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Twitter Closing New Venture Round At $1 Billion Valuation
- dryicerx 17y ago1. Big User Base 2. Big Money Invested 3. ??? 4. Profit!
- matthavener 17y agoPossible answer for #3: http://www.byrnehobart.com/blog/facebook-is-profitable-again/ http://www.byrnehobart.com/blog/facebook-is-profitable-again...
- axod 17y agoI think a lot more people use twitter from 3rd party clients, than use facebook from 3rd party clients (As a %). Facebook the website is a lock-in, and a place that can be easily monetized. Twitter has the complication that for a ton of people, twitter is just the network and not the client. Monetization of a network seems pretty hard to me... far harder than monetizing a client.
- jonknee 17y ago... So they should stop running the banner ads they don't have, switch domain names and create services that make money? Brilliant.
- tjic 17y agoOne thing I saw in the comments: > If they still have 30 million in the bank of the 55 million, why are they raising more money? Answer: it's always easier to raise money when you don't need it.
- andreyf 17y agoit's always easier to raise money when you don't need it. Oi, that doesn't necessarily mean it's a good idea. What Twitter desperately need right now is a way to make money (and taking it from VC's don't count). If they want to justify a $1 BILLION valuation, they need a clear way to make a lot of money. My prediction: they're looking to buy a company that they think will make them money. While one might hope Benchmark Capital might pass down some wisdom from AOL's botched "best acquisition EVAR" fiasco, I have a bad feeling about this. As it stands now, my feeling regarding their technical competence tells me the hypothetical merger will be tougher than anticipated, and history will see Twitter as the shining example of the "Web 2.0 bubble".
- steveplace 17y agoYou can't have a bubble at these valuations. Twitter may be a little frothy, but the industry is nowhere near exuberant.
- condor 17y agobased on what? we have a sense of prices, but how is the underlying value measured?
- steveplace 17y agoWe've got only a handful of companies right now at WTF valuations. That is not indicative of some irrational exuberance.
- andreyf 17y agoGood point. I don't get that sense about the rest of the industry (as much), but twitter seems like a good example of a company which is "breaking the heuristics" - they got wildly popular via SXSW, which has many influential minds, but also hugely inflates the growth-to-usefulness ratio. They used that bump to raise enough money to do enough PR to get Oprah and half of Hollywood on board. This let them continue growing until this coming valuation. Throughout, they've struggled technically, leaked documents, and just haven't polished their UX enough. Facebook and Google, on the other hand, have been growing out of being useful to their users, with no comparable technical issues (I'm hoping the FriendFeed acquisition does some good things for Facebook's architecture).
- TrevorJ 17y agoYou really think Twitter is worth one billion dollars? Why?
- steveplace 17y agoProbably not. I don't particularly care about a single company, but they are not going to mark the end of a bubble. It might be the beginning, but we have yet to see sentiment and valuations that would lead me to believe that a crash in tech is coming soon.
- jerryji 17y agoAnswer 2: It's always easier to raise money while you still can.
- bdr 17y agoFor Twitter to turn down Facebook's acquisition offer, they must have a damned good plan for beating them in the "status" war, because FB is on the attack and gaining ground. What is that plan?
- brandnewlow 17y agoThey're not in the "status" war. Facebook wants to sell hypertargeted ads to businesses/people/brands. I think Twitter wants to sell a premium service to every small business in America that will render most forms of local advertising completely moot.
- purp 17y agoReally? It's always seemed to me that Facebook wants to own your address book and inbox, while Twitter wants to own real time news/search/intentions. But maybe that's just what you said from a different perspective.
- thetrumanshow 17y agoIn Twitter's case, realtime status, micro-blogging, and me-too viral spread were the hooks that drew in the masses. The business model looks to be about in creating link between local businesses and local customers. Pub-sub. Ex: I (business/publisher) announce a special, you (customer/follower) receive the note and respond accordingly. The problem is, I think, that Twitter has given away too much of the core value of the platform already (they had to in order to grow). I think it will be hard for them to create 'tools' to improve on this interaction and cause businesses to be willing to pay for it. I think this is why everyone is on the edge of their seats about this, because everyone thinks in the back of their minds that it can possibly happen but no one can easily connect the dots. From our perspective, if they do pull it off, it will seem somewhat miraculous.
- ashishk 17y agoI think it's too early to summize (ha!) who is going to make money in which way. But, I would point out that hypertargeted == local advertising. 74% of FB's ad revenues are from local businesses.* *Source: http://mashable.com/2009/07/20/facebook-local-ads/ http://mashable.com/2009/07/20/facebook-local-ads/
- tptacek 17y agoWhat company could Twitter acquire that would make them money a couple quarters down the road? Consider that if Twitter has a huge valuation edge over (say) Yelp, they're in a position to finance an acquisition at favorable terms. Twitter's ability to execute those acquisitions could in turn feed back into its valuation.
- immad 17y agoIf Twitter did that it would be some sort of weird hedge fund doing hype-based leveraged Buy Out.
- tptacek 17y agoCompanies raise funds to buy other companies all the time. It's called a roll-up.
- fallentimes 17y agoSee: Kayak, Sidestep
- andreshb 17y agoOnly they know what they are doing, and so far, it's gone very well for them. I am left without words.
- javery 17y agoPeople are building more and more onto the platform and relying on it more and more, this is ultimate lock-in at the moment. Whenever they want they can start charging companies for API access, search access, access to the data, access to the live stream, etc. I think they are just biding their time (they have the money) to grow it as much as possible and then either sell it off or start flipping the switches.
- moe 17y agoI think they are just biding their time (they have the money) to grow it as much as possible and then either sell it off or start flipping the switches. And I think they are just cashing out before the bubble pops and have absolutely no idea where twitter could be going nor why people are throwing money after them in metric kiloton bundles. Ofcourse they have to keep pulling bullshit like "realtime search" outta their rears because the "stake"holders want to hear something. But all I have seen in that direction was, at best, feel-good babble and not any remotely tangible vision. "Flipping switches" is not an option either because people would simply flip their own switches - towards the next best clone.
- javery 17y agoYeah, like everyone switched away from Windows the minute they started milking their platform. Or how everyone switched off Gasoline when it hit $4/gallon. Or how everyone stopped paying for Cable when the cable companies jacked up the prices even more. Once they own the network that everyone is using it will be almost impossible for imitators to take it away.
- nir 17y agoWell, maybe like how people switched from ICQ to MSN to gTalk to Skype, or from Slashdot to Digg to Reddit to HN. Opening a user account on a competing website is much easier than changing OS or car engine.
- moe 17y agoYou're not seriously comparing twitter to these things, are you? What will they do when a competitor offers to "keep your account in sync with twitter" (tweets and followers)? Forbid it in their TOS ofcourse - and that's the beginning of the end. Also get over the "everyone is using" myth. Last time I checked the number of twitter accounts was in the ballpark of 0,1% of the internet population. Based on their publicized, inflated figures mind you - likely including all dead and double accounts.
- DarrenMills 17y agoPerhaps if they start bleeding due to bandwidth and maintenance costs, they've got some serious bank set aside until someone figures out a way to make Twitter a highly profitable venture? Okay, maybe not. But I'd like to see the break down on what exactly their dropping $30 mil on. That's a lot of money for a such a simple idea that is already a household name with no real competition.
- URSpider94 17y agoA $50MM round at a $1 billion valuation means that the VC's are collectively getting 5% of the company for their investment. Does anyone else think that's an unusually tiny share?
- rjurney 17y agoIt probably says a lot about the dogshit alternatives VCs are looking at as the inflated dot com leftover VC industry is about to come crashing down - acquisition market dried up, no IPOs in sight... buying a piece of twitter at a gagillion dollar valuation would look pretty good to most VCs. But personally, I think its a good investment because I think twitter is disruptive.
- netsp 17y agoWhen VCs put up this much money at this high a valuation are they still looking for 5-10X returns?
- sachinag 17y agoNo. Early-stage VCs look for 5-10X returns. Investors in this round are growth equity investors. They use IRR metrics. 30% IRR is generally considered a huge success.
- netsp 17y agoBut surely they need a pretty high tolerance for risk. Twitter still has a reasonable chance of just fizzling out. It could just be a fad and it could just fail to find a business model.
- nir 17y agoFunny how this is happening the same week we discover Google now supports (or works on) real time search: http://blog.omgili.com/?p=108 http://blog.omgili.com/?p=108