Twitter: Possibly Valued at $250 Million
Twitter may have signed a term sheet with Institutional Venture Partners according to a recent report on TechCrunch; a deal that will place the valuation of the rapidly growing microblogging service at $250 million.
At first glance the deal seems to contradict co-founder and CEO Evan Williams assertion last month that he doesn't want to raise money in 2009, but look a little deeper and it may just make sense.
Although Williams may not want to raise money, the only way VCs would fund Twitter in our current economic climate would be if they could see a clear and detailed business plan that solidifies its revenue model.
"We're looking at Q1 for revenues," Williams told the Churchill Club last month. "This is a change from the original, pre-economic meltdown plan," he said. "The original plan was to focus on revenues in 2010."
Clearly, the Twitter crew has been heavily invested in coming up with potential revenue models, and while they may not be able to implement them in the time Williams anticipates, a plan may just be enough to entice the VCs into giving them some breathing space.
While other startups are experiencing financial difficulties, for instance the recent cut backs at Digg and the shutting down of Pownce, Twitter appears to be making great strides. By getting on with the job, investing in Summize, working on scalability, rejecting Facebook's offer, hiring new staff and generally focusing on its product, the company is clearly experiencing phenomenal growth.
Twitter has so far raised over $20 million in funding and it appears that this time around it's likely to raise the same amount, if not more. Although the TechCrunch report did not get into details, it did cite "a source with knowledge of the deal."
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Yes, but how do they make any money?
I am amazed that anyone would give Twitter more money after seeing them do next to nothing with their last round.
If they were to start putting money to work, I can see the $250m valuation.
Twitter's business model?
If they want to go after big money, they've got to get less social and more business focused. LinkedIN has got a revenue model b/c they take advantage of big time business people who use their premium services to do research for their businesses.
With Twitter being open source, I bet they'll be a lot of premium services that aren't necessarily owned by twitter, but will allow companies do better research on themselves, competitors and do market analysis on their customers.
There could be a lot of interesting tools that search all the past tweets and see what was said, constantly monitor and organize this information...
According to Robert Scoble in his blog this comes to $42/users.
A bank makes about $35-$40/account/year.
Seems Twitter is valued more than any bank?
Just way overvalued we guess.
Although the current situation of Financial institutions is not making money.
Doesn't matter how they make money, not at this point at least.
I think we need to consider the idea that twitter has transcended web app status and moved on to radio like specturm upon which others can build upon.
Just as much as Google has moved on from company to become essentially "search", twitter started out neato concept to woah trend to ummm gotta have it.
Google gives you what's been left in the web, twitter gives you whats going to happen next in the web.
There's just been too many instances where twitter has been first to serve up and connect the masses with "instant" on such a level we've never experienced before, and baby thats crack, thats not something we the web is going to walk very easily away from.
Best example would be any media event, you will hear its real effect in twitter instantly. Plane crash, earthquake, mumbai attacks, all great examples of how massive twitter is in connecting people with the real time now. Thats just the media news angle, insert brand here, and lets fire up the twitter search- lets tap into the collective mindset of 2 million people and tune in- tell me what was on everyones mind yesterday, newyork, when we rolled out that big ad.
That power is seriously addictive and no one is gonna let that concept fade off the menu.
Now twitter itself could fade away tomorrow but the planet would demand a replacement.
I think charging users like you and me a fine for using this super connected now highway, pfft, whatever fine, probably not the best way to make money off twitter. Charging us isn't going to be how it makes money, understanding us is how its gonna make money- thats the bigger picture. Ad placement, yawn. Trivial. Ads will only hamper the quality of signal really, and twitter already has a problem with that with mass marketing mayhem pimping twitter like all get out.
If Google were to buy Twitter right now, I'd put its valuation at twice that of what they bought YouTube for, and man if they do ever buy Twitter- Google would own it all basically.
@Jmartens – There hasn’t been that much innovation on the Web for a long time - but for Twitter so this in itself shows us clearly why investors would offer them more money.
Twitter is moving leaps and bounds; it’s a brilliant easy to use tool that’s quickly moving mainstream.
I actually don’t think Twitter has yet found its true place on the Web – but it is getting close. It’s not there for people to rant and rave on, it’s not there to be used as a product pusher, and it’s not there to give the bad guys another place on the Web to hang out. I truly think that its ultimate goal is to move news and useful information quick fast and it’s just starting to get there. Take a look at their first blog post here to see what I mean.
I suspect that’s why they haven’t been pushing the business side until now – they were waiting for users to truly get what it’s about. Once it’s being used the way it was meant to be, they’ll quickly be able to monetize it.
@MattWilsontv – Although Twitter does have an open approach, I don’t believe it’s open source (such as WordPress). They use open source components and they contribute to the open source community, but Twitter is proprietary.
Take a look at these posts: building on open source and Starling
But you’re right, there are other companies monetizing on Twitter – Twitter is just waiting for its moment :)
@ Engago Team - Yeah, Scoble said 42, Owyang said 73
Bottom line? The service is valuable.
@ Dan Rockwell - Great overview, although two points; Google tells you what's been on Web, while Twitter tells you what’s happening now on the Web. Also, I think the founders have given enough to Google; now it’s their turn ;)