Twitter went public in 2013, it was valued at $24 billion—more than 12 times the Times’s market capitalization—even though the Times earned $133 million in 2012 while Twitter lost money. What explains the huge premium for Twitter? The answer is cash flow. This sounds bizarre at first, since the Times was profitable while Twitter wasn’t. But a great business is defined by its ability to generate cash flows in the future. Investors expect Twitter will be able to capture monopoly profits over the next decade, while newspapers’ monopoly days are over.
