These 8 Internet Companies Are Worth Over $1 Billion—But They Haven’t Made a Dime

Generating profit is for tech dinosaurs like Apple and Google. Today it's all about growth potential

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Twitter’s long-awaited initial public offering is expected to arrive next week. But before you bust out your checkbook to own a piece of Silicon Valley’s latest hyped stock, consider this: Twitter has yet to earn any money. The company, whose initial share price range of $17 to $20 pegs its value around $11 billion, has posted a net loss of $134 million so far in 2013.

That hardly makes Twitter unique in today’s tech landscape. Increasingly, Internet firms—typically with a social bent—are amassing billion-dollar valuations without earning a dime. Venture capitalists and other investors hope that today’s scrappy startup is tomorrow’s Apple or Google (though those two companies were both profitable before they went public). The firms themselves often say they’re currently focused on growth instead of profits (though fast-growing Facebook still generated $205 million in earnings the quarter before its IPO).

Here’s a look at 9 companies that have crossed the $1 billion valuation threshold without having to worry about actually making money. Some will flourish: the New York Times called Google’s $27 billion IPO valuation “bubbly” in 2004, and today the company is worth twelve times that. Others will flounder: social game maker Zynga’s valuation peaked at $14 billion as a private firm but has since cratered to less than $3 billion as a publicly traded company. Either way, it’s worth understanding exactly how these companies plan to shift from red to black.

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Current Valuation: Up to $11 billion

Twitter has not yet made any money, but its revenue doubled to more than $420 million in the first nine months of 2013. With the company projected to generate $1 billion in revenue in 2014, many analysts believe the IPO valuation is too low and likely a conservative response to last year’s botched Facebook offering. Twitter’s future prospects depend on expanding its userbase, which is growing more slowly than in the past, and convincing more advertisers that it truly is a virtual water cooler that can be leveraged during big news events and television programs.



Current Valuation: More than $3 Billion

The streaming service has been hailed as a vital new revenue source for the music industry by some and a raw deal for artists by others. The one indisputable fact: Spotify doesn’t make money, and posted a $78 million loss in 2012. The company, which currently has more than 6 million paid subscribers, will have to recruit lots of new listeners to find profit. But scaling up will only grow more challenging with companies like Google and popular headphone manufacturer Beats Electronics launching competing streaming services.


Current Valuation: $3.8 billion

The company had two huge financing rounds in 2013 and is quickly becoming one of the most high-valued private tech companies. But the three-year-old social media website only just introduced promoted posts to a subset of users. Investors are big on Pinterest because it attracts young, high-income women, a key advertising demographic.


Current Valuation: Acquired by Facebook in 2012 for initial price of $1 billion

Instagram made headlines last spring when Facebook agreed to pay $1 billion for it even though it was only a year and a half old and had generated no revenue (the final purchase was $715 million due to a decline in the value of Facebook stock). Today Instagram is basically in the same spot, revenue-wise. The company has only begun introducing sponsored posts in the last few days. But as an inherently visual medium with 150 million active users, it could become a profit center for Facebook in the future.

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Current Valuation: $1 billion

The trendy online retailer has accrued more than $300 million in investments in the past two years, but it regularly loses money. Fab execs won’t say how much, but Fast Company pegs the figure at $90 million in 2012. Now the e-commerce site seems to be trying to rein in costs. The company has laid off about a third of its workforce in the last three months, according to AllThingsD, and CEO Jason Goldberg has said he won’t take a salary in 2014.


Current Valuation: $800 million

2013’s hottest tech startup is poised to join the billion-dollar club imminently, with multiple reports claiming that the photo-messaging service is mulling a new round of financing that would catapult its valuation to more than $3 billion. Currently Snapchat, which is shuttling 350 million photos per day, generates no revenue. A new feature that allows photos to persist for 24 hours could likely be converted to an ad unit later, and CEO Evan Spiegel has said the company is considering in-app transactions of some sort in the future.


Current Valuation: Acquired by Yahoo for $1.1 billion in May 2013

The popular blogging platform has 300 million monthly unique visitors, but it wasn’t turning those visits into profits before being bought out by Yahoo. The company generated $13 million in revenue but had $25 million in operational costs in 2012, according to a Forbes feature. Financial filings show that Tumblr had only $16.6 million left in the bank at the time of the Yahoo acquisition. It’s unclear when or if Tumblr will make money, but that is likely not a short-term priority for Yahoo. The tech giant attributed 75% of the billion-dollar price tag to Tumblr’s “goodwill”—the idea that Tumblr’s hip cachet will help revitalize Yahoo’s image in the eyes of young Internet users.


Current Valuation: $4.4 billion

Customer review website Yelp has actually seen its valuation rise steadily since its $900 million IPO, with its stock price quadrupling from $15 to around $65. Still, the company has not had a profitable quarter yet on Wall Street, racking up almost $15 million in total losses since its IPO in March 2012. But the company is losing less money in 2013 than it did last year, so maybe 2014 will be the year it enters the black.

And then there’s:


Current Valuation: $165 billion

Surprise! The world’s largest online retailer just posted a $41 million loss in its most recent quarter. That’s on top of a loss of $39 million for all of 2012. Of course, Amazon has generated big profits in the past—more than $1 billion in 2010—and often tops analyst expectations for revenue growth. Current losses are part of an aggressive expansion across multiple sectors such as video streaming, tablets and high-end fashion retail. With a smartphone and a set-top-box rumored to be in the works, Amazon profits may not return anytime soon. But investors don’t seem to mind—its stock price has increased by more than $100 per share since the start of the year.