Twitter closing another massive $400M round | Hacker News Reader

Twitter closing another massive $400M round

venturebeat.com

27 pointseokuma27 comments

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.

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.

I feel like an important part of my comment still stands: I don't think Twitter itself is particularly well positioned to lead a market like this. It's nearly as easy for a 3rd party to scrape from Twitter and do the same type of analysis you're talking about so I'm not seeing real competitive advantage there.

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

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/

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.

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?

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.

Over five years, but your point is well-taken.

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...). That said, they are valuing each customer at between $200-$114 each. Just thought I would put that out there...

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... 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...

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...

Earlier today they just claimed to have 100 monthly actives. http://thenextweb.com/twitter/2011/09/08/twitter-100m-users-...

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

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

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.

Does Bing still pay for access to the data?

No clue, sorry.

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

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

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

8 billion is a lot of future profits.

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.

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

Based on what calculation?

I've got to imagine that they can parlay their sponsored Tweet concept into a mult-billion dollar a year revenue stream. If not, forget it, but I actually like the concept of sponsored Tweets (from an advertiser's perspective, I like that the content of the ad will look a lot like the main focus of the site -- regular Tweets.)

I don't know what kind of revenue Twitter has right now, but if they can get anywhere near $2 Billion a year (with lets say a 25% margin), then at a 20-1 P/E that would be a $10 Billion valuation. Only time will tell, Twitter may be a fad, but the price seems more reasonable to me than Facebook at $80 Billion.

> I've got to imagine that they can parlay their sponsored Tweet concept into a mult-billion dollar a year revenue stream.

It's worth noting that the ultimate basis of the valuation calc is based on what you "imagine".

This just seems more reasonable to me than an $80 Billion Facebook price tag. I'm not actually a big Twitter fan, but it's already an advertising device, so to me it makes sense to have some paid ads as well -- and I like ads that are similar in look to core content (from a business perspective I like this...).

Yes, my rationale is more based on sense than on any revenue data as Twitter doesn't have much revenue, and doesn't disclose anyway.

Again I like that their ads are going to look like their core content (I think of Adwords, but based on user interest, instead of intent).

More about $400 going to insiders...

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