

Why Twitter Is Massively Undervalued Compared To Facebook - pathik
http://techcrunch.com/2010/10/16/why-twitter-is-massively-undervalued-compared-to-facebook/

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michaelchisari
I would make the argument that both Twitter and Facebook are massively
overvalued, only Facebook is much moreso.

I'd want to see a solid revenue model that produced tangibly large profits for
both of them before I'd stop being skeptical about their valuation. So far, I
only see speculation, and given the effect of speculation in other, more
tangible markets, I'm extremely wary.

~~~
michael_nielsen
Facebook's revenues this year are expected to be in the neighbourhood of $1
billion ([http://www.insidefacebook.com/2010/06/22/exclusive-
discussin...](http://www.insidefacebook.com/2010/06/22/exclusive-discussing-
the-future-of-facebook-and-the-facebook-ecosystem-with-ceo-mark-zuckerberg/)
), a near doubling from last year. Given that, their current valuation is
totally unsurprising.

~~~
michaelchisari
With $1 billion in revenues, that puts their valuation at over 33x their
revenue. And their operating costs are also off the charts, so that's where
questions about profitability come in, since investors expect to be rewarded
at some point.

~~~
iamcalledrob
You might be interested to know that Facebook is turning a profit, and has
done for a while.

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koski
I often read this "Facebook is turning a profit" but could someone point me a
reliable link where to read more about this?

Or at least, does anybody know how much are they making profit?

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mikeryan
Their were a bunch of articles late last year where they we're claiming that
they were cash flow positive

[http://www.wired.com/epicenter/2009/09/facebook-makes-
money-...](http://www.wired.com/epicenter/2009/09/facebook-makes-money-
tops-300-million-users/)

This has been conflated with profitability. (Not that its too different)

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jonknee
Twitter doesn't get a billion organic searches a day, so his numbers are far
off into fantasy land. That number (if valid) counts all the auto-refreshes
("X new tweets"), trend browsing, API access from apps like TweetDeck, etc
etc. Google makes so much per search because people actually sit down and want
to find out something.

Having an auto-refreshing search for your company name that generates hundreds
of searches a day isn't going to ever bring a dime of revenue in for Twitter.
To get realistic numbers you'd have to first find out how many real "I want to
find" searches are happening and then see what they are searching for. If I'm
typical, the search traffic won't be super lucrative.

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jdp23
BREAKING: Twitter investor asserts that Twitter is undervalued.

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gloob
To be fair, if I thought Twitter was undervalued, I'd probably be interested
in investing in Twitter as well.

~~~
dasil003
And after investing your interest would be the perception that Twitter is
undervalued...

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al_james
The author argues that the 'interest graph' is more commercial than the 'real
friends graph'. True. However its clear to me that the 'real friends graph' is
much more useful to real people. Facebook's 'real friends graph' is a useful
tool, helping me keep track of people in my life. The 'interest graph' is a
much less useful thing.

~~~
webwright
I don't think the authors would argue with you that a friends graph is more
useful to real people. I think the theory is that an "interest graph" is more
commercially valuable. If you follow Apple, you're very targetable. If you're
friends with your college buddies, you are not.

I think Facebook realizes this-- which is why you're seeing them offering
"like" buttons, share buttons, embeddable commenting functionality, etc. I
honestly think Facebook is doing as good a job as Twitter at capturing
interesting nowadays... And for a broader audience.

~~~
al_james
Yes I agree. My point is that _just_ being a intrest graph service limits the
service to the early adopter tech crowd. Facebook are in a much stronger
position as (normal) people are there already with their friends, and they can
grab the interest graph as well.

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jfarmer
I'm skeptical that Twitter "lends itself brilliantly to commerce."

First, Twitter pulled the plug on their @earlybrid project
(<http://twitter.com/earlybird>). I know some companies who ran deals through
them and they produced disappointing results.

Any story about why the future of Twitter is commerce will have to account for
that.

Second, there have been major changes in online commerce over the last three
years, most obviously with companies like Groupon and Gilt.

Commercial activity on Twitter seems a little "tabula rasa" right now. There
are companies out there actively changing the ecommerce landscape. Twitter has
massive usage, but it's ability to augment commerce is still a promise.

Facebook has had a much bigger impact in online commerce. Facebook Credits are
going to be everywhere. You can already buy them at Target, or whatever.

Groupon's marketing spend was dominated by Facebook ads for a long time, and
they (along with Zynga) more than doubled the CPC for Facebook ads over the
last two years. There are two $1Bn+ companies built right off the back of
Facebook.

What's the biggest company built on Twitter? I can't think of a single
interesting one.

The sociology of Facebook doesn't support "commerce" in the sense of making FB
posts about things you've bought, but I don't know that Twitter does either.
So we're talking about monetizing things indirectly, e.g., running ads
targeted against their "interest graph." What Zynga and Groupon did were
essentially find a better way to monetize Facebook users than Facebook itself
had, and acquired those users by paying Facebook for the privilege.

It all hinges on Twitter's advertising product. We'll see how compelling it is
and if someone can build a Zynga or Groupon on top of Twitter the same way
those companies were built on Facebook.

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SteveMorin
I am not really sure twitter is undervalued actually, compared to risk. I
believe it has potential to be huge, but they haven't cracked the revenue nut.
I believe a number of smart minds including Naval Ravikant and Adam Rifkin
believe if they "get it right" they can be worth much more. I agree with the
potential of twitter, but I don't believe they figured it out yet. It's their
current value vs risk that they'll figure it out. Facebook on the other hand
is bringing in revenue with a lot of potential to bring in a lot more.

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athst
I totally agree with this. Twitter has created an entire communications
platform, and its potential for business and monetization is only getting
started.

Whereas maybe 3-4 years ago I spent a bunch of time on Facebook, nowadays I
find myself spending all of my time on Twitter because the people and
interactions there are so much more valuable and interesting. You don't need
to go to news websites or blogs anymore - all of the content comes to you.

Surprised to see all this anti-Twitter sentiment on HN.

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jderick
Does anyone here use twitter? Can you explain how and why?

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dpcan
Thank you. If you use it, why? When? What for? How is it actually "used"
anyway? If you tweet, do you also ever read what's ... tweeted?

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michaelchisari
I found it very useful for following the Iranian uprising last year. Since
then, however, I mostly use it for updates and promotion of my open source
software project (Appleseed).

As for more intimate discussion, I've never really grokked how to use it in
that way.

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msort
This article argues for potential. But for Twitter to be as high-valued as
Facebook, it has to prove it can be adopted by average internet users. Twitter
has such a potential, yet Facebook has already been achieved that.

When I recommend Twitter to my friends, it usually goes like this:

Me: Try Twitter, it is interesting. Friend: What can you get from it? Me: a
lot of interesting updates from your favorite people and topics Friend: I
already have enough internet updates. I shall pass...

The point is that average user only has several web sites on their minds.
There much be a good reason for them to use one more web site.

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baq
if anything, twitter is overvalued...

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bugsy
I must admit that after reading the title I was not surprised to see the
disclosure at the top that the article was written by someone with a lot of
twitter stocks he's probably thinking of unloading.

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thirtyseven
Twitter is massively overvalued because it's a _fad_. Can you imagine Twitter
still being popular in 5 years? 10? What long-term potential does it have?

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njharman
facebook is making others(zynga) tons of money. twitter not so much. a company
creating a new market, new ecosystem is much more valuable. what twitter does
could be a facebook app. the converse is not true.

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okaramian
Twitter is adding value to companies for marketing purposes. What about the
old spice stuff? Or various companies reaching out to users when they complain
about a product on twitter? It's far easier for companies to do this via
Twitter than Facebook.

Maybe the value added in that case is harder for people to measure, so it's
being forgotten.

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thewordpainter
consider how many businesses are reliant on twitter.

facebook may have their hand all throughout the social graph, but twitter has
given rise to an entire ecosystem that is not going anywhere.

just think about all the social media (AKA twitter) jobs that have been
created!

