Valuing Twitter at $250 million

Remember those old style internet valuations, as when Google bought Youtube for 1.6 billion dollars. A lot of those valuations never made it much, such as the huge amount of money paid for AOL by CNN, something that killed the long term strength of the company. A offshoot of these kind of valuations was that other companies also started expecting the same sort of valuations, way out of their earning potentials (even if you were very optimisitic).
The standard model is simple, setup a site with something new or a better way of doing something that brings in the millions of users, and then poof!, the valuations start screaming upwards. In the midst of this, revenue and short-to-mid term potential cannot meet these valuations. And there are a number of companies who have done very well in terms of attracting users, especially social networking sites. So, a site like Facebook has a lot of heavy-usage users, including a lot who hunt for people to add to the network. However, very few people have been able to generate long term revenue generation plans. Twitter is one such network that has become extremely popular over the relatively short period of time of 2 years, although it has the same problems in trying to show an effective business model. Consider that this micro-blogging network gets a valuation of $250 million:

Rumor is Twitter hit up more than a few venture firms to pitch the $250 million valuation, and got more than one 'no,'" TechCrunch wrote Saturday. "But someone's bit, perhaps encouraged by Twitter's breakneck growth and the interest from Facebook. That means Twitter gets a new cash injection and time to figure out its business model at an even more leisurely pace."
That certainly would be a boon for Twitter, which until now has not shown signs of a viable business model. Though it is growing rapidly and has millions of users, no one knows how the company could support itself. Some have worried that while it is increasingly useful to the many people who rely on it, it might not be financially viable over time.

One can only hope that the world is saner now in terms of valuations, especially the considersation of revenue generation.