Twitter is in the process of raising hundreds of millions of dollars in new funding, according to a source close to The Wall Street Journal. The rumored round is estimated to value the microblogging site at $7 billion, or double the company’s valuation from about half a year ago.
Back in December, Twitter closed a $200 million round of financing led by Kleiner Perkins Caufield & Byers, at a valuation of $3.7 billion.
Though $200 million sounds like a lot of money to burn through in six or seven months, we have to remember that Twitter is a lot more data-intensive than it has ever been. The site now processes 200 million tweets every day, more than double the quantity from a year ago.
Furthermore, its acquisition of TweetDeck in May wasn’t exactly a steal. The deal, which sources say went down for as much as $50 million, was a necessary purchase for Twitter, however. UberMedia, a major third-party purveyor of Twitter services, would have been responsible for a large portion of Twitter usage had they won the battle over TweetDeck, giving them huge leverage in terms of revenue and advertising dollars.
If high data demand and acquisitions aren’t enough to explain why Twitter would be seeking a new round, then look no further than the recent batch of IPOs. Twitter is by no means ready to hit the public market, but all those social media companies that have gone (and are going) public--including Renren, LinkedIn and Zynga--have made investors more excited about the prospects of social than ever before, hard numbers be damned.
That’s largely why Twitter’s valuation has nearly doubled too. Social media has been attracting eyes and dollars for several years now, but lately, that attraction has hit new heights. After all, it’s not really apparent that Twitter has earned a valuation so high.
Advertising revenue for the site is expected to hit $150 million in 2011, according to an eMarketer report from earlier this year. Whether that’s taking into account the possibility of in-stream advertising tweets is unclear.
Twitter has declined to comment on the report.