What if Twitter Isn’t a Big Business?

Here’s the financial update on Twitter: In 2011, Twitter is expected to have $140-million in revenue, while CEO Dick Costolo recently disclosed the company’s valuation is pegged at $8-billion.

On the surface, both numbers are impressive given Twitter’s revenue will more than triple from $45-million in 2010, and its current valuation is a staggering 60X sales.

The big question is whether Twitter’s business can get large enough to justify its sky-high valuation. eMarketer expects Twitter’s revenue to hit $400-million by 2013 based on the assumption the momentum from Promoted Tweets, Promoted Trends and Promoted Accounts will continue.

With a $8-billion valuation, there are obviously huge expectations among investors that Twitter’s business will thrive as it finally lands upon a vibrant and robust business model after struggling for several years to find a winning formula.

So far, advertisers seem happy with Twitter’s offerings, although it is still early days. One of the key challenges for Twitter and advertisers will be the willingness of users to accept more and/or different advertising as part of the overall experience.

The appearance of a handful of Promoted Tweets is one thing, a steady stream of Promoted Tweets is another thing altogether. As Twitter looks to ramp up advertising, it will be interesting to see how it can successfully integrate more advertising within the overall experience in a way that users will accept.

As much as eMarketer is bullish about Twitter’s revenue prospects, I would suggest it’s far from a slam-dunk. The overall economic landscape is uncertain and Twitter’s advertising model is still work in progress.

There is no doubt Twitter has successfully evolved into a business from a project but the big question is how big of a business it will become.

More: According to eMarketer, people who use Twitter a lot are more likely to click on ads.



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