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Twitter: A fine 'pre-business' but un-monetizable and a deadly acquisition target

20 points by jackowayed 18y ago

swombat 18y ago
The ones that do make money all seem to involve either mailing stuff to people who have paid for it online or getting advertising deals from the likes of General Motors. What kind of web analyst misses out on the slew of other online monetisation strategies and dares make such a ridiculous statement? I find the whole argument dubious. I'm pretty sure that there are many potential monetisation strategies for Twitter, most of which the analyst couldn't think of, apparently. I don't really want it to be bought, but I don't think it would be a bad purchase for, say, Google.
- tptacek 18y ago
  Your argument, which might be strong, would be evidently strong if you could cite a couple cases where a large "pre-monitized" turned out to be lucrative for an acquirer.
  - dangoldin 18y ago
    I can think of Summize which became Twitter search. It doesn't necessarily make Twitter any more money but I do think they're getting a lot more growth because of it.
    - tptacek 18y ago
      How much do you think Summize went for? 500k? $1MM at the outside? Is that really the best counterexample we've got?
      - wallflower 18y ago
        I remember Summize was rumored to have gone for $15m in cash and Twitter stock.
        tptacek 18y ago
        The entire round of funding Twitter took just prior to buying Summize was $15MM.
    - omarchowdhury 18y ago
      Your best example is a derivative startup?
  - swombat 18y ago
    Wouldn't blogger.com count? I'm sure they're making a fair amount from slapping adverts on it, not to mention all the user data harvesting.
garply 18y ago
Whenever I see a webapp that's popular and has no ads, I can't help but wonder why. Sure, maybe they have a non-ad-based business model further down the pipeline, but what do they lose by putting up some ads? I doubt that they would lose many users, and it would slow their burn rate, at least.
- dsil 18y ago
  In nearly all cases you won't make enough money to increase your burn rate at all. When you're focusing on growing your user base, its not worth it to lose a few users and generally make your site a little less usable and appealing for $100ish dollars a month.
  - garply 18y ago
    Really? The notion that this many (http://www.statsaholic.com/twitter.com http://www.statsaholic.com/twitter.com) eyeballs a day (with a lot of those people being early adopters) is worth $100 / month strikes me as completely incredulous. I personally would pay well over $100 a month to buy ads on their site.
    - dsil 18y ago
      Oh no no, I meant most sites...twitter could be making thousands of dollars a month, probably tens of thousands. But they're going for acquisition/valuation of hundreds of millions of dollars. Ads would slow their growth, if only a bit, but even a few hundred thousand in ad revenue at this point isn't worth that, in my opinion, and apparently theirs as well.
  - ackkchoo 18y ago
    I agree with this to a point, but I think that it is also important to test out ads from an early stage, just to see how "viable" the business model really is. There are so many variations in placement, eCPM, clickthrough, etc across different sites that the only real way to know whether or not something works for a particular site is to test it. Without this sort of testing, it's difficult to gauge how much you really have to grow to become viable. Unfortunately, I think a lot of companies use this argument to justify a non-sustainable business model, in the hopes that once they get enough "eyeballs", the monetization will follow. So they don't put up any ads at all, then when they do eventually put them up, they are likely to be shocked at the actual (likely to be much, much lower) earnings. Another advantage to putting up ads early is that users become accustomed to them from the start. Going from no ads to ads, especially after a community has grown used to the concept of no ads at all, can cause the same loss of users.
ig1 18y ago
Those figures for companies given as examples seem off.
- tptacek 18y ago
  Why?
BRadmin 18y ago
"AOL: Acquired by Time Warner for $120 billion" I'm pretty sure it was AOL doing the acquiring of Time Warner. I remember hearing this from an AOL exec, thinking it was absurd, and then looking it up online only to find out she was right.
BRadmin 18y ago
No mention of Calacanis and the recommended list?
asadkn 18y ago
On one hand, people despise services that start out free and turn to be completely paid, but on the other hand, they appreciate services that start our free and later introduce some paid services WHILE still continuing to offer the existing services for free.

20 points by jackowayed 18y ago

The ones that do make money all seem to involve either mailing stuff to people who have paid for it online or getting advertising deals from the likes of General Motors. What kind of web analyst misses out on the slew of other online monetisation strategies and dares make such a ridiculous statement? I find the whole argument dubious. I'm pretty sure that there are many potential monetisation strategies for Twitter, most of which the analyst couldn't think of, apparently. I don't really want it to be bought, but I don't think it would be a bad purchase for, say, Google.

tptacek 18y ago
Your argument, which might be strong, would be evidently strong if you could cite a couple cases where a large "pre-monitized" turned out to be lucrative for an acquirer.
- dangoldin 18y ago
  I can think of Summize which became Twitter search. It doesn't necessarily make Twitter any more money but I do think they're getting a lot more growth because of it.
  - tptacek 18y ago
    How much do you think Summize went for? 500k? $1MM at the outside? Is that really the best counterexample we've got?
    - wallflower 18y ago
      I remember Summize was rumored to have gone for $15m in cash and Twitter stock.
      - tptacek 18y ago
        The entire round of funding Twitter took just prior to buying Summize was $15MM.
  - omarchowdhury 18y ago
    Your best example is a derivative startup?
- swombat 18y ago
  Wouldn't blogger.com count? I'm sure they're making a fair amount from slapping adverts on it, not to mention all the user data harvesting.

garply 18y ago

Whenever I see a webapp that's popular and has no ads, I can't help but wonder why. Sure, maybe they have a non-ad-based business model further down the pipeline, but what do they lose by putting up some ads? I doubt that they would lose many users, and it would slow their burn rate, at least.

dsil 18y ago
In nearly all cases you won't make enough money to increase your burn rate at all. When you're focusing on growing your user base, its not worth it to lose a few users and generally make your site a little less usable and appealing for $100ish dollars a month.
- garply 18y ago
  Really? The notion that this many (http://www.statsaholic.com/twitter.com http://www.statsaholic.com/twitter.com) eyeballs a day (with a lot of those people being early adopters) is worth $100 / month strikes me as completely incredulous. I personally would pay well over $100 a month to buy ads on their site.
  - dsil 18y ago
    Oh no no, I meant most sites...twitter could be making thousands of dollars a month, probably tens of thousands. But they're going for acquisition/valuation of hundreds of millions of dollars. Ads would slow their growth, if only a bit, but even a few hundred thousand in ad revenue at this point isn't worth that, in my opinion, and apparently theirs as well.
- ackkchoo 18y ago
  I agree with this to a point, but I think that it is also important to test out ads from an early stage, just to see how "viable" the business model really is. There are so many variations in placement, eCPM, clickthrough, etc across different sites that the only real way to know whether or not something works for a particular site is to test it. Without this sort of testing, it's difficult to gauge how much you really have to grow to become viable. Unfortunately, I think a lot of companies use this argument to justify a non-sustainable business model, in the hopes that once they get enough "eyeballs", the monetization will follow. So they don't put up any ads at all, then when they do eventually put them up, they are likely to be shocked at the actual (likely to be much, much lower) earnings. Another advantage to putting up ads early is that users become accustomed to them from the start. Going from no ads to ads, especially after a community has grown used to the concept of no ads at all, can cause the same loss of users.

ig1 18y ago

Those figures for companies given as examples seem off.

tptacek 18y ago
Why?

BRadmin 18y ago

"AOL: Acquired by Time Warner for $120 billion" I'm pretty sure it was AOL doing the acquiring of Time Warner. I remember hearing this from an AOL exec, thinking it was absurd, and then looking it up online only to find out she was right.

BRadmin 18y ago

No mention of Calacanis and the recommended list?

asadkn 18y ago

On one hand, people despise services that start out free and turn to be completely paid, but on the other hand, they appreciate services that start our free and later introduce some paid services WHILE still continuing to offer the existing services for free.