Twitter valued at $US8-10 billion after acquisition talks with Google, Facebook

Internet giants Facebook and Google have reportedly been courting micro-blogging service Twitter in discussions which apparently value the site at between $US8-10 billion.

The reports comes after a string of unusually high valuations for internet-based companies, with Facebook and Groupon recently valued at $US50 billion and $US6 billion respectively after financing deals and acquisition talks.

It also comes after the Huffington Post was acquired by telco giant AOL this week for $US315 million despite only expecting $US10 million in profit this year, prompting many analysts to question whether another 1990s-style tech bubble is occurring.

The new Twitter report, first published by the Wall Street Journal, claims that Twitter has been involved in “low level” discussions with Google, Facebook and other companies, about a possible acquisition.

Google and Facebook have discussed buying Twitter previously and were turned down, but they have always kept open communications with the company.

According to people familiar with the talks, Twitter is being valued at anywhere between $US8-10 billion. This comes after reports indicate the micro-blogging service is expecting revenue of $US100 million this year, representing a multiple of anywhere between 80-100 times revenue. The site is still yet to turn a profit. 

The latest valuation comes just months after the company accepted another $US200 million in funding led by Kleiner Perkins. That investment valued the company at over $US3 billion, and saw former DoubleClick chief David Rosenblatt and Flipboard chief Mike McCue join the company’s board.

However, the new report claims that Twitter has so far denied any suggestion of an acquisition, with the talks going “nowhere”. It is understood the company, under the leadership of chief executive Dick Costolo, wants to establish itself as an independent company with a profitable advertising business.

This has been a constant struggle for Twitter – turning its user base of over 200 million into a profit generator.

So far, it has done well. The promoted tweets program has attracted a number of customers, and Costolo is set to introduce a range of advertising measures for businesses this year.

Its headcount is also increasing – it now has over 350 employees, compared to just 100 in January 2010. Costolo, formerly a Google executive, came on board last year highlighting the new business-focused strategy the company was taking.

The report claims Twitter believes it can become a $US100 billion company – such a strategy will require a huge leap in advertising revenue. Emarketer analyst Debra Williamson points on the WSJ that while there is good ad momentum on the Twitter platform, they will need to do something “big” to justify the new valuation.

“Most of their advertisers are just experimenting at this point; the challenge will be to get those advertisers to come back and buy more.”