People tend to forget that Twitter is 3 years old and that it has tried to figure out the best way to develop its service to reach critical mass and lately to figure out the best way to turn the Web 2.0 service into cold hard cash. I’ve spoken earlier that similar to bricks and mortar companies the valuation of a business is a difficult thing to tie down between 2 private companies where the majority of the value given ie. Facebook proposing to give Twitter private stock valued at $500 million but here we have stock analysts questioning whether or not Twitter can really be valued as high as its investors had hoped.Sanford Bernstein believes that historically companies have had a hard time trying to capitalize on this technology, whether through acquisition or building it from scratch, have overpaid for technology, especially in the Web 2.0 space. The examples used are AOL acquired Netscape for $4.2 billion and eBay buying Skype for $4.1 billion We see these 2 examples they definitely haven’t paid off with AOL having written off their investment in Netscape a long time ago and Skype still struggling to become profitable.Bernstein believes that its difficult to get people to pay for a subscription service after it being free for several years. Case in point, would you have paid to use Google Search in the beginning? I think the majority of people probably would have stayed using Yahoo or Ask.com search instead.But people argue saying that Twitter might be purchased by Facebook or Google, well we see that Facebook has now their own newsfeed system and it looks more similar to Twitter, and they earn revenue from people buying the “Virtual Gifts, games, etc.” which has conservative estimates at over $50 million year, which is no slouch currently. FaceBook has had its own push back from its users for the types of advertising brought on by FaceBook. Google on the other hand you would seem a better fit, but it has had its own failure in its Orkut social network experiment and its YouTube purchase has yet to make huge revenues yet. I believe that Google with its recent strategic decisions to shut down products lines that haven’t done well.Twitter can still make money from selling the data from the streams of information they get from its users as well as limited advertising, but the main selling feature about Twitter is that is a quick blogging service 140 characters and you’re out so how long can the advertising be that the advertisers would be willing to pay for it similar to a Google?For the short term you’ll probably see continued losses at Twitter and maybe for a decade?We’ll see is what I say, but I think that in today’s venture capital world more people are recommending caution rather than running to the bridle aisle.
acquisitions, Facebook, Google, mergers, orkut, technology, Twitter, venture capital, web 2.0