should find themselves with a more lucrative business model that yields more revenue.

Digital Sky Technologies who funded Facebook’s $200 million round back in 2009, are also involved in Twitter’s. J.P. Morgan who also have invested in Facebook are reportedly involved in the Twitter funding round through its digital-growth fund. DST also has stakes in games developer Zynga, who in fact provide Facebook with their most popular games. They also have stakes in the huge discount code site Groupon.

In similar news, we recently reported on an interview with the founders of Twitter when they met with Facebook CEO Mark Zuckerberg, over being acquired, its very funny so check it out. So with Twitter’s cash injection and valuation explosion, is it about time for them to really plan out their business model? After all if they are ever to rival the likes of Facebook, they must surely be earning a similar amount and have a similar valuation?

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    I like Twitter as a service, however, its current valuation is far too high in my eyes. A more decent valuation should be emphasised on earnings not future revenues.