January 25, 2009

Twitter Is Worth A Lot More Than $250 Million

See Also: There's No Way Twitter Is Worth $250 Million Today

Michael Arrington of TechCrunch led the weekend news cycle Saturday evening after revealing Twitter is in the middle of a funding round that could see the still pre-revenue company valued a cool quarter-billion dollars. Not only do I believe the company will end up getting the money they are looking for, but whatever investors choose to pony up could eventually be seen as having gotten a bargain - because Twitter, with the increased investment, looks prepared to 'double down' and become a must-use utility in our increasingly realtime, increasingly connected, digital world.

Despite the company's many failings, be it with uptime, developer relations, or seemingly blaming its most active users for aggressive activity, Twitter has, over the space of 24 months, cemented itself in a position where it is a critical part of the way we share information, communicate with others, and in times of news and change, can learn from the firehose of tweets from all corners of the world.

Twitter's rise to prominence has been largely in part due to its simplicity. It does two things - let you send short updates to followers, and let you see updates from those you follow. The addition of many third party services, including the since-acquired search capabilities, and scads of desktop or Web tools, have only served to let people consume and distribute the data as they wish, as Tweets can be issued automatically from mobile phones broadcasting location info, sent from blogs using RSS, or from a host of updating services, including Ping.fm and FriendFeed.

Twitter, amid pressure from users and developers to add the ability to display photos and video, to extend the number of characters to beyond 140, to add threaded comments, and to find a business model - any business model - has simply continued doing what it does, even as competition has faltered. Pownce shut down altogether. Jaiku disappeared into the Google black hole. And FriendFeed dances to its own drummer, acting as a great complement for Twitter even as people occasionally say it could knock Twitter off its pedestal. Facebook's status updates are probably the closest thing to being a head to head fighter to Twitter out there today, and many simply pull their updates from Twitter to the social network, as I do.

Twitter will find a business model. It will very likely include some form of advertising, even in a tough economy for ads. It may also charge for premium options to users, and might find a way to break into the enterprise, eliminating the need for Yammer and other copies. And investing in Twitter today means you're buying into a company that already is #1, by a long shot, in its self-built market, before it has truly hit the mainstream, and among the Web 2.0 set, Twitter is the closest to do so - being featured frequently on CNN and used by prominent figures, including the new president's team as part of his social Web strategy.

And don't be fooled into thinking Twitter is just for consumers. Savvy business users are recognizing that Twitter is a vital audience to be communicated to and to listen to, for product mentions, feedback and competitive updates. Twitter is part of the noise, and you can either embrace it, or ignore it, to your own peril.

How can Twitter be worth 1/4 billion today without any revenue? Take a look at the market capitalizations of Web companies today, even after the stock market blowout. Yahoo! is worth nearly $16 billion. Google is worth more than $100 billion. And in traditional media, even the very damaged New York Times is worth more than $800 million at its current price. As I have mentioned many times on this blog, I find Twitter's search capability to be even more important than that of Google for breaking news. Given the company's incredible momentum, and inability to get knocked off its pedestal, we would be foolish to think Twitter can't continue to grow and increase its user base and offerings, and be worth more than $1 billion in very short order.

If I had cash sitting around to put into Twitter and they came knocking on my door, I would ask plenty of questions, but at the end of the day, I would be investing. This will be a deal to watch for sure.