6 ms·

Why is Twitter so slow to find a good business model, while Facebook is profitable?

by gabaix 15y ago

swombat 15y ago
Because Twitter is innovative, while Facebook is just f'in huge?
- thematt 15y ago
  That's ridiculous. Facebook is incredibly innovative as well, even more-so than Twitter. They're solving huge scalability problems that nobody else has encountered before.
  - carbonica 15y ago
    The only new scalability issue that Facebook has tackled is how to scale one enormous MySQL database. They've primarily done this by sharding it thousands upon thousands of times and putting over 10,000 memcached instances in front of it. Most everything else they've confronted was done by Amazon and Google years before Facebook had to.
  - swombat 15y ago
    Facebook as a product to monetize is not innovative. It's a website serving targeted ads. Twitter is a new kind of messaging service. How to monetize that is not so clear.
kloncks 15y ago
Why try and achieve something hard like profitability when you can easily be valued at $8b and raise $800m to keep that going? I don't mean to be too critical but sometimes I wonder if this is better than, say, Twitter finding out that it can't make more than some small amount of money in profit.
- orky56 15y ago
  Raising capital and valuations are just temporary measures and good faith to turn the product into a company. Having money to hire more people just exacerbates the problem. They now have higher operating costs (where this new capital goes) and now need to have the even higher revenue to create a margin that makes it all worth it in the first place. OR you just get stuck in a Groupon situation where we have big revenue off big costs (salespeople).
barredo 15y ago
Facebook is profitable, yes. Most of people (edit: instead of most I said '99%' but that's not true so I updated) use FB from their browser going to facebook.com (or searching facebook on Google and clicking the first link), while Twitter is used mostly in desktop/mobile apps. It's a bit more difficult to develop a business model for Twitter than for Facebook, which is profitable with "just put ads on the right of everypage". But: shouldn't a company as huge as FB be many times more profitable that they are right now? (400M$ in profits in 2010: http://dealbook.nytimes.com/2011/01/06/goldman-unit-passed-on-earlier-facebook-investment/?src=twt&twt=nytimesdealbook http://dealbook.nytimes.com/2011/01/06/goldman-unit-passed-o... at a 75B$ valuation if I recall correctly). Anyway, my point is Twitter & FB business models are not & i'd guess won't even be similar, and it'd difficult to compare them.
- leftnode 15y ago
  33% of Facebook traffic comes from mobile devices - http://www.facebook.com/press/info.php?statistics http://www.facebook.com/press/info.php?statistics Facebook has a tremendous mobile foothold.
  - barredo 15y ago
    Ooops! Sorry, I pulled the 99% from my ass to make a point and I was not really meaning 'real 99%'. Sorry. I'll edit the post. Thanks for the correction.
benofsky 15y ago
Twitter's data set is incredibly valuable; Twitter won't make money from ads, they will make money from analyses of their data [1]. Developing infrastructure and software that can analyse the sheer quantity of data Twitter generates takes time — and money. But, when they finally crack it they will be extremely profitable. It's much easier for Twitter to do this opposed to Facebook (who I would say is also interested in doing this) because of Twitter's public by default culture (/policies). [1] If evidence is needed: they just bought BackType; They're starting to lock down and sell their APIs rather than give it away for free as they realise the data's immense value.
- dotcoma 15y ago
  ok, but do they really need 800 million (or 400 million) to turn backtype and other companies and/or ideas into a working business?
  - fatalisk 15y ago
    I think they do need this amount of money in order to stay competitive with the big guys Google and Facebook. They could be more easily outbid in acquisitions if they weren't competitive with capital.
    - dotcoma 15y ago
      Yes but, unlike Google and Facebook, they're not a real company. They're a start-up on VC welfare.
- LargeWu 15y ago
  I'm curious to know what kind of data Twitter has that is that valuable. Just because you have a lot of data doesn't mean it's that valuable. I used to analyze direct marketing campaigns for a major big-box retailer. They had literally billions of rows of transactional data that they could tie to specific customers, and despite attempting to harness the power of that data, most of their direct marketing campaigns didn't even move the needle. So, whenever I hear "But, when they finally crack it they will be extremely profitable", I can't help but thinking this is nothing but a bunch of handwaving. I'm sure everybody at Twitter is real smart and they're working hard on this problem, but until they start bringing in some real money, I'll remain skeptical.
forgottenpaswrd 15y ago
Because they don't need to? You know, if you could get 800M$ who cares about revenue? They are getting money while they can before the bubble burst, the early investors are getting money selling to a greater fool and the greater fool are putting money over the table betting someone else will be even bigger fool. Facebook is profitable but "not that profitable", they need to be much much more profitable at the current valuation, that means being pure evil, and I don't know if the people will stand that. The Facebook, Zynga, Groupon burst will be something great to see, again(it seems people just can't learn from the past, "this time is different").
- fatalisk 15y ago
  "This time is different" because people have learned a lot from the first bubble. For the most part, investors are people who really understand the economics of technology, the economics of the deal and the mistakes of the past. I think there is a long way to go before any major burst. Granted with the amount of hype in the market and massive over-subscriptions (i.e. greed) there's bound to be a correction at some point. But, I don't think it will be as bad as before.
  - chopsueyar 15y ago
    The only reason it won't be as bad is because not that many people are employed by these companies this time. Most people are already out of work or under-employed.
    - fatalisk 15y ago
      That's not true. My understanding was that the dot-com bubble was primarily a result of naive investment in technology. My point was that investors today are way more sophisticated when it comes to tech, therefore, they won't be blindly betting on every internet or mobile company. Venture Hack's Naval Ravikant describes the bifurcation of the funding situation in technology, where there is a long-tail of companies investors don't view as remarkable and so don't invest. Remember, those dot-bombs were pretty much worthless from the start in terms of the value they provided, and they had enormous nonsensical valuations. There was no such thing as determining product-market fit or customer development before product development, or even a blogosphere of information related to this kind of investment. Both investors and entrepreneurs are more prepared and more knowledgable today than they were in 1999. So I don't think the same kind of devastating burst is very likely.
revorad 15y ago
It must at least partly be due to the fact that Twitter has been guarding the simplicity of its product. Facebook is a communications platform at its core, but it also allows third-party developers to use it just as an identity database on its own property. You can run games on Facebook.com, you can't on Twitter.com. The simplicity of Twitter has also made them discourage third-party development off their property. If all you've got is a SMS broadcasting service and you have an open API, it's not so hard for others to clone all your features and more. It's not as easy to clone Facebook because it has a lot more functionality. So that has limited Twitter's off-site monetisation options. Twitter is similar to Facebook in the sense that people spend a lot of time on it, but for some reason (good for users, bad for short term profitability), Twitter has not added any Facebook-style display advertising on its website. Now, this guarded simplicity exists in another internet giant - Google search. You cannot really make any third-party products on top of it and you're unlikely to see flashing banner ads there any time soon. But, Google has intent, which means Adsense works great. While Twitter doesn't have as clear an intent signal, an Adsense-like product on it won't be a big surprise. The simplicity of Twitter as a social network gives it a lot of pace. Stories, trends, memes move fast on Twitter. So, it's hard for advertisers to capitalise on any particular theme for long or at the right time. But, I expect they will churn out more brand management and marketing tools for big companies. That's what I guess Twitter's major source of revenue will be (big deals), rather than self-serve ad platforms for small to medium companies like Facebook and Google.

Why is Twitter so slow to find a good business model, while Facebook is profitable?

by gabaix 15y ago

Why is Twitter so slow to find a good business model, while Facebook is profitable?

swombat 15y ago

Because Twitter is innovative, while Facebook is just f'in huge?

thematt 15y ago
That's ridiculous. Facebook is incredibly innovative as well, even more-so than Twitter. They're solving huge scalability problems that nobody else has encountered before.
- carbonica 15y ago
  The only new scalability issue that Facebook has tackled is how to scale one enormous MySQL database. They've primarily done this by sharding it thousands upon thousands of times and putting over 10,000 memcached instances in front of it. Most everything else they've confronted was done by Amazon and Google years before Facebook had to.
- swombat 15y ago
  Facebook as a product to monetize is not innovative. It's a website serving targeted ads. Twitter is a new kind of messaging service. How to monetize that is not so clear.

kloncks 15y ago

Why try and achieve something hard like profitability when you can easily be valued at $8b and raise $800m to keep that going? I don't mean to be too critical but sometimes I wonder if this is better than, say, Twitter finding out that it can't make more than some small amount of money in profit.

orky56 15y ago
Raising capital and valuations are just temporary measures and good faith to turn the product into a company. Having money to hire more people just exacerbates the problem. They now have higher operating costs (where this new capital goes) and now need to have the even higher revenue to create a margin that makes it all worth it in the first place. OR you just get stuck in a Groupon situation where we have big revenue off big costs (salespeople).

barredo 15y ago

Facebook is profitable, yes. Most of people (edit: instead of most I said '99%' but that's not true so I updated) use FB from their browser going to facebook.com (or searching facebook on Google and clicking the first link), while Twitter is used mostly in desktop/mobile apps. It's a bit more difficult to develop a business model for Twitter than for Facebook, which is profitable with "just put ads on the right of everypage". But: shouldn't a company as huge as FB be many times more profitable that they are right now? (400M$ in profits in 2010: http://dealbook.nytimes.com/2011/01/06/goldman-unit-passed-on-earlier-facebook-investment/?src=twt&twt=nytimesdealbook http://dealbook.nytimes.com/2011/01/06/goldman-unit-passed-o... at a 75B$ valuation if I recall correctly). Anyway, my point is Twitter & FB business models are not & i'd guess won't even be similar, and it'd difficult to compare them.

leftnode 15y ago
33% of Facebook traffic comes from mobile devices - http://www.facebook.com/press/info.php?statistics http://www.facebook.com/press/info.php?statistics Facebook has a tremendous mobile foothold.
- barredo 15y ago
  Ooops! Sorry, I pulled the 99% from my ass to make a point and I was not really meaning 'real 99%'. Sorry. I'll edit the post. Thanks for the correction.

benofsky 15y ago

Twitter's data set is incredibly valuable; Twitter won't make money from ads, they will make money from analyses of their data [1]. Developing infrastructure and software that can analyse the sheer quantity of data Twitter generates takes time — and money. But, when they finally crack it they will be extremely profitable. It's much easier for Twitter to do this opposed to Facebook (who I would say is also interested in doing this) because of Twitter's public by default culture (/policies). [1] If evidence is needed: they just bought BackType; They're starting to lock down and sell their APIs rather than give it away for free as they realise the data's immense value.

dotcoma 15y ago
ok, but do they really need 800 million (or 400 million) to turn backtype and other companies and/or ideas into a working business?
- fatalisk 15y ago
  I think they do need this amount of money in order to stay competitive with the big guys Google and Facebook. They could be more easily outbid in acquisitions if they weren't competitive with capital.
  - dotcoma 15y ago
    Yes but, unlike Google and Facebook, they're not a real company. They're a start-up on VC welfare.
LargeWu 15y ago
I'm curious to know what kind of data Twitter has that is that valuable. Just because you have a lot of data doesn't mean it's that valuable. I used to analyze direct marketing campaigns for a major big-box retailer. They had literally billions of rows of transactional data that they could tie to specific customers, and despite attempting to harness the power of that data, most of their direct marketing campaigns didn't even move the needle. So, whenever I hear "But, when they finally crack it they will be extremely profitable", I can't help but thinking this is nothing but a bunch of handwaving. I'm sure everybody at Twitter is real smart and they're working hard on this problem, but until they start bringing in some real money, I'll remain skeptical.

forgottenpaswrd 15y ago

Because they don't need to? You know, if you could get 800M$ who cares about revenue? They are getting money while they can before the bubble burst, the early investors are getting money selling to a greater fool and the greater fool are putting money over the table betting someone else will be even bigger fool. Facebook is profitable but "not that profitable", they need to be much much more profitable at the current valuation, that means being pure evil, and I don't know if the people will stand that. The Facebook, Zynga, Groupon burst will be something great to see, again(it seems people just can't learn from the past, "this time is different").

fatalisk 15y ago
"This time is different" because people have learned a lot from the first bubble. For the most part, investors are people who really understand the economics of technology, the economics of the deal and the mistakes of the past. I think there is a long way to go before any major burst. Granted with the amount of hype in the market and massive over-subscriptions (i.e. greed) there's bound to be a correction at some point. But, I don't think it will be as bad as before.
- chopsueyar 15y ago
  The only reason it won't be as bad is because not that many people are employed by these companies this time. Most people are already out of work or under-employed.
  - fatalisk 15y ago
    That's not true. My understanding was that the dot-com bubble was primarily a result of naive investment in technology. My point was that investors today are way more sophisticated when it comes to tech, therefore, they won't be blindly betting on every internet or mobile company. Venture Hack's Naval Ravikant describes the bifurcation of the funding situation in technology, where there is a long-tail of companies investors don't view as remarkable and so don't invest. Remember, those dot-bombs were pretty much worthless from the start in terms of the value they provided, and they had enormous nonsensical valuations. There was no such thing as determining product-market fit or customer development before product development, or even a blogosphere of information related to this kind of investment. Both investors and entrepreneurs are more prepared and more knowledgable today than they were in 1999. So I don't think the same kind of devastating burst is very likely.

revorad 15y ago

It must at least partly be due to the fact that Twitter has been guarding the simplicity of its product. Facebook is a communications platform at its core, but it also allows third-party developers to use it just as an identity database on its own property. You can run games on Facebook.com, you can't on Twitter.com. The simplicity of Twitter has also made them discourage third-party development off their property. If all you've got is a SMS broadcasting service and you have an open API, it's not so hard for others to clone all your features and more. It's not as easy to clone Facebook because it has a lot more functionality. So that has limited Twitter's off-site monetisation options. Twitter is similar to Facebook in the sense that people spend a lot of time on it, but for some reason (good for users, bad for short term profitability), Twitter has not added any Facebook-style display advertising on its website. Now, this guarded simplicity exists in another internet giant - Google search. You cannot really make any third-party products on top of it and you're unlikely to see flashing banner ads there any time soon. But, Google has intent, which means Adsense works great. While Twitter doesn't have as clear an intent signal, an Adsense-like product on it won't be a big surprise. The simplicity of Twitter as a social network gives it a lot of pace. Stories, trends, memes move fast on Twitter. So, it's hard for advertisers to capitalise on any particular theme for long or at the right time. But, I expect they will churn out more brand management and marketing tools for big companies. That's what I guess Twitter's major source of revenue will be (big deals), rather than self-serve ad platforms for small to medium companies like Facebook and Google.