Did you happen to read the amazing interview in Monday’s Wall Street Journal with Jeff Horing, co-founder of Insight Venture Partners, a New York private-equity firm that was the lead investor in Twitter’s third and latest fund-raising round?
These are the geezers who just pumped in $100 million in funding to the 140 character wunderkindt, to give it a valuation of over ONE BILLION F******G DOLLARS. This for a company that to date, generates not one penny in revenue.
When asked about this amazing number, Horing said… “When we modeled it, we were looking at revenue somewhere between Google and Facebook. Google monetizes at $30 a user and Facebook is about $2 a user. If you look at Twitter’s user community and make some fairly conservative assumptions about revenue, we thought you could make a healthy exit at a multiple of a $1 billion.”
Hey, pardon me, but based on the Google and Facebook numbers, and the fact the Twitter's founders have made no bones about how at this stage, they don’t have a bloody clue how they’re going to start making money… For this guy to claim they are making conservative assumptions about revenue, smacks of either pig-headed bravado, or pig headed stupidity.
Remember, it was just three short years ago that Rupert Murdoch paid over half a billion dollars for MySpace, and all the pundit's said it was a steal? Now after massive layoffs, it’s leaking money like a sieve, and in all the happy chat about social media, it hardly ever gets mentioned.
In the Social-Sphere, three years is an eternity.
Something smells like Boo.Com to me.
Boo.com Twitter is not, $1bn in revenues seems wildly out of reach. Twitter could yet go the way of MySpace (and it at least generates revnue). All it takes is for another Facebook to come along. I think almost the most interesting thing about Twitter is that while teens are hooked on FB they aren not on Twitter - yet at least.
Social Media sites are glorified nightclubs. People will move on when the next one opens up.
The model they really used is probably something like this:
'We invest $100M. It values Twitter at $1B. That entices some other investors to buy into it. Our share's value will be more than $100M. We sell it. Thank you very much.'
If the model is as they mentioned, they are idiots...
Hey George, nice post.
You'll like this: 37signals.com/.../1941-press-release-37signals-valuation-tops-100-billion-after-bold-vc-investment
Doc Searls has some interesting comments on this at his blog
blogs.law.harvard.edu/.../on-value-and-valuation
But I don't think making that amount of money is insanely hard. Most active users would probably pay for the service if it were made easy to pay. And it could be. All you do is allow for premium rate texts to twitter which carry some added value (extra functionality, location updating, greater duration, visible charitable donations, visible support for a cause, human powered search) and you've got your dosh back from users alone.
I also suspect (like RSS) people will establish very valuable services on the back of Twitter. Taxi booking is one recent idea. It would not be impossible to apply gentle moral pressure that such beneficiaries should stump up a commission to the tune of 10p a booking.
Twitter is sure better that boo.com. At least there are ways to generate some (!) revenue. But I guess this is more like a validation case for investors and investment bankers at this point. And hey; one billion is pretty well done in these times of a recession!
I also believe people would be using something for the Twitter service if (a) they feel it valuable and (b) there is that easy way to pay for it. Actually, Twitter might be more interesting case than Facebook if (!) there is a good plan on the table, in addition to those dollars.
Personally I hope they will invest some of the money to develop the next generation interface. UI is really getting stupid if you have more than 10 active sources you follow.
People said the same thing about Facebook. 'Zuckerberg doesn't have a clue', 'How are they going to make money?' etc etc. Things have a way of working themselves out - especially when smart VC people get involved.
Pretty much every brief we talk about now has some sort of Facebook element. There is every reason to believe that Twitter will be as omnipotent as Facebook.
I guess the real test is whether you would invest some of your own money. So if someone gave you an easy option to buy into twitter now - forgetting whether you would have a got a better deal two years ago etc - would you?
I know I would.
Balloons are great til they go POP!
Guys...
Good comments all. I am not saying that Twitter cannot make money, I'm saying that the valuation is insane. As I said, everyone thought Murdoch was a genius for buying MySpace for $600 million. Look at it now. Also, there was nothing wrong with the Boo.Com concept, it just happened too early. Taking a day to dress an avatar on a dial-up connection didn't cut it... Plus the three "C's," Concorde, champagne & coke didn't help either. Check out my next post on the Olympics... I promise to post more regularly now. I've been busting my chops on my next book.
Cheers/George
Twitter, or more precisely TWEETING is just very hard to understand for many punters, so many folks just don't "Get it"
Indeed, it took me a great length of time to get why anybody would be interested in the trivial mundane minutiae of my everyday existence
Also it really smacks of being a FAD
Like MySpace it could be hot one minute and disappear the next
Seriously, If this fad ever make a $Billion in revenues I'd be greatly astonished
Books are the future.
They burn, but not electricity,
They last forever, and are so technologically advanced
you can even read them in a California State power cut by candlelight !
George Parker
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