On Twitter: What's Valuation Got to Do With Revenue?

Valuing a business is like valuing a house. 1) If you have multiple buyers, you can usually sell for a higher price. 2) There are some features (add that new bathroom) which will increase the price you achieve, and 3) It's possible to overcapitalize on features that have less value than it costs to add them.

Revenue, and particularly the combination of profitability and cashflow positivity, is likely to attract more buyers, therefore increasing value 1).

But a business needs to do something to increase revenue. Twitter and Facebook are both aiming to do 2) ... and running the risk of doing 3).