Twitter: The Dumbest Web Service Ever to Get a $1B Valuation

 
 
By Clint Boulton  |  Posted 2009-09-20 Email Print this article Print
 
 
 
 
 
 
 

News Analysis: TechCrunch reported Sept. 16 that Twitter is close to taking in $50 million, with private venture round valuations of $1 billion. Then Newsweek columnist Steve Lyons proclaimed Sept. 17 that Twitter, for all the hype, traffic and investment attention it commands, is, well, stupid. Lyons sounds surprised that Twitter is doing so well, but he shouldn't be. In fact, once you acknowledge the similarities between the Twitter zeitgeist and TV, you shouldn't be surprised at how popular it is, or that investors would want to pay the startup for a slice of the stupidity pie. There is good money in bad TV.

Two things happened this week with Twitter that underscore what a fascinating phenomenon is as a simple, 140-character-per-message Web service.

First, TechCrunch reported Sept. 16 that Twitter is close to taking in $50 million, with private venture round valuations of $1 billion.

Then Newsweek columnist Steve Lyons proclaimed Sept. 17 that Twitter, for all the hype, traffic and investment attention it commands, is, well, stupid. Lyons wrote:

"Twitter has become a playground for imbeciles, skeevy marketers, D-list celebrity half-wits, and pathetic attention seekers: Shaquille O'Neal, Kim Kardashian, Ryan Seacrest. Sure, some serious people, like George Stephanopoulos and Al Gore, use Twitter. And a lot of publishing companies and bloggers (myself included) use Twitter to send links to articles we've published. But most of what streams across Twitter is junk. One recent study concluded that 40 percent of the messages are 'pointless babble.'"

His subsequent analogies comparing Twitter with a lot of the vapid modern television shows brightening our plasma or LCD screens are fair. Lyons likely published his piece before seeing reports that Twitter is about to get that nice cash infusion from Insight Venture Partners and others.

Frankly, Lyons sounds surprised that Twitter is doing so well, but he shouldn't be. In fact, once you acknowledge the similarities between the Twitter zeitgeist and TV, you shouldn't be surprised at how popular it is, or that investors would want to pay the startup for a slice of the stupidity pie. There is good money in bad TV.

Maybe this is na???ve, but I'd like to believe Insight and whoever else is investing in Twitter (above and beyond the $55 million from Benchmark and Institutional Venture Partners) is doing so not simply because of the stupid entertainment value, but for the incredible growth prospects as a marketing tool for businesses.

Companies like Dell and Pepsi have said they are making millions off promotions on Twitter, and the company is doing a lot more to ingratiate itself to serious businesses. While the startup's founders have regularly shunned advertising in the past, the company's new terms of service welcome it. Oh, and by the way-imagine the TV comparisons Twitter will draw when it starts offering online ads.

Twitter created Twitter 101 as the company's tutorial on how companies do and can earn revenues from self-promoting on Twitter. Eventually, Twitter said it will offer analytics to help companies better hone their marketing.

So, Mr. Lyons, while lots of people use Twitter for dumb, stupid or inane comments, Twitter will soon cultivate real business value. You won't be laughing as hard at Twitter in 2010, or bloviating on the stupidity of Dane Cook and other Twitter fans. There are tougher targets on Twitter who aren't as feckless or insipid.

Robert Scoble, who it is fair to say can be effusive in his treatment of Twitter (OK, he's an unpaid Twitter evangelist on a crusade), believes the company might actually be worth $5 billion for all of the content that slings through it on a daily basis.

You can laugh at that, but given the choice between erring on the side of caution with Twitter valuation or raising my expectations, I'm with Scoble.  

Anyway, I invite readers to point out companies, products or services that racked up a lot of money but are fundamentally, well, fluffy. I welcome all submissions. We're just talking here. 


 
 
 
 
 
 
 
 
 
 
 

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