Twitter slaps itself with $1bn price tag Twitter is trying to raise another $50m, pushing the (self) valuation of the company above a billion dollars, despite lacking an income of any kind. News of the new round of funding and valuation comes from "multiple sources" according to TechCrunch: we've not managed to get confirmation as yet but if it's true then it gets …
What are they spending these millions on anyway? They aren't spending it on infrastructure that's for sure, all the site has to do is shunt around 140 bytes worth of text a pop and it can't even do that without crashing regularly.
The whole site has just become a melting pot for everyone else's lame marketing stunts, any advertising Twitter themselves try to add will quickly be drowned out by the background noise.
Should they make it a subscription service I predict it's popularity will plummet overnight and within a week nobody will be using it anymore and that will be the end of that (finally)
Their only hope is to be bought out by a large media conglomerate and be turned into yet another vehicle for pushing the music industries lame manufactured crap. In which case the kids will keep going there, the bands will keep making money off the back of songs they didn't write and the world will keep on turning.
Given the large proportion of people who communicate on Twitter using third party applications, they'd never be able to make enough money through advertising alone.
Charging license fees to use the API might be one route - although given the API is currently free, it would have to change significantly.
Another route could be being bought up by a media conglomerate who won't mind shelling out for the hosting / handful of staff on the basis that the loss is more than compensated for by other aspects of the company.
A third route would be do go down the Wikipedia route - forget all notions of becoming a profitable company, and instead set up as a charity. You don't charge for anything, but 'gently' remind users logging in to the web interface that they need so many million dollars per year to cover the cost of the hosting...
"What are they spending their millions on?"
Hosting (on a decent specced server / server farm) and bandwidth (the more the merrier!). Individual data packets may be small (140 bytes), but the volume of packets is incredibly high. Most people familiar with Twitter are familiar with the "Fail Whale", and the only way to avoid being too busy is to ensure you have enough server and bandwidth capacity to handle the ever-increasing volume of traffic.
Having said that, implementing a more effective 'seek and destroy' policy with regards to spam bots / pr0n bots / retweet bots would help reduce demand slightly :)
Simple just offer a premium advertising filter package, let advertisers tweak tweets:
"I could really use a smoke right now" could become "I could really use a Marlboro right now"
"Can anyone share the latest Brittany album" could become "I support the music industry and am firmly opposed to piracy"
You can't really go down the Wikipedia not-for-profit route after you've taken $57m from venture capitalists and given them company shares in return.
And the idea that Twitter could charge for anything is, in my opinion, a complete non-starter. Their only meaningful asset is a large, established network, and a fat lot of good that did Friends Reunited. The very nature of their product makes it impossible for them to charge a premium above the market rate for social Internet communication (zero) - imagine how fast "Twitter has introduced charging, I and everyone else I know are heading over to identical but free service TwatBurst.com, please come join us"* would fly round the network.
That leaves the Greater Fool, i.e some company with more money than sense which will buy it and eliminate all Twitter's problems. Once Twitter ceased being a company with a P&L account and became a subsidiary with a departmental budget, no-one would care anymore.
(Well, in two years' time TechCrunch might steal some office spreadsheets and run a follow up "Was the acquisition worth it?" article. But it would almost certainly be lost above a feature about how one of Eric Schmidt's turds looks a bit like an operating system and below a review of a website that lets Michael Arrington create tag clouds about his daily consumption of cake.)
So that's now looking like the most likely scenario - those of us expecting the doomsday scenario probably didn't expect Twitter to survive this long into the credit crunch, and are having to recalibrate our predictions.
In all honesty, I don't think the tech industry would allow Twitter to go under, as in completely run out of money, cease all services and replace the webpage with an "Out of Business" sign. Twitter's perceived value is so high that if the free market branded it as officially worthless, it would be a huge shock to the Silicon Valley system. If the reward for being as big as Twitter is to go out of business, the venture capitalists might think, then what's the point of funding anything Web 2.0?
So Twitter might be the HBOS of the tech world - everyone knows it's worthless but if it went under it would destabilise the cosy assumptions under which the industry operates, so someone will have to hold their nose, buy the damn thing and sweep it under their balance sheet.
*I don't know if that's fewer than 140 characters and I don't care.
Google can monetise it and cut costs as an relatively small increment to their monster global farmplex. Feeding twits into new stories would be another opportunity.
Cross fertilisation between massive, free and otherwise unprofitable net enterprises is their only chance. Only Google has the scale and money to choose what it wants when and fit it into an existing net. I bet they have a bid ready, they are just waiting until it would cost around 10% of today's price. They are much smarter guys than eBay, ITV ...
I think we're just beginning to see the value from Twitter and it's such a big space that there will be room for more than a single player even as Facebook, Google, and others evolve. More thoughts here - http://bit.ly/J0Ep1, but to me this makes sense as a high risk, high reward bet by investors.
Twitter's business model doesn't exist. What probably started as a fun little tool has developed poorly into a large server farm hosting hundreds of thousands of meaningless crap. I actually had enough of it, I couldn't follow squat on it due to the amount of self-promotion. The amount of bots that just continually blast self-marketing is amazing. And the pr0n bots? Don't get me started, had to block anywhere from 10 to 20 a day before I gave the whole thing up.
If they get this $50m, what's it going to do, keep the infrastructure up for another couple of year? Then what, ask for an additional $100m for the next couple of years? All I foresee is a big splat, users leaving in droves, servers crashing and data so easily hacked into there will be 10 of each user wandering the world due to identity theft.
Go away Twitter, you ain't worth $50m, let alone $1b.
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