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.
Tags: co:Twitter17 Comments
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Mark Evans said:
Question: What’s anything worth?
Answer: Whatever someone else is willing to pay for it?
Twitter could be worth $150 million or $1.5 million - somewhere in between. Its value - and the value of any interesting Web property - is established by investors.
Sure, you can use different metrics to justify an investment or purchase price but the value of something is what it can attract.
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Jay (Twitter @qthrul) said:
For as many uptime problems as Twitter has, it’s always good to remind yourself that “Sorry! an unexpected error has occurred. ” is still a top hit in Google for MySpace.
Granted, bands haven’t tapped Twitter with the same fervor as they did on MySpace. However, being able to tweet to the crowd about shows, band updates, that’s crazy interesting. The 5000 th tweet wins free tickets.
I’d ask how much Twitter is worth to MySpace (or MySpace Music) to not try and re-create it.
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MG Siegler said:
@Mark - Well yes, obviously. My point was more or less to just go into why I think Twitter is a valuable property despite its issues. The $150 million is just a sexy headline :)
@Jay - Good points. I definitely foresee the kind of music promotion you are talking about coming.
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jett said:
I have both Ning and Twitter. Twitter is infinitely more valuable to me than Ning. Ning is a nice way to quickly create a social network, but there are a million+ white label, social networks. Twitter is branded Twitter and comes with a strong network effect.
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more than 140 chars said:
@MG,
Blogging community finds Twitter interesting, however, it is abused by the same community for spamming “friends”. It is very interesting to see that these bloggers feel how important they are, but in reality it shows they have too much “free time” and their lives are really boring.
If Twitter gets $150M valuation good for them.
The rest find Twitter and Twits useless.
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Fools said:
twitter is for valleyheads with severe cases of ADD. rest of the world, doesn’t care.
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Ian Lamont said:
MG, I don’t agree with your estimate, but your observation about the “big boys” is quite accurate — Google, Yahoo, and Microsoft have a history of throwing millions at startups that have lots of buzz but no revenue, and Twitter definitely fits the mold.
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MG Siegler said:
@jett - i think there are quite a few who would agree with that assessment.
@more than - I also think there are quite a few people who would agree with that assessment :)
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MG Siegler said:
@fools - we’ll see, that was one of the main points obviously, expansion beyond the valley - which it already has to some extent in place like Japan as I noted.
@Ian - thanks, read your piece as well and definitely respect your take on it. As I noted “that may sound about right provided Twitter can answer some fundamental question marks about its service.” Those are certainly questions that would effect its value, I’m fairly bullish on it though and think they can fix those issues.
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Andrew - @andrewmccluskey said:
..I laugh when I read about Twitter as a time waster - although I have to confess - the laugh is more schadenfreude - as I’m busy speaking directly to potential customers while the doubters are off wasting time saying how useless the service is!
I could list out all the benefits that Twitter has delivered to my business’ bottom line - but then more people might start using it.
I don’t for a second believe that the team behind Twitter doesn’t know where it’s going and have a vision - there’s just too much real value in this service for it not to make money - even if you have to suspend belief for a month or so to “get it!”
(oh - and hi @qthrul - thanks again for the help on the Joomla gig - I found a guy through twitter in 2 days who was able to deliver within timescale and budget ;-)
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Abap said:
Mark Evans wrote:
> Question: What’s anything worth?
> Answer: Whatever someone else is willing to pay for it?Zen, but not insightful. The article is about the thought process of valuation. Valuation precedes forking out.
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MG Siegler said:
@andrew - I’m with you. Most people I know thought Twitter was a total waste of time — until they started using it. Now they can’t live without it for a variety of reasons. Glad you were able to hook up with @qhtrul though it.
@abap - thanks, glad you understood that.
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Frank Church said:
The question of monetization is always popular with twitter. I like this kind of discussion, so…
At a high level, there are really only two options for generating revenue:
1) The marketers
2) The users (some sort of freemium)Because the API is so popular, and twitter has excelled in understanding it is not a destination site, it does not make sense to do the banner ads people keep mentioning have been part of the Japanese roll-out. Any advertising will have to be integrated into the service itself (eg. marketing mesgs thru SMS/ IM/ 3rd party clients).
Or, some might argue that many of twitters users are marketers already marketing, and so would be willing to pay for such a service. That would keep the service clean for those wishing to use it without any explicit commercial aspects. Twitter could charge based on follower #s (like limiting friends on FB).
There are so many options (each with their own drawbacks) it could be a great blog post examining all the possibilities (hint hint). Improving their bottom line could be achieved thru integrating more vertically and establishing direct connections with the telcos instead of going thru an SMS gateway (maybe they have already, I’ve heard rumors)
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Myby said:
I never understood why Twitter is that popular.
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jesse said:
The usefulness of the social networking sites that attract a large segment of powerful individuals is something we are going to see be worth a whole lot more than most business pundits seem to understand.
The social experiment humans take up, often called life, is something that now tends to require a knowledge of social networking.
social networking is centered, in the US, that is, in computer mediated communication.
Computer mediated communication has widespread use and serves as a sort of experiment, if you will, for human education about human behaviour.
As people use sites like twitter more and more, a sense of community is born.
This sense of community taps into the basic tenet of human nature, which is the tendency to act socially, an intrinsic behavoral trait.
Now as we act, we must decide on the ratio of war and peace. Is it related to the ratio of ignorance compared to the planet’s population? Is there a way to sort out power? Is there a way to provide information and education in order to prevent the need for violence?
any of the intricate basic tenets of human behaviour, spurred on by human interaction and communication, can and will be changed by the flow of information and education.
Twitter is becoming the home of citizen journalists (even those who receive regular paychecks from information warehousing organizations) and will play a significant role in the shaping of the future of life on planet Earth.
Do not discount the price of this service, nor the intentions of its leadership.
Sometimes we sell things to make money in order to make other things that we keep.
Sometimes providing things for free makes a lot more sense than selling them for a profit and watching their value deteriorate rapidly due to narrow thinking based on the sole committment to cause revenue.
just a thought….
http://twitter.com/jesatiu
~jesse -
Scabr said:
If I think about Twitter’s worth than I remember Facebook’s
$15 billion estimation. Maybe Twitter potential compares with
Facebook one. -
Jochen Schweitzer said:
I dont get it either, it just doesnt make any sense. I would never use Twitter.
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