Twitter Closing New Venture Round At $1 Billion Valuation
techcrunch.com
techcrunch.com
> If they still have 30 million in the bank of the 55 million, why are they raising more money?
Answer: it's always easier to raise money when you don't need it.
Oi, that doesn't necessarily mean it's a good idea. What Twitter desperately need right now is a way to make money (and taking it from VC's don't count). If they want to justify a $1 BILLION valuation, they need a clear way to make a lot of money.
My prediction: they're looking to buy a company that they think will make them money. While one might hope Benchmark Capital might pass down some wisdom from AOL's botched "best acquisition EVAR" fiasco, I have a bad feeling about this. As it stands now, my feeling regarding their technical competence tells me the hypothetical merger will be tougher than anticipated, and history will see Twitter as the shining example of the "Web 2.0 bubble".
Facebook and Google, on the other hand, have been growing out of being useful to their users, with no comparable technical issues (I'm hoping the FriendFeed acquisition does some good things for Facebook's architecture).
1. Big User Base
2. Big Money Invested
3. ???
4. Profit!http://www.byrnehobart.com/blog/facebook-is-profitable-again...
Facebook the website is a lock-in, and a place that can be easily monetized.
Twitter has the complication that for a ton of people, twitter is just the network and not the client. Monetization of a network seems pretty hard to me... far harder than monetizing a client.
Consider that if Twitter has a huge valuation edge over (say) Yelp, they're in a position to finance an acquisition at favorable terms. Twitter's ability to execute those acquisitions could in turn feed back into its valuation.
What is that plan?
I think Twitter wants to sell a premium service to every small business in America that will render most forms of local advertising completely moot.
Ex: I (business/publisher) announce a special, you (customer/follower) receive the note and respond accordingly.
The problem is, I think, that Twitter has given away too much of the core value of the platform already (they had to in order to grow). I think it will be hard for them to create 'tools' to improve on this interaction and cause businesses to be willing to pay for it. I think this is why everyone is on the edge of their seats about this, because everyone thinks in the back of their minds that it can possibly happen but no one can easily connect the dots. From our perspective, if they do pull it off, it will seem somewhat miraculous.
But, I would point out that hypertargeted == local advertising. 74% of FB's ad revenues are from local businesses.*
But personally, I think its a good investment because I think twitter is disruptive.
Early-stage VCs look for 5-10X returns. Investors in this round are growth equity investors. They use IRR metrics. 30% IRR is generally considered a huge success.
I think they are just biding their time (they have the money) to grow it as much as possible and then either sell it off or start flipping the switches.
And I think they are just cashing out before the bubble pops and have absolutely no idea where twitter could be going nor why people are throwing money after them in metric kiloton bundles. Ofcourse they have to keep pulling bullshit like "realtime search" outta their rears because the "stake"holders want to hear something. But all I have seen in that direction was, at best, feel-good babble and not any remotely tangible vision.
"Flipping switches" is not an option either because people would simply flip their own switches - towards the next best clone.
What will they do when a competitor offers to "keep your account in sync with twitter" (tweets and followers)? Forbid it in their TOS ofcourse - and that's the beginning of the end.
Also get over the "everyone is using" myth. Last time I checked the number of twitter accounts was in the ballpark of 0,1% of the internet population. Based on their publicized, inflated figures mind you - likely including all dead and double accounts.