I was having a conversation last night with a person who wasn’t on Twitter. He just didn’t understand it, he said. Myself and the others I was with attempted to explain it to him, but when he constantly saw all of us with our noses buried in our phones checking the service, that was probably all he needed to know. By the end of the night he had a Twitter account.
Twitter is looking to raise a new Series C round of funding, according to Silicon Alley Insider. Their sources say it is seeking a number that could puts its value as high as $150 million. That may sound absurd, but this is a world were just last week the social network creation company, Ning, saw a post-money valuation of $560 million.
The actual value of Twitter will probably come in far below that. Silicon Alley Insider cuts it in half, to $75 million post-money. For those who do not understand and do not use Twitter, that will still seem way too high. For those who do, that may sound about right provided Twitter can answer some fundamental question marks about its service.
The first and foremost is monetization. This has been talked about a lot over the past year. Twitter currently does not advertise on its main Twitter.com domain, but you can bet its coming, despite denials. Earlier this week, Twitter rolled out the Japanese version of the site. It had two key differences. One, it was in Japanese. Two, it had advertisements.
The second, and perhaps more problematic question surround Twitter, is its reliability. Twitter exploded onto the scene following SXSW (the South By Southwest festival in Austin, TX) in 2007, but for much of the year Twitter was marred by downtime and sluggishness. All seemed to be corrected this year as the service made it through SXSW 2008 and events like the Super Bowl without any major hiccups, but then last weekend the service broke down. While it was technically still up, users were not getting the majority of updates from their friends and followers for over three days.
Shortly afterwards, it was revealed that Twitter’s chief architect, Blaine Cook, had left the company. A few days later, a VP of engineering and operations which Twitter had just recently hired, was gone as well. While it is not entirely clear yet why either left the company, speculation is swirling that the downtime and scaling issues were to blame.
The third issue is usage outside of the tech sphere. Assuming you have friends outside of the tech world, or, God forbid, you are not in the tech world yourself, you probably know a lot of people who have simply never heard of Twitter. While I can’t go anywhere in the Bay Area without running into someone I know through Twitter, others, like the guy last night, didn’t know anyone using the service.
There are signs that could change relatively quickly however. I’ve already mentioned that Twitter rolled out in Japan, where usage has been huge, but we’re also starting to see Twitter pop up in world news stories. Maybe you heard about James Carl Buck, the college student who was traveling in Egypt when he found himself thrown in jail. He tweeted (the term for a Twitter message) one word to his friends and followers: “Arrested.”
Buck continued to give updates on Twitter via his cell phone throughout the ordeal. People back in the United States were watching. In less than 24 hours, Buck was free. This is the power of Twitter.
Twitter has proven itself useful in a variety of other complicated events as well such as a few different earthquakes and the forest fires in San Diego. World news stories like these are nothing but good, free publicity. I had another friend who doesn’t understand what Twitter is, email me the Buck story today. Twitter can expand beyond its early-adopter user base.
If I had to guess, I would say the end game for Twitter would be a sale to one of the big boys: Google, Yahoo, Microsoft, etc. Twitter co-founder Evan Williams has done this a few times before, notably selling Blogger to Google in 2003. Until then, a new round of money and a valuation around $75 million doesn’t seem too unreasonable. The people who know the service well find it hard to live without when its down. The upside for the company is when the rest of the world catches on.