Do They Make Any?
Facebook’s courtship with Twitter in the past few weeks has officially ended after Evan Williams, the founder and CEO of Twitter confirmed on Tuesday that there would be no marriage with Facebook. The web world has been abuzz with news recently about Twitter’s reported refusal for a $500 mostly stock offer from Facebook. Both social networking platforms are yet to turn profitable and this raises several questions about how viable these are as propositions for investors. There is certainly a point in a way Mr. Williams envisions Twitter’s prospects in the coming years. He has clearly stated that Twitter would be looking to monetise its platform before such an association and if his strategies to turn Twitter profitable work, then there could be a higher price tag on Twitter than what Facebook is currently offering.
Twitter, a simple micro-blogging platform built on Ruby-On-Rails, has been gaining popularity since early 2007. Started with a $20 million capital raised from Venture Capitalists, Twitter allows users to broadcast messages up to 140 characters through its platform. With an estimated 6 million global users, Twitter is fast catching up with some of the other popular social networking sites although it lags behind miles in comparison with the massive 120 million user base of Facebook. Moreover, of the 6 million estimated users, only a fraction of them tweet regularly. Despite a fairly decent subscriber base, Twitter like most social networking platforms, is struggling to translate its success into profits, although Mr. Williams foresees the opportunity to monetise the platform in the next couple of years. However, one of the first tasks Mr. Williams has identified is to stabilise and improve the Twitter platform.
Facebook has its own challenges to turn profitable. Despite having 120 million registered users and consumer data which is extremely valuable for marketing, Facebook has failed to achieve the desired levels of success. It offers a great platform for businesses to market themselves by leveraging the options of setting up free business pages to interact directly by fostering communities with the target base on a personal level. It also offers an opportunity for businesses to advertise for a fee, although businesses might find that Facebook offers little return on money spent on advertising.
Given the current economic climate, it’s a huge surprise that Facebook is throwing $500 million weight of stock and cash on a smart tool which has, for the moment, no revenue potential. The $15 billion valuation, when Microsoft bought into a piece of the Facebook pie, seems to be extremely overvalued. If Facebook’s stock were to be revalued now, Twitter would loose much of the value of the stock, considering bigger technology companies like Google and others have seen their stock values eroding in the recent past. And the biggest irony is, Twitter refusing such an offer! This, despite Mr. Williams’ assertion that there are no business people among Twitter’s 25 strong team, which could actually put it on the path to economic success.
If past successes are anything to go by, then Google certainly is a beacon of hope. As most of us would already be aware, the seeds to Google’s growth were sown back in 1998 when Google developed an incredible product – a better search engine. And for nearly two years, they ran from pillar to post trying to convince venture capitalists to invest in an idea which absolutely had no revenue channels. Of course, it did benefit from the dotcom boom and fortunately, their revenue potential was realised through another smart product – Adwords, which literally is the driving force behind Google today.
Undoubtedly, both Facebook and Twitter have been successful in capturing user attention. How successfully they translate this attention to bank balance is a matter of curiosity, which depends on efficient leadership and only time will tell this. One thing is certain. They might not make any money for their founders but it certainly does make you less productive in the workplace!
