Before we begin this post, I want to make it plain: I love Twitter. But, even with that, the madness has to be slowed. Everyone is having their own cow over Twitter being valued at around a billion dollars in their last round, when they sold around 10% of the company at that valuation. Who am I to stay above the fray? Twitter is here to stay, and will change our lives, but we need to get our hats on straight. Let’s talk math, valuations, revenue, and the future.

I have already tangled with Scoble and Fred Wilson to a lesser extent about all of this once. The Week summarized it well. At the very end of my post on the subject I took the position that Twitter was “worth” probably something around two billion dollars. That number was what someone would have to pay to purchase Twitter outright. Now with Twitter being valued at one billion, they have moved that number up. No VC is going to be happy with Twitter being purchased for my paltry two billion; they need a multiple of return much higher than that to stay in business. …

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