Twitter is in the process of raising $400 million in a deal that values the company at $8 billion, according to the New York Times.Rory Maher, an analyst for Hudson Square Research, says Twitter makes about $200 million a year from online advertising and is close to profitability. At those levels, a valuation of $8 billion, or roughly 40 times sales, is difficult to justify."
That is just one more bit of evidence that we might be in an Internet investing bubble, or building towards one. That is no slam on all the social application innovation going on right now. I use Twitter just about every day, and I find it one of the most useful business tools I use on a regular basis. But valuations can diverge from end user value in dramatic ways at times.
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