6 ms·

Twitter’s business model is to sell the company

40 points by diego 18y ago

brandonkm 18y ago
A business model that focuses on selling the company is risky. This applies even more so in twitter's case because they don't generate significant revenue at all, but they continually remain overvalued due to lots of hype. Classic web 2.0 tactics at work basically.
pg 18y ago
In short, building a product to sell to one company is a valid business model. It's a valid strategy, but it's not a business model. It's not that great a strategy either...
- diego 18y ago
  I was thinking of a model similar to the Pope commissioning Michelangelo to paint the Sistine Chapel's ceilings. It's not bad if it's something that you like to do and the Pope will pay for it. In this day, the Pope could be Google (after all, they do no evil...) The problem with companies like Twitter is that they don't know if the Pope will like their art. My point is that if you are going to create one product to sell to the church, you should try to attract the Pope's interest as early as you can to reduce your risk.
- mlinsey 18y ago
  Well, a "business model" to sell companies would be something like an incubator...a company that continuously created new companies and sold them off. Of course, since the talent that was able to execute on these ideas is going to be the most useful asset that these spinoff companies have, eventually your incubator will look more and more like an investment firm. If you think about it, investors are in the business of (helping to) build products to sell to other companies (or the public).
- dcurtis 18y ago
  Not a single YC company that I know of has made any remarkable amount of money without being sold. But, in fact, many YC companies have made considerable amounts of money by selling themselves. Why is having the goal of being sold while making things people want not that great of a strategy?
  - ken 18y ago
    But do you think any YC combinator wouldn't have eventually made a lot of money if they hadn't sold? Selling your startup doesn't cause it to have value; that's backwards. YC startups were sold for money because presumably the purchaser thought they would be worth at least that much money in the future. If you can build something people want, it seems relatively easy to convince some fraction of those users to pay for it. Convincing a big company to buy you is a long shot; convincing a big company to do anything (even if you work there) is tough. Look at Dinosaur Comics -- that guy can't even draw, but he's making a living at it. Now imagine trying to sell such a crazy idea to an existing company. If you can make something people want, it almost seems irrelevant to think about big companies. They'll only consider buying you once you look like a solid business proposition already. It's a reward, not a bailout.
    - aswanson 18y ago
      Look at Dinosaur Comics -- that guy can't even draw I think his drawings are pretty good.
      - icky 18y ago
        It's really amazing how he can manage to draw the dinosaurs to look exactly the same from day to day. He must have a very steady hand.
    - diego 18y ago
      There are plenty of companies that get acquired before having a solid business proposition. Jaiku (along the lines of Twitter) is a recent example, but there are many others. A company can be acquired for a variety of reasons. Maybe the team is a good fit for the parent (talent acquisition). Maybe the product is hard to monetize on its own but it's a good feature that will increase the value of something else (could have been Xobni). Perhaps it's a loss leader, a service that you plan to give away in order to attract customers to your main business (a contrived example, Godaddy could buy some game that somehow encouraged you to buy domain names).
- michael_dorfman 18y ago
  It's not a bad strategy in itself, but the lack of a business model makes it pretty hard to pitch the value proposition to any interested buyers. If the founders haven't been able to come up with a way to monetize the site, what's to think the buyers will?
- sabat 18y ago
  I think you could count it as a business model: stay alive and thriving long enough to become an attractive acquisition target. And sure it's a good strategy -- at least, others are using it pretty well. Is justin.tv really planning to stage an IPO?
socksandsandals 18y ago
Um, exit via acquisition is not a business model. By very definition. Link bait trash.
jdvolz 18y ago
I think Twitter should put out a personally hosted version of their service, maybe sell it to people for a nominal fee ($10-25). That way the uptime is improved (spread over a lot more computers and decentralized) and they start to have a revenue stream. Providing both better service and making some money seems like a step in the right direction...
nir 18y ago
Well, if it works it's a great model... A "sell the company" business model is like becoming an actor with a mind of becoming rich like Tom Cruise. No doubt some people who do it will find some success, but by definition this is something that (a) works only for a small number of people (the world needs a limited number of movie stars, Google & Co acquire a limited number of companies) and (b) contains a large element of luck - many actors have comparable talent & looks, many companies can (and a few already have) build a Twitter-like product. The Black Swan by Nassim Nicholas Taleb is a great book about the randomness in our lives: http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515 http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp...
- sabat 18y ago
  Selling the company: that's not a rare event. An IPO: that's like becoming an actor with the intent of being the next Tom Cruise. There are many, many buyers out there, hardly just Google. If you make something that people need (not merely what they think they want, but what they need) then you will be able to sell.
mr_gunn 18y ago
Is anyone honestly surprised by this?

40 points by diego 18y ago

A business model that focuses on selling the company is risky. This applies even more so in twitter's case because they don't generate significant revenue at all, but they continually remain overvalued due to lots of hype. Classic web 2.0 tactics at work basically.

pg 18y ago

In short, building a product to sell to one company is a valid business model. It's a valid strategy, but it's not a business model. It's not that great a strategy either...

diego 18y ago
I was thinking of a model similar to the Pope commissioning Michelangelo to paint the Sistine Chapel's ceilings. It's not bad if it's something that you like to do and the Pope will pay for it. In this day, the Pope could be Google (after all, they do no evil...) The problem with companies like Twitter is that they don't know if the Pope will like their art. My point is that if you are going to create one product to sell to the church, you should try to attract the Pope's interest as early as you can to reduce your risk.
mlinsey 18y ago
Well, a "business model" to sell companies would be something like an incubator...a company that continuously created new companies and sold them off. Of course, since the talent that was able to execute on these ideas is going to be the most useful asset that these spinoff companies have, eventually your incubator will look more and more like an investment firm. If you think about it, investors are in the business of (helping to) build products to sell to other companies (or the public).
dcurtis 18y ago
Not a single YC company that I know of has made any remarkable amount of money without being sold. But, in fact, many YC companies have made considerable amounts of money by selling themselves. Why is having the goal of being sold while making things people want not that great of a strategy?
- ken 18y ago
  But do you think any YC combinator wouldn't have eventually made a lot of money if they hadn't sold? Selling your startup doesn't cause it to have value; that's backwards. YC startups were sold for money because presumably the purchaser thought they would be worth at least that much money in the future. If you can build something people want, it seems relatively easy to convince some fraction of those users to pay for it. Convincing a big company to buy you is a long shot; convincing a big company to do anything (even if you work there) is tough. Look at Dinosaur Comics -- that guy can't even draw, but he's making a living at it. Now imagine trying to sell such a crazy idea to an existing company. If you can make something people want, it almost seems irrelevant to think about big companies. They'll only consider buying you once you look like a solid business proposition already. It's a reward, not a bailout.
  - aswanson 18y ago
    Look at Dinosaur Comics -- that guy can't even draw I think his drawings are pretty good.
    - icky 18y ago
      It's really amazing how he can manage to draw the dinosaurs to look exactly the same from day to day. He must have a very steady hand.
  - diego 18y ago
    There are plenty of companies that get acquired before having a solid business proposition. Jaiku (along the lines of Twitter) is a recent example, but there are many others. A company can be acquired for a variety of reasons. Maybe the team is a good fit for the parent (talent acquisition). Maybe the product is hard to monetize on its own but it's a good feature that will increase the value of something else (could have been Xobni). Perhaps it's a loss leader, a service that you plan to give away in order to attract customers to your main business (a contrived example, Godaddy could buy some game that somehow encouraged you to buy domain names).
michael_dorfman 18y ago
It's not a bad strategy in itself, but the lack of a business model makes it pretty hard to pitch the value proposition to any interested buyers. If the founders haven't been able to come up with a way to monetize the site, what's to think the buyers will?
sabat 18y ago
I think you could count it as a business model: stay alive and thriving long enough to become an attractive acquisition target. And sure it's a good strategy -- at least, others are using it pretty well. Is justin.tv really planning to stage an IPO?

socksandsandals 18y ago

Um, exit via acquisition is not a business model. By very definition. Link bait trash.

jdvolz 18y ago

I think Twitter should put out a personally hosted version of their service, maybe sell it to people for a nominal fee ($10-25). That way the uptime is improved (spread over a lot more computers and decentralized) and they start to have a revenue stream. Providing both better service and making some money seems like a step in the right direction...

nir 18y ago

Well, if it works it's a great model... A "sell the company" business model is like becoming an actor with a mind of becoming rich like Tom Cruise. No doubt some people who do it will find some success, but by definition this is something that (a) works only for a small number of people (the world needs a limited number of movie stars, Google & Co acquire a limited number of companies) and (b) contains a large element of luck - many actors have comparable talent & looks, many companies can (and a few already have) build a Twitter-like product. The Black Swan by Nassim Nicholas Taleb is a great book about the randomness in our lives: http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515 http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp...

sabat 18y ago
Selling the company: that's not a rare event. An IPO: that's like becoming an actor with the intent of being the next Tom Cruise. There are many, many buyers out there, hardly just Google. If you make something that people need (not merely what they think they want, but what they need) then you will be able to sell.

mr_gunn 18y ago

Is anyone honestly surprised by this?