Twitter is the "it girl" startup in the world of social networking. Twitter's not making money and there's no clear profit model, though some other startups like Twitterise and Twittad design marketing tools with real revenue streams around Twitter's service. Twitter's co-founder, Biz Stone, has indicated that the company wants to remain independent to build its on its business model and grow its user base. But even so, can a company with a great idea that hasn't hit a tipping point in terms of users snag $500 million in this market?
Now Facebook was planning to use $500 million in stock, but is that stock based on its $15 billion valuation? The deal could have put both Facebook and Twitter's value much lower, but this deal does put Facebook's value in the spotlight. Twitter seems like a natural fit for Facebook-- it's effectively a status update system, and combining with Facebook would instantly make Twitter a huge hit, though Twitter's early adopters probably wouldn't be too thrilled. "
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http://www.unionsquareventures.com/2007/07/twitter.html
The Internet is largely a communications medium. It's also used for content distribution, commerce, and a number of other things. But the thing I do most on the Internet is communicate. Via email, Skype, instant messaging, blogging, commenting, and twittering. It makes sense. When you connect 700mm+ of the Earth's inhabitants to a global network, people are going to use it to talk to each other.
There are lots of different ways to communicate on the Internet:
Text/Voice/VideoAsynchronous/SynchronousReply Expected/Reply OptionalPrivate/Group/Public
There is something really powerful about public, asynchronous text communications where a reply is not expected. A great example is blogging. You blog something and it's out there on the Internet for public consumption. Others read it and they either comment or create their own blog post in reaction. Collectively, we engage in a discussion.
The asynchronous aspect of blogging is critical because "real time" conversations such as conference calls don't scale past something like 20 people. Keeping the communication public is equally vital. When anything is made totally public with no limitations on who can participate, you create an open market for ideas, thoughts, and opinions.
The optional reply is arguably the most important aspect of this whole new way of communicating--it sets blogging apart from more traditional online communication like email and instant message.
But blogging is not without it's limitations. With a focus on publishing a formal, reverse-chronologically formatted web page, blogging lacks the banter that characterizes most forms of live conversation.
Twittering is an emerging new form of communication on the Internet that changes the expectations associated with other forms of communication and yet it's fundamentally different than blogging. Twitter provides a platform for banter that blogging doesn't and it's available in so many places via IM, mobile text messaging, or the Web that it induces a different sort of behavior. Twitter encourages people to adapt and invent behavior to suit their needs.
This emergent behavior is particularly intriguing. Some of the most interesting platforms on the web have been extended and enhanced by users and now support all kinds of activities and behaviors that the creators of the service never intended. Twitter makes its innovative network for short, asynchronous public communications available via an API for anyone to extend.
If you think about it, Twitter extends short messaging (SMS) style communications to the web and does it in an open way that anyone can build on top of it. I think we’ve only begun to see the kinds of things that can be built on top of a messaging system like this.
After Facebook, I think Twitter is the most interesting API that people are building to these days. Here is one person's list of the top 10 Twitter apps and here is the fan-created wiki with even more. The breadth of activity in the Twitter ecosystem is astounding. Open systems that support emergent behavior are way more likely to become platforms and we are excited by the possibilities of new consumer facing web platforms.
And this is why we are so excited about our investment in Twitter. We reached out to Evan Williams, Jack Dorsey, and Biz Stone, the co-founders of Twitter, earlier this year and told them if they ever decided to spin Twitter out of the Obvious Corporation incubator it started in, that we'd like to be an investor. The timing was fortuitous as they were thinking of doing exactly that. We put together a financing that will allow them to scale the service and connect it to more places.
As we stated when we made our investment in Delicious,The question everyone asks is "What is the business model?" To be completely and totally honest, we don't yet know.
The capital we are investing will go to making Twitter a better, more reliable and robust service. That's what the focus needs to be right now. We'll have plenty of time to figure out the business model and there are many options to choose from.
We are thrilled to be part of a company that is building a new form of communicating on the web. We hope you will join Twitter and participate in this new medium along with us.
July 25, 2007 2:27 PM, By Fred Wilson
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