My friend, Chand, hat-tipped some of vague notes. I’m citing him for turning it into a thesis. In cooking terms, I made the noodles, he tossed them at the wall, here are the sticky bits with sauce. Some ideas take a circuitous route to reach the table. This one took 409 days.
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On November 2, 2022, NASDAQ quoted Wedbush analyst Dan Ives that Twitter was worth $10B. Fast forward a year to October 31, 2022, and The Hill wrote about Musk’s albatross and quoted the year-old Ives number, “…which is currently worth an estimated $10 billion,…” Two weeks later, chuffed (check me out using UK lingo) with line, The Hill quoted the line again. A week later, Miles Younger posted the latter Hill story and pulled the Ives quoted.
I’m not a big fan of recycling but, here, it prompted me to think about what Twitter might be worth today. Not an echo of what it may have been worth a year ago.
You can value a company by finding similar companies. Let’s say Snap (chat) is a lot like Twitter. If Snap did $1B in revenue and it’s worth $10B, we can just multiply Twitter’s revenue by 10 to get a sense of what it’s worth. EZPZ.
Sometimes, you have to consider a few extras. Let’s say you have two shops: Macy’s & Gimbels. They both do $10M in sales in 1947. They should be worth about the same. Right? Now, what if Macy’s owns their store and Gimbel’s rents theirs? You have to add the value of Macy’s real estate.
Twitter is a lot like Snap. They’re both social platforms. 406 million people use Snap. 400 million people use Twitter. In 2022, Snap had $4.6B in revenue. In 2022, Twitter did about $5B. Today, Snap is worth $28B. What’s Twitter worth? Careful, I taught a college course all about this. This is a head-fake question.
A year ago, Ives said Twitter was worth $10B. I didn’t buy that number then. I buy it even less now. Twitter is similar to Snap so it should be worth about $30B. By some estimates, Twitter lost more than half its revenue. So, it’s worth a little less than $15B. Which is still 50% better than Ives’s year-old number.
Last year, Snap lost $1.4B. In the first half of 2022, Twitter lost $500M. They were on pace to lose a billion before Musk bought them. Snap is on pace to lose $1.4B again this year. Twitter is “close to breaking even.” We have to say things like that because Twitter is private now and doesn’t share its financial details. So, we have do a little NCIS forensic work to figure it out.
Twitter is still — mostly — a media app for newsy stuff. Traffic was up 21% from November 2022 to November 23. That’s a shockingly great stat for news. CNN was down 20%. New York Times down 28%. Fox News down 13%. Wall Street Journal down 16%. Washington Post down 27%. LA Times down 29%. Politico — who just licensed their news to OpenAI — down 35%. Now, you see why. And, the folks at The Hill, well they were down 23%.
Musk did what media companies do? He added a subscription model. In September, that was about $12M. In a year, that will add $140M+ to the top line. Linda Yaccarino knows how to sell media. She’ll know how to turn the market’s only traffic gains and users who pay into advertising dollars.
Linda can focus on revenue. Elon has chipped away at the costs.
In Musk’s first year, Twitter shed 85% of its staff. Snap has 5300 employees. Twitter has about 1000. They had about 8000 when Musk bought them. That saves them $600M a year. Reduce that to $400M after accounting for stock options. It does so much more than save money. Twitter has a startup mentality. A core group working to build something exciting not sitting around flicking light switches to see if they still turn on. I have no idea how to put a dollar value on that. But, it’s worth lots.
To save $1B per year, Musk changed the way Twitter uses compute resources. A tech maverick I follow is David Heinemeier Hansson. He goes by the shorter moniker, DHH. You can read the tech details here, but suffice to say, smart management can save big money.
“What if Twitter was just a giant front-end for an LLM? Twitter gathers data so that it can train Grok. Twitter doesn’t have to make money. Advertising is a giant whatever” Thanks, Chand. Rocking AI with Grok changes Twitter’s trajectory entirely.
Mistral is worth $4B just for training an AI. And, they haven't launched. Twitter has an exclusive training ground for Grok. Grok is Mistral plus free data plus hundreds of thousands of paying users. Grok’s better comparable is OpenAI. OpenAI is worth $100B. Grok is doing about one-tenth of their revenue. Value Grok at $10B.
Musk promised to make Twitter more than a place to share texts. He aims to make it a payment app. He has money transfer approvals in 13 states. Which means you can use Twitter like Venmo. PayPal, Musk’s old company bought Venmo for $800M in 2013. It’s worth $38B today. Let’s pretend, Twitter only cover 10% of Americans with their current permits. Add $3B more to Twitter’s value.
There’s no definite value any company let alone one that’s private and rebuilding the plane as it goes down the runway. Maybe it’s a Snap. Trend-bucking media metrics. Massive cost savings. Renewed energy for getting Twitter to think like a startup. Payments. And, an AI.
Today, stacking its assets, Twitter is worth $28B.
