While their growth is phenomenal and the service is great (though not really anything new) what bugs me a little about the numbers is it seems we've learned nothing from the financial sector and I'd like to see that touched on more. What we have here is a company with no revenue model that we know of having millions of dollars dumped into it because of what it's been valued at. Even though that value is not based on actual value but rather an imagined value that could plummet virtually overnight.
I assume a build to sell model was adopted by the team at some point because basically from the stats we are looking at exactly why the economy collapsed.
Tammy Camp
· 2 months ago
Well said Jason. I completely agree with you.
wolfmanjeffrey
· 2 months ago
What concerns me is what’s going to happen when twitters VC start calling them on the returns. Who are these guys spooning with that they can get this kind of money without an investor exit plan or even a profit projection? If they cant product a profit soon there going to ruin the VC market for the tech industry for the rest of us for a very long time!
sidharth
· 2 months ago
You said "Twitter has yet to make a single cent in profit" > Leave profit aside but have they even made a single cent of revenue ?
Carlton Flowers
· 2 months ago
Many pple think that Twitter is a waste of time or something to amuse the self-absorbed. The fact that it has not turned a red cent of profit seems to reinforce these beliefs. But if this were the case, we've got a truckload of stupid people with nothing better to do with their money than to throw it down the Twitter rabbit hole. I don't think this is the case. The valuation of Twitter at the $1 billion tells me that there is value here, and those betting on Twitter believe that it will become an integral part of the way we communicate in the future. That doesen't seem like such a stretch to me, since it has already become a vital part of our society. I'm confident that the company will make the transition to a profitable outfit in the near future.
Tammy Camp
· 2 months ago
Twitter's valuation of $1 Billion is completely schemed up by whomever is raising funds for Twitter. That is how they sell it to the investors and potential buyers.
"Invest in Twitter because the price per share has gone up 239,619%! We will continue to see growth so you better invest now!"
How can you put a valuation on a private company that has not made a cent? Especially at $1 Billion. One word -- Ostentatious! It is just this simple - If you don't have a monetization scheme, then you don't have a business. Don't get me wrong, I LOVE Twitter and use it everyday. However in terms of finance, it just doesn't add up.
Name
· 2 months ago
Cool story, bro.
tyrewebdesign
· 2 months ago
Very interesting. I wonder when they plan on implementing the profit making portion.
Andy Taylor
· 2 months ago
Ak, they're going to be piling on a load of ads sometime in the future.
barringtonarch
· 2 months ago
i wonder what their first monetization step will be?
Go Themes
· 2 months ago
some revenue ideas A) create an official iphone app for profit B) have a pro version with a yearly fee. NO ADS!
Chris
· 2 months ago
Why would anyone pay for a Twitter app when they have an open API and there are a million free apps for it?
Roger Toennis
· 2 months ago
"No ADs"? What ads are you talking about? The ads tweeters post to their streams for the businesses they work for or own?
Kind of tough to sort what is an ad and what isn't.
I think they will start offering advanced content filtering and follower connection capabilities as part of the service and charge a premium subscription fee for those.
Apple has it's Genius service for recommending music to me and also setting up smart playlists. If twitter had a Twitter Genius feature that did that and made it easy for me to get right to content and tweeters I am likely to be interested in and I would pay for that.
Zee.
· 2 months ago
nicely done Ben
NielDLR
· 2 months ago
Woah that's impressive. Either something big is going to happen, or Twitter will forever play the Duke Nukem: Forever kind of game. Baffles me that they haven't made any profit yet.
Liam Daly
· 2 months ago
Wow impressive stats
Jared O'Toole
· 2 months ago
Pretty crazy and seems over-valued. For new business owners though don't try to go after the same model. You can monetize things early on with the right plans. It'll be interesting to see the long-run though. Never before have companies been valued at a billion dollars before making a dime. Feels like something will give at some point.
bitlockers
· 2 months ago
Wow impressive
iTbay
· 2 months ago
Article would be gr8 explaining the 1 billion valuation , which imputed, has future profits in valuation. There is a * for price per share but no calcualtion or explaination of how itts determined
Aysar Gharaibeh
· 2 months ago
I think that it is amazingly nice of them, and cool to not do this for profit.
wolfmanjeffrey
· 2 months ago
Twitters founders are beginning to remind me of a unemployed 38-yesr-old living in his parents basement. They barrow money from there folks and say “yeah, I’ll pay you back when I get a job” and the parents just chuckle knowing they’ll never see that happening anytime soon.
@jkerrison
· 2 months ago
Great post. Thank you. I follow you guys on Twitter. You pose the question, how can Twitter be worth what it is, if it hasn't made a cent? The implications are more direct targeted advertising or premium services. The big gamble is an obvious one-- would people stop Tweeting? I'd rather pay a dollar a day than have adverts tweeted to me. Tweeted ads would take away from the conversational engagement Twitter is known for. Again, thanks for the great info.
blastoff network
· 2 months ago
impressive stats not so impressive about making money
How will Twitter make money? What people fail to see is that Twitter has a "real-time" search. How long does it take for Google to pick up on something after it is posted unless it is aggregated news it takes a long time. The twitter search is amazing. I use it to find out what people are saying about certain movies or restaurants. I can honestly see Twitter using their search to generate a massive amount of money in no time. There are millions of Twitter users who don't even know that Twitter has a separate page for search.
Erik
· 2 months ago
"5. Twitter has yet to make a single cent in profit. We’ll let you be the judge of what that means. Let us know your thoughts in the comments. "
That will eventually be part of their downfall. I mean, if I had money, I'd rather give to like, a cancer-research organization than a superfluous social media website.
GoingLikeSixty
· 2 months ago
Twitter value is OP $ (other people's money) How they continue to convince investors to pump in cash with absolutely no profit just boggles.
Brock
· 2 months ago
Why does anyone think Twitter is worth shit? Twitter is blogging platform with an open API and a 140 character posting limit. Only it's worse than blogging because it's got a 140 character limit and it's on a centralized service, rather than de-centralized protocol like RSS. That's why Twitter goes down and "the blogosphere" does not.
As the post says, Twitter has not made a cent of profit - and it won't. Not as long as it remains what it is today. And now with RSSCloud and Pubsubhubbub it doesn't even have a monopoly on "real time." Any blogging platform (like Blogger) is just as real time, and I get "push" updates in Google Reader.
There's always the possibility that Twitter will reinvent itself somehow, in the same sense that Google reinvented itself from "a search engine" to "exclusive ad wholesaler to a search engine". That still might happen, but it hasn't happened yet.
Helen
· 2 months ago
What the heck!? 1 billion!!! Jeeez.... I wonder what their plan is on making $$$ finally ... Are they just going to sell it .... seems like the easiest solution .... wow...
Mark
· 2 months ago
Yeah. $1 Billion.
If I could convince half the people I am following to get onto Identi.ca instead I would drop Twitter over night.
Ryck Lent
· 2 months ago
How about a Twitter Buy Out clock? Great iPhone app! It would need multiple dials: - $ Daily Burn Rate - $ Venture Funding + $ Revenue - $ Total Burn = $ Available Funding - $ Valuation / $ Available Funding = Wishful Thinking Ratio (e.g. $1B / $100M = WTR of 10) - $ Available Funding / $ Daily Burn Rate = Days of Survival Left - $ Daily Burn Rate / Daily Tweet Volume = $ Cost per Tweet (or revenue per tweet needed to break even. How much would that annual sub cost?)
OK ... who's got the burn rate? We can model the rest.
mykey1
· 2 months ago
You are right on the money! Let's hope the burn rate is small enough for this party to last for awhile. In the meantime, marketers should get their followers onto an email list that they own! At least that won't go away in case Twitter does!
mykey1
· 2 months ago
It's not unusual for a company to show no profits in the early stages of growth. If you look at Amazon.com, they had no profits for years but grew a huge distribution channel and now they are raking it in. Hopefully that's what will happen with Twitter.
Wow..super cool..exactly the kind of numbers that caused the housing boom, recession, etc...all notional..
at least this time I am happy..only those investors with no idea where they been flushing their millions into will be gone...I'm happy for earth..
sharin
· 2 months ago
Interesting breakdown. Thanks for the great info.
William Carleton
· 2 months ago
Focusing on the valuation by which the as-converted equity percentage was set for the latest round is probably not the right number to focus on. The number to pay more attention to is the liquidation preference. With respect, more useful numbers on Twitter's financings in this respect can be found at my blog, http://bit.ly/XNbEE
edh
· 2 months ago
Interesting stuff. Thanks Ben.
One question - Are the dates correct for the series A and B rounds? If so, they took $97,500 on 11th July 07 and then $5.5m 6 days later?! Must be the shortest gap between rounds of all time!
jiberjab
· 2 months ago
Interesting post Ben.
Brad_Williamson
· 2 months ago
The most intriguing story of Twitter's history will be the day people begin to realize the fad is fading FAST.
stevepohlit
· 2 months ago
I suppose it is possible for funding of this magnitude without a positive cash flow and profit strategy, but I doubt it. I really hope a sound one is in place and the fact that it is not know is not relevant. Twitter is enjoyed and loathed by so many. Continuous growth and value is more likely with positive cash flow.
Jeremy Campbell
· 2 months ago
Wow those are certainly some interesting stats, thanks for digging those up Ben, there sure aren't many companies that can raise over $150 million without making a cent in profit. They must have some very impressive future projections to show investors.
I wonder how many new users Twitter is adding/day right now?
Naomi
· 2 months ago
I wonder why they didn't start off like this site did, with the idea of everyone making money from day one: http://www.sokule.com/BNJEnterprises
Mere Mortal
· 2 months ago
Isn't this exactly the same sort of hype that's gotten the economy into trouble in the first place? a runaway train called h.y.p.e. and it just runs down the same track as before...it doesn't matter what you name it or what sector it is but universally it's known as BS.
Steve Fisher
· 2 months ago
It's interesting how Twitter can be so highly valued with no real sales or advertising revenue.
It will be more interesting to see how Twitter will evolve in the future the profit arena.
Sooner or latter sales will need to be generated to pay investors.
But what a return on investment so far, it's just simply amazing.
Matt Shuff
· 2 months ago
Twitter won't generate profit. It will be bought by someone who will envelop Twitter and make it a part of their brand-building and customer experience content...Google or Microsoft? The value of Twitter is not the intrinsic value of Twitter.
All Comments
I assume a build to sell model was adopted by the team at some point because basically from the stats we are looking at exactly why the economy collapsed.
"Invest in Twitter because the price per share has gone up 239,619%! We will continue to see growth so you better invest now!"
How can you put a valuation on a private company that has not made a cent? Especially at $1 Billion. One word -- Ostentatious! It is just this simple - If you don't have a monetization scheme, then you don't have a business. Don't get me wrong, I LOVE Twitter and use it everyday. However in terms of finance, it just doesn't add up.
A) create an official iphone app for profit
B) have a pro version with a yearly fee. NO ADS!
Kind of tough to sort what is an ad and what isn't.
I think they will start offering advanced content filtering and follower connection capabilities as part of the service and charge a premium subscription fee for those.
Apple has it's Genius service for recommending music to me and also setting up smart playlists. If twitter had a Twitter Genius feature that did that and made it easy for me to get right to content and tweeters I am likely to be interested in and I would pay for that.
You pose the question, how can Twitter be worth what it is, if it hasn't made a cent? The implications are more direct targeted advertising or premium services. The big gamble is an obvious one-- would people stop Tweeting?
I'd rather pay a dollar a day than have adverts tweeted to me. Tweeted ads would take away from the conversational engagement Twitter is known for.
Again, thanks for the great info.
http://kaching-kaching.info
http://Evolvhealthy.com
What people fail to see is that Twitter has a "real-time" search. How long does it take for Google to pick up on something after it is posted unless it is aggregated news it takes a long time.
The twitter search is amazing. I use it to find out what people are saying about certain movies or restaurants.
I can honestly see Twitter using their search to generate a massive amount of money in no time.
There are millions of Twitter users who don't even know that Twitter has a separate page for search.
That will eventually be part of their downfall. I mean, if I had money, I'd rather give to like, a cancer-research organization than a superfluous social media website.
How they continue to convince investors to pump in cash with absolutely no profit just boggles.
As the post says, Twitter has not made a cent of profit - and it won't. Not as long as it remains what it is today. And now with RSSCloud and Pubsubhubbub it doesn't even have a monopoly on "real time." Any blogging platform (like Blogger) is just as real time, and I get "push" updates in Google Reader.
There's always the possibility that Twitter will reinvent itself somehow, in the same sense that Google reinvented itself from "a search engine" to "exclusive ad wholesaler to a search engine". That still might happen, but it hasn't happened yet.
If I could convince half the people I am following to get onto Identi.ca instead I would drop Twitter over night.
- $ Daily Burn Rate
- $ Venture Funding + $ Revenue - $ Total Burn = $ Available Funding
- $ Valuation / $ Available Funding = Wishful Thinking Ratio (e.g. $1B / $100M = WTR of 10)
- $ Available Funding / $ Daily Burn Rate = Days of Survival Left
- $ Daily Burn Rate / Daily Tweet Volume = $ Cost per Tweet (or revenue per tweet needed to break even. How much would that annual sub cost?)
OK ... who's got the burn rate? We can model the rest.
http://www.seodoom.info/2009/09/what-is-meant-b...
at least this time I am happy..only those investors with no idea where they been flushing their millions into will be gone...I'm happy for earth..
One question - Are the dates correct for the series A and B rounds? If so, they took $97,500 on 11th July 07 and then $5.5m 6 days later?! Must be the shortest gap between rounds of all time!
I wonder how many new users Twitter is adding/day right now?
http://www.sokule.com/BNJEnterprises
It will be more interesting to see how Twitter will evolve in the future the profit arena.
Sooner or latter sales will need to be generated to pay investors.
But what a return on investment so far, it's just simply amazing.