Should Facebook–or Someone Else–Take Another Run at Twitter?
by Kara Swisher
Posted on January 26, 2009 at 7:00 AM PT
Twitter–the non-money-making start-up that lets a user update status in a pithy manner–had a banner day last week with the inauguration of President Barack Obama, which followed all the tweets about the successful airline crash in the Hudson River in Manhattan, which came after…well, you get the point.
That kind of frenetic news cycle has kept Twitter growing quickly, last week surpassing the formerly hot–at least, according to the dopey echo chamber that is Web 2.0, which is as restless as a teenaged girl looking for the next Jonas Brother–Digg in Web traffic.
And that has apparently setting the stage for raising a big new round of funding.
The presumable third round of investment, according to MediaMemo, would nab Twitter $20 million in added cash and give it a $200 million to $250 million valuation.
That’s certainly a lot of simoleons for a company that makes no simoleons, of course, even though Twitter folks are always going on about how they don’t need money since the burn rate is so low and because they could turn on the revenue spigot any old time they want to.
Well, Twitter might want to ask Facebook about how burn rates can rise quicker than you think and how hard it is to get that pump of revenue truly going in a sustainable way.
Still, you have to love the chutzpah of Twitter, which is correct to get if the getting is good in this not-so-good economy.
But before the valuation becomes so rich as to make Twitter completely impossible to buy by anyone, the company might want to reconsider what it considered and abandoned late last year, as BoomTown reported in endless detail, which was an acquisition of Twitter by Facebook.
Why? Because:
1.) The pair actually do fit nicely together, creating the most powerful universal address book ever, and pairing the two fastest growing social-networking assets on the Web.
2.) While the likelihood of Facebook going public anytime soon remains dim, due to the weak economy and lack-of-enough-revenue issues, the idea of Twitter doing so is laughable.
3.) Some larger company, I would bet my favorite Barry Manilow album, will eventually buy Twitter–my vote would be Google (GOOG)–but higher valuations make an exit harder. Before that happens, Twitter should get itself the home where it would have the most autonomy and influence, which still is Facebook.
Well, no one is listening to me, obviously!
The initial deal between Facebook and Twitter fail-whaled after Twitter decided that the $500 million in cash and stock offer from Facebook was not to its liking.
That liking was for more cash and also, presumably, the lack of interest in being bossed around by Facebook Founder and CEO Mark Zuckerberg.
Everyone had a different take on the nonconsummation of the marriage of Facebook and Twitter.
Some thought Twitter was right to take a shot at building its business as well as it has its traffic, while others thought that goal and refusal to sell were the height of trend-induced hubris.
Whatever the case, Twitter is now making a definitive choice that it can make itself into an even tastier target or even a real company someday with this new round of funding.
And while it might seem another infusion of investment dollars might take the pressure off Twitter, I actually think the pressure has never been higher.
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Comments
Twitter seems like a much better social medium, because followers (friends) are immediately validated through the quality of their content and interaction. There’s also a social etiquette that keeps followers honest. This is very different from Facebook, where the interaction component is missing for the most part, and maintenance of one’s requests can become tedious.
Posted by Ernie Varitimos at January 26th, 2009 at 8:52 amTwitter is valuable because it is an English word that describes what it’s about — so it’s easy for people to “grasp”. That’s not the case for sites like “jaiku”, which are simple a meaningless string of characters.
I would place the size of the commercially relevant vocabulary (e.g. “shoes”, “cars”, “homes”, “plumbers”, etc.) somewhere around 10K. If twitter is “average” among such terms, that would set the value of the .COM TLD at 10K*250MM = 2.5 trillion dollars.
Does that seem “reasonable” to you?
What about the other 300 TLDs? How much might they be worth?
nmw
Posted by Norbert Mayer-Wittmann at January 26th, 2009 at 8:53 amKara, I think you have a valid point that Twitter runs a risk of not striking while the iron is hot, but they would argue that they could certainly get more today than they did previously from Facebook. The asking price looks like it is just going up and up so why not hold out for more money – after all, isn’t that the American way?
Also, being a user of both Facebook and Twitter, I like them both for different purposes and actually would prefer they stay separate companies. In this case, a little healthy competition is good for both companies (will likely make them better at what they do) and in the end, we all win. Honestly, I wouldn’t expect to see an acquisition until Twitter’s popularity starts to plateau.
Posted by Liam Rose at January 26th, 2009 at 9:22 amTwitter and Facebook aren’t a good match culturally. Much more interesting than a financial transaction between the two would be for Facebook to adapt the openness of Twitter.
Facebook Connect is an attempt to add the rest of the web to Fb, but not to let Fb back out onto the rest of the web. Twitter gets it. They want to openly and freely give and take everywhere.
See Could Twitter’s transcendent clarity trump Facebook?
Posted by Dale Larson at January 26th, 2009 at 10:37 am*If* they were ever able to pull it together, microsoft has killer assets for a winning social communications strategy: outlook, exchange, messenger, hotmail, & ie..
seems like they would be in the best position to get value out of twitter (if they head there). They could integrate twitter deeply into those apps and tap evan’s brain for some vision in this area.
Posted by craig donato at January 26th, 2009 at 10:59 amKara, you seem to be totally missing the point of Twitter. It has evolved beyond sending’pithy updates’ to a global communication platform which enables connections to streams of consciousness and realtime news.
During the NY/Hudson river plane crash, the first photos available were posted by a Twitter user at the crash site. No longer are CNN et al getting the scoop- but your avg person via Twitter!
This trend will continue as more people join Twitter and providing the leverage to out-scoop the news agencies.
Posted by nemrut dagi at January 26th, 2009 at 11:46 amI’m not sure Facebook has any better idea of how to make money from Twitter than Twitter seems to have. They would probably just screw it up. My hunch is that Twitter is most valuable as a loss leader to promote other, more profitable, products… much like email and IM are to the big web portals.
I’d like to see Apple buy Twitter. They could bundle some sort of free, premium version with the iPhone and Mac to boost hardware sales. Then overtime, Twitter could become the communications / social graph backbone for Apple’s consumer web products (MobileMe, etc).
Posted by Joe Lazarus at January 26th, 2009 at 1:42 pmSo scary to be in this position. I feel like its justified to wait on a sell because this genera of micro publishing may turn out to have the largest group of publishers of any medium ever. Twitter has the momentum to use its search power to compete even with Google right now, let alone Facebook.
Facebook may be less likely to pay as much because they have the technology already in place, as well as the momentum. And of course being so far ahead, Facebook has an equally tuff choice of deciding whether or not to buy or compete.
At least that’s one subjective perspective to throw out there. Talking about evaluations, I’ve noticed, is a lot like talking about metaphysics.
Posted by andrew baron at January 26th, 2009 at 3:29 pmtwitter isn’t a business, it’s a technology
Posted by Sam Harrison at January 27th, 2009 at 11:49 am