$500 million offer for a company with revnues in .....$0

Sounds strange but this is the latest news on silicon valley's new crush , twitter.
Apparently facebook whose future itself does not seem so rosy because of the cash it is burning versus the revenue it is earning , offered $500 million for the new microblogging platform twitter
Not sure why the facebook offered this kind of valuation whose revenue till this date is $0.
Twitter does not earn even a $ versus other social networking sites who have at least some revenue model with advertising.

Still, combining the world’s fastest growing social networking site with what is quickly becoming the best known microblogging service is actually a natural fit.

While some sources at Facebook said Zuckerberg was becoming frustrated by the buzz Twitter was getting, a market that should have been dominated by Facebook others at the company said he was interested in buying Twitter because of his respect for its progress.

Twitter needs all the investors it can get, since it has no revenue, although it has been exploring things like charging business customers and adding advertising into the consumer service.

This brings back to again the same old question of how to value a startup. Some value based on the number of registered users, other value based on the no of hits.
Much also depends on how much hype is one able to create !