(Note: this was written back in 2009)
My friend and ex-colleague at Joost, Steve Allen, just tweeted about a great article in the NY Mag about Twitter (http://tr.im/flai). Long and short of it is that Twitter isn’t making money. Yet.
Now, we’re living through the biggest economic downturn in, well, ever. This has led me to begin to wonder: why, when something good comes along on the web (and Twitter is good) does it immediately become necessary for it to be worth 100′s of millions and show hyper-growth in revenues? I don’t know Twitter’s founders, or what drives them personally, but I hope they don’t get pressured into a corner to start bolting on revenue-generating features that detract from the user-experience.
I’m no hippy, I’ve run my own business and appreciate cashflow and margins more than most. What concerns me is the rush to take something promising and make it a goliath. Along this path what tends to happen is the original team become disenfranchised, the culture within the company changes and people leave. This happens normally in the lifecycle of any startup, but is accelerated in a hyper-growth strategy. Users of such a powerful social tool as Twitter are perhaps the most sensitively attuned to changes – if the product begins to morph away from its key USP, enabling a culture of sharing information, people will leave and look elsewhere.
Will Leitch states in the article, relating the story of how Janis Krums started the tweet coverage of the Hudson plane crash:
In the midst of chaos—a plane just crashed right in front of him!—Krums’s first instinct was to take a picture and load it to the web. There was nothing capitalistic or altruistic about it. Something amazing happened, and without thinking, he sent it out to the world. And let’s say he hadn’t. Let’s say he took this incredible photo—a photo any journalist would send to the Pulitzer board—and decided to sell it, said he was hanging onto it for the highest bidder. He would have been vilified by bloggers and Twitterers alike. His is a culture of sharing information. This is the culture Twitter is counting on. Whatever your thoughts on its ability to exist outside the collapsing economy or its inability (so far) to put a price tag on its services, that’s a real thing. That’s the instinct Stone was talking about. If the nation has tens of millions of people like Krums, that’s a phenomenon. That’s what Twitter is waiting for.
It is a ‘real thing’, just not one that can necessarily make the company as valuable as Facebook or Microsoft. Worryingly, the article mentions that a recent TechCrunch report claimed the founders signed a term sheet with another fund that values the company at $250 million. That’s a lot of virtual value to live up to.
There are many, many good mid-sized companies out there, tunring over reasonable profits and giving out worthwhile dividends to shareholders. If Twitter can do that who’s to say it’s a failure (other than the VCs who’ve already put in $20 million)?
Not the twitter user-base that’s for sure.