Re-valuing Twitter

HipMojo on the valuation of Twitter at c $250m via a 3rd funding round of c $20m:

Twitter is making the same mistakes Facebook did, which are:

- raising money instead of generating any,
- letting the valuation get ahead of realistic business prospects which will make any M&A nearly impossible,
- thinking that the “success” its had with its obsessive, early-stage adopters can be mirrored to the broader world,
- will obsessively create valuations based on online advertising estimates even though the company is at best a communications and/or e-commerce play,
- mistaking a API for others to use as a business model
- encouraging other businesses to build applications on top of their grid, without itself knowing that their business is/will be.

There are some differences:

- Twitter is more of a mobile app than Facebook is, and mobile, while wildly speculative, is all about hype and fads with very little to show for it. On top of this, the wireless world remains a largely closed one where to become a true success you need to operate in the world of carriers, something that is impossible to pull off.

- If Facebook really wanted to, it could put Twitter out of business by pushing their own status update feature (more people have a Facebook account than Twitter will ever have).

- Lastly, while over time a majority of Web surfers might have a Facebook profile and could stay somewhat engaged with it to varying degrees, the same simply cannot be said about Twitter.

I'm normally a fan of Ashkan Karbafrooshan's stuff (he writes HipMojo) but this time I must disagree in parts - Twitter is not a social network per se, its more of a comms application system (think email 2.0) in my view, and more real time - that puts it in a different bracket to Facebook. As to raising money, they need to do it now to give them the breathing space to find a business model and there are signs that it is mainstreaming as TV personalities and Slebs come on board. Granted its risky, but the funding they are taking is pretty small beer for something that may be the next Email - if anything, this gives me some faith the "venture" bit of the VC market is still working.

As to the point about mobile - personally, I think thats how they should try to make money - people actually pay for mobile, putting a small % of the traffic it generates going into Twitter's pocket is very scalable.