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Twitter Worth $1 Billion, Easter Bunny and Tooth Fairy Are Real

by Terrence O'Brien on September 19, 2009 at 10:23 AM


Correct us if we're wrong, but didn't we get into this economic morass because banks and investment firms took unnecessary risks with money that didn't really exist? So, why, exactly, is no one pulling the alarm on the latest round of investments drummed up by the popular micro-blogging service Twitter?

Don't get us wrong. We love Twitter, use it constantly, and aren't sure how we'd waste our days without it. But the newest influx of cash, roughly $50 million, has been raised based on a valuation that puts the social network's worth at $1 billion. That's right: a one with nine zeros after it.

There are two major problems here. First, the Internet, and the world of social networking in particular, is very volatile. Trends, sites, and companies rise and fall so quickly that most online phenomena, in a matter of years, become little more than half-forgotten footnotes. Back in what seems like the Dark Ages, Friendster kick-started the social networking revolution and was a huge success. (We still remember getting excited over "friending" members of The Strokes... remember them, too?) That is, until MySpace came along and one-upped the grand-daddy of modern networking sites. And MySpace did very well for itself, too. That is, until Facebook came along and turned it into little more than a replacement for the long-forgotten MP3.com. Now, Twitter has stolen some of the thunder from Facebook, which still commands a large audience, but is certainly not the darling of the tech elite that it once was.

Second, there is the glaring fact that Twitter has not yet developed any business model, much less a viable one. Twitter has raised millions of dollars from venture capitalists -- in fact, it received $35 million in capital earlier this year -- but it has yet to make a single dime in profit. The service is free, has no "premium" options, and displays no advertising -- leaving no discernible avenues for revenue (aside from asking rich folks for it, that is).

Twitter may be particularly vulnerable to the whims of the Web, thanks to its all-too-common outages (Fail Whale anyone?). Even worse, we've already seen that most Tweeters' accounts are abandoned within the first month. We're not saying that Twitter is definitely going to collapse on itself. We just hope none of our retirement funds are tied up in it. [From: Reuters and TechCruch, via The Daily Beast]

Tags: business, top, twitter, venture capital, VentureCapital

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