

Twitter closing another massive $400M round - eokuma
http://venturebeat.com/2011/09/08/twitter-400-million-round/

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bcrescimanno
Twitter has never shown any indication that they know how to leverage the
massive network to which they have unrestricted access. I've never seen
anything from them that gives me any notion that they have any idea how to
make money from the beast. Everything we've seen them try rings more as a
"shot in the dark" than execution on a legitimate strategy.

Twitter's network of people is valuable (though not likely as valuable as some
believe); but the setup of the network, as it is today, means that Twitter
isn't in a very good position to monetize it. I'd argue that a celeb with 100
million followers has far more power within the Twitter network than Twitter
itself (a fact that I think is changing now that more people are connecting
via "official" clients like the website and other formerly 3rd party clients).

I realize that I don't have access to the proposals that they are showing
these investors and maybe in there is some really great strategy for turning
what's essentially free, publicly viewable text messages into a gold mine--but
I just don't see it. This strikes me more as yet another round of investors
riding the hype wave and hoping to time their own cash out before the sad
reality sets in that just because something becomes popular doesn't mean
there's a good way to make money from it.

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SoftwareMaven
Twitter's value is going to stem from using that huge amount of data (yes,
including where you had lunch) to power analysis for things like sentiment. I
really think the "sponsored tweet" crap rdilutes their true value because it
deputes the natural conversations that are critical for the validity of that
analysis.

~~~
revorad
Sentiment analysis using Twitter data mining is often mentioned as a business
opportunity. Can you give any examples of where this has worked?

~~~
SoftwareMaven
I've had conversations of some sort with each of these. They will give you a
starting point at least; I'm sure there are many, many more.

<http://www.radian6.com/>

<http://www.allegiance.com/>

<http://www.attensity.com/>

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dkrich
How can a company that's worth $8 billion need an injection of $400 million?
Simple- it ain't worth $8 billion.

Can we please put a moratorium on pegging valuations on companies that are
still reliant on raising funding rounds? We're not talking about a company
that produces industrial machinery in large factories. We're talking about a
micro-blogging website that's been in existence for four years.

~~~
harryh
Well, if someone is willing to pay 400M for 5% of the company it certainly
seems like it's worth 8B total. This is how markets work. How else do you
propose we put a value on things?

~~~
dkrich
That's not a market valuation. That's one group's overinflated opinion of
Twitter's value.

A market valuation is obtained by offering a good for sale to a public group
of people who, in concert, determine a fair value over a certain period of
time.

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entrepreneurial
Interesting to note. Twitter has an estimated monthly user base of 40-70
million ([http://www.quora.com/How-many-active-users-does-Twitter-
have...](http://www.quora.com/How-many-active-users-does-Twitter-have-
monthly?q=active+users+on+twitter)). That said, they are valuing each customer
at between $200-$114 each. Just thought I would put that out there...

~~~
bane
Good point.

It's fun to do the popular comparison of Twitter vs. Facebook as well.

It's interesting to note that in terms of revenue, Facebook is pulling in
around $5/user/year right now. But their valuation per user is around
$114-$143 (currently $80-100 billion).

<http://news.ycombinator.com/item?id=2969934>

FB claims 700+million users, with 600million active.

Twitter claims 175million users but going by your metrics a much lower
percentage are active.[1]

Given these numbers and a common metric of valuation over 5 years (and the
assumption of no more user growth...I know it's not realistic but it makes the
math easy), FB has to figure out how to multiply $25/user (over 5 years) by 4
to 6.

Twitter has a _much_ steeper hill to climb to justify their valuation. Not
only do they have less information about a user (so targeting advertising is
harder), but FB has other methods of revenuing a user, online apps, games,
etc. Twitter hasn't even proposed a revenue model outside of limited, randomly
sampled, access to global tweet streams (which are likely not a major revenue
driver in anybody's business plan) and recently announced paid forced tweets
just showing up in people's streams (which I'm sure will go over well
_sarcasm_ ).

To make matters worse, their experience doesn't really require people to come
to their website. And it appears most activity is not via the site, so
embedded adverts are going to be very hard.[2]

I can't figure out the math on this to be honest. Hell, I can't figure out the
math on FB, but they look positively reasonable compared to Twitter.

[1] this article [http://www.businessinsider.com/chart-of-the-day-how-many-
use...](http://www.businessinsider.com/chart-of-the-day-how-many-users-does-
twitter-really-have-2011-3) uses follows as a metric for "active" but arrives
at ballpark similar numbers.

[2] a little old but [http://blog.programmableweb.com/2010/04/15/twitter-
reveals-7...](http://blog.programmableweb.com/2010/04/15/twitter-
reveals-75-of-our-traffic-is-via-api-3-billion-calls-per-day/)

~~~
eokuma
I completely agree. Twitter's motto of simplifying their current product
definitely steepens the hill to justify their value. But then again, the whole
concept behind Twitter is a simple microblogging service. Very hard to
monetize this unless they expand...

 _Quote: “We’re thinking about how we can simplify the product even further.
That’s what makes it different. [We're looking] for what can we ‘edit’ out.”
He said. “These other products are adding services and we are trying to
simplify ours down.”_ [1]

[1] [http://techcrunch.com/2011/09/08/twitter-ceo-on-google-
its-c...](http://techcrunch.com/2011/09/08/twitter-ceo-on-google-its-
complicated/)

------
veyron
What do twitter's revenue / profit numbers look like? Are they profitable at
this point?

~~~
epicviking
I've seen nothing to indicate they've seen a profit since 2009

~~~
getsat
I know they were profitable (heard from Twitter employees during lunch) in
very late 2009 right after Bing and Google decided to pay them tens of
millions of dollars each month for access to realtime Tweet data. They only
had ~150 or so employees at the time.

No idea if they're still profitable, and the Google deal has since been
canceled.

~~~
veyron
Does Bing still pay for access to the data?

~~~
getsat
No clue, sorry.

I imagine Google didn't bother renewing because they're hoping to get
interesting data from Google+ users.

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suking
I hope this doesn't turn into a Grouponesque company and get slammed for
cashing out while not being profitable.

~~~
shoham
This doesn't seem like a totally unfair valuation to me.

~~~
0x12
8 billion is a lot of future profits.

~~~
shoham
Well, you'd need 400 Million on profit for a fair $8 Billion valuation (at
20-1 P/E). I don't know what Twitter's current ad revenue is, but I think that
having sponsored tweets is a good idea, as long as I don't get emails from
Twitter featuring sponsored Tweets (and if sponsored Tweets are something
everyone can buy). Having ads mesh in with the main content of your site is, i
believe a winning formula (this has been a great is part of Google's success).
I think that $8 Billion at this point is more reasonable than lets say $80
Billion at this point for Facebook, but we shall see.

