Filed under: Microblogging
Keep hype alive : Twitter raises more pocket change
Twitter -- everyone's favorite plucky little micro-blogging service -- is making room in the bank for another $50 Million dollars in venture capital money. In and of itself, that's not all too surprising. What is shocking -- utterly mind blowing in fact -- is the valuation at which Twitter raised all that new scratch. In case you're unfamiliar with venture capital, valuation and all this money raising mumbo-jumbo --and, I wouldn't blame you if you were -- let's look at what that $50 million means. When VCs buy in, they're taking a chunk of ownership for a price. If you had a company and I gave you $100 for 1% ownership, your valuation -- what we agree the company is worth -- would be $10,000 (100% times $100). Twitter's one billion dollar valuation means that 1% of the company has an agreed value of ten million dollars.
Big deal right? Twitter is *hot*. Why am I hating on Twitter for raising some ducats, you ask? Well, I'm as big a fan of Twitter as the next guy. Heck, I even got engaged on Twitter. But a billion dollars is a whole lotta dough.
One billion dollars is:
- 9,607 - 2009 Mercedes S550 4Matic AMG Sedans (A new one each day for 26 years)
- One quarter of Marvel Comics (Disney just paid $4 billion to purchase Marvel)
- One year of health insurance for 308,000 people.
- The average yearly U.S. tax liability of over 100,000 people.
- Enough to buy 1,428,571,428 people a soda
- Or 285,714,285 of your closest friends a happy-hour beer.
Certainly anyone pulling such giant purse strings must have done their research. Is there any possibility that Twitter is actually -- or will ever be -- worth this much?
So, just how good at time waster games are you? Think you've got the stuff? Well, The World's Hardest Game 2.0 doesn't think you do.
Yes, amazingly, it's possible to have a sequel to a game called "The World's Hardest Game". It doesn't seem logically possible, since if the first one was actually the world's hardest, how could another one come along and share the moniker? It made me doubt the name in the first place. That is, until I tried the game.
The mechanics of the game are very simple. You are a small red square, ...
Reader Comments (Page 1 of 1)
tide3456 said 10:15PM on 9-16-2009
News Corp bought MySpace for 580 million, Micorsoft got 1.6% of Facebook for 240 million so what's the problem with a billion dollar valuation for Twitter.
"Enough to buy 1,428,571,428 people a soda"
I don't see the relevance of this.
Reply
Grant Robertson said 1:42AM on 9-17-2009
And, NewsCorp has faced significant difficulities capitalizing on MySpace at the level they anticipated. In fact, they just went through a big round of layoffs. Oh, and, MySpace had a revenue model the day NewsCorp bought them. So, it's difficult to compare.
The MS-Facebook deal wasn't a 15 billion dollar valuation as was widely reported. It was $240 Million for 1.6% of the company *and* an expanded ad deal making Microsoft the exclusive ad provider to Facebook until 2011. At the time (and maybe less relevant now) break even numbers to Microsoft's ad unit, especially when they tie up an exclusive, meant keeping Google out of a very large chunk of pageview inventory. They did a similar (yet much less costly) deal with Digg. Oh, and.. both Facebook and Digg had a revenue model. Facebook -- as announced this week -- is even free cash flow positive. Twitter is jut burning cash right now, and really haven't elaborated well on their plans to turn microblogging into a high margin business.
I normally don't dig into arguing about venture capital deals, there's a lot that goes on inside which no one knows about besides the principals, and Venture Beat can do a much better job plying that kind of information out of an unwilling exec. What bugs me about this one is, Twitter has no announced model that makes sense. It's just sort of this "secret", where Biz and Ev kinda say "Wink, we've got some ideas.. you'll see."
I'm not the most accomplished tech "journalist" around but, I've been doing this long enough to know that secrets, especially ones held far to long, often disappoint once they become public. The hype machine snowballs out of control, and you can't create the value or the model to match the hype.
michas_pi said 10:19PM on 9-16-2009
"ducats"
Reply
Grant Robertson said 1:45AM on 9-17-2009
Danke schön! Changed.
michas_pi said 3:51AM on 9-17-2009
@Grant Robertson:
Bitte schön!
allonblack said 11:26PM on 9-16-2009
They must have a stunning plan for profitability. I'm curious to see how it pans out, though I can't help but be very, very skeptical. It's akin to attempting to make money off of irc servers.
Reply
allonblack said 11:27PM on 9-16-2009
Also, do they actually hold any patents?
Todd said 9:21AM on 9-17-2009
"...Is there any possibility that Twitter is actually -- or will ever be -- worth this much?"
Much more than that when if factor in the revenue Twitter takes away from the phone companies. AT&T charges $1,300.00 per megabyte for text messages:
http://government.zdnet.com/?p=3991
...so how many Twitter DMs, how many tweets in general, have been sent that would have otherwise been text messages? At $1,300.00 a meg, tweets have robbed the telcos of multiple billions of dollars.
Reply
Grant Robertson said 8:56PM on 9-17-2009
I see where you're going Todd. That would make sense, if Twitter made any money being a replacement for overpriced SMS. As it stands, Twitter actually burns money by providing the SMS gateways, as they pay for those messages, instead of the user. (Albeit at considerably less than $1300 per megabyte, which is a little bit of a misnomer.)