Is Twitter really worth $1 billion?

Twitter may be a social network hit, but it currently has barely any sort of revenue... so how has it been valued at $1 billion?

According to a new valuation, the company has been valued less as a single business but more as a hub for worldwide communication and data. Speaking to BusinessWeek, Seth Levine, managing director of Foundry Group said, "It is an increasingly platform for business and consumers."

He's got a point. The social network media has been embraced by companies, politicians and celebrities alike, and it is seen as a valuable resource for business intelligence, targeting interested consumers all around the world.

However, many think it is far too early to say that Twitter is worth that much, especially when in a few years time it could be bought out or absorbed by the likes of Facebook or Google.

Even its users agree.

When the news was announced, there was a flurry of tweets comparing the valuation to the excesses of the dot-com era that saw many businesses crash and burn.

"Nutty valuation," tweeted one user "I've seen this movie before, it starred eToys.com and ended in fail."

This hasn't stopped people from investing in it though; the company's valuation has been attributed to over $100 million in new investments. Paul Holland of Foundation Capital was quoted as saying, "Once every five years or so, a company comes along that has nearly unlimited potential in terms of worldwide users; five years ago, it was Facebook. Today, Twitter appears to be the 'next big thing' in social networking."

His estimation could be a bit premature though; many have criticised Twitter users as simply being late to the social networking game, having missed the 'Facebook boat' and promoting banality with their 'tweets'. Also, while it might be heralded as the 'Facebook', it is far from achieving its figures, having only one-tenth of its population.

However, you can't deny Twitter's ability to deliver up to the minute news and its dominance of 'real time web'. Twitter Search is fast becoming a vital source for analysing what consumers are thinking.

"There's a perception that Twitter will have a grip on the real-time Web, which connects customers to brands," says Eric Porres, co-founding partner at New York's Underscore Marketing.

Like Facebook, Twitter is going to have to expand and diversify to make money. It was reported that Facebook only started seeing profits for the first time last week, so if Twitter are indeed hoping to make some money for themselves then they must nurture and expand its vibrant and prosperous community.

Such ideas have included moving into the mobile market via smart-phones, but like all social network sites, the money is in advertising.

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