Twitter as Tech Bubble Barometer

As Internet valuations climb and bankers and would-be buyers circle Silicon Valley in an increasingly frothy tech market, many eyes are on one particularly desirable, if still enigmatic, target: Twitter. Discussions with at least some potential suitors have produced an estimated valuation of $8 billion to $10 billion.

Executives at both Facebook and Google, among other companies, have held low-level talks with those at Twitter in recent months to explore the prospect of an acquisition of the messaging service, according to people familiar with the matter. The talks have so far gone nowhere, these people say.

But what's remarkable is the money that people familiar with the matter say frames the discussions with at least some potential suitors: an estimated valuation in the neighborhood of $8 billion to $10 billion.

This for a company that, people familiar with the matter said, had 2010 revenue of $45 million—but lost money as it spent on hiring and data centers—and estimates its revenue this year at between $100 million and $110 million.

"Are these prices justifiable based on financial multiples? No," said Ethan Kurzweil of venture capital firm Bessemer Venture Partners. But these start-ups are building social services and have lots of data about their users and "the market is valuing that mightily right now."

A Twitter spokesman declined to comment on its finances, valuations and interest by other companies. Google and Facebook also declined to comment.

Twitter, which started selling ads last spring against its business of allowing users to send messages of no more than 140 characters, is just one of many tech targets being batted about as valuations climb. In December, when it got $200 million in new venture capital, Twitter was valued at $3.7 billion.

Click here to read more on Twitter from the Wall Street Journal.