The economic meltdown and accompanying advertising slowdown is the best thing that could happen to Twitter, much the same way that Google benefited from dot com bubble bursting. Had the dot com bubble not burst, Google’s business model would have been to slap Doubleclick (version 1.0) display banners everywhere. Instead, the bubble burst, display banner went bust and Google pioneered borrowed ripped off and scaled GoTo.com Overture’s pay per click model.
The rest is history: today Google owns Doubleclick (version 2.0).
When Twitter first began to take off, I wrote that Twitter should lose the “Google envy” (to build a ubiquitous online advertising model) and focus on what its natural disposition was: e-commerce and referal. Read more in Twitter’s 140 Problems.
When you see its most popular users include brands such as Zappos, you realize that this is Twitter’s niche anyway, and that forcing “yesterday’s ad model” into the product would only hinder its growth.
Now, I will say this, if Twitter were smart, it could leverage its fanboy’s noise about how “Twitter is search” to get Microsoft to consider pay a crazy amount for it (as it did for PoweRset), which might prompt Google to outbid Microsoft, as it did for Doubleclick.
Ultimately though, Twitter is not search, at least not yet, and its long term utility has yet to be determined. In no way is this a knock. It’s an observation. It’s also reality. Twitter is evolving, and the market meltdown could prove to be a blessing in disguise… were it not for one thing (which we’ll delicately/respectfully get to in a second).
Twitter might be search, it might be news, it might be classifieds, which is what I think Google actually was… but the point it, 1% of 1% of people would turn to Twitter for search in its current incarnation. If MSFT’s own Don Dodge argues that 1% market share of search was (pre-crash) $1B, then 1% of that is $10M. Not too shabby, but Twitter’s raised over $30M on a $250M valuation. So if I were Twitter (in its current incarnation), I wouldn’t push the “search” tagline too much… maybe Twitter is a part of the future of news. But let’s face it, news organizations are so shackled now (due to their print pedigree) that they won’t know what to do with it either, and even if they did, they could not.
Ultimately, Twitter only has 6M users, which is nothing to sneeze at, but having won over a vocal minority isn’t enough to talk down to players like Google… and just as it was ridiculous to say last year that “Facebook would kybosh Google“, it’s more ridiculous to say that about Twitter.
Which leads us to make the following recommendation to some of the company’s financial backers: get the hell out of the spotlight and let the company operate and execute instead of looking for a soapbox to inflate expectations out of any realm of possibility.
The best summation of all of this is a commentor on the SAI blog:
A guy with a multi-million dollar vested interest in Twitter tells you that he swears they have a secret business model, and you idiots print it as news. That’s great guys.
After all, the most successful companies of the last decade (starting with Google) all underpromised and overdelivered. In other words, for a company that likes to limit expression to 140 words, some of its backers are doing way too much yacking for the firm’s own good… Come to think of it, the same can be said for most of the company’s supporters, too.
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WatchMojo NewsletterThe housing bubble burst leaving would-be investors weakened financially. The ensuing credit crunch is now weakening companies’ ability to stay afloat.
While US financial behemoths are becoming the punch line of jokes,
the central Bank of Canada is going all out to avert a carbon copy storyline north of the border, as well:
The Bank of Canada took its short-term interests rates nearly as low as they can go on Tuesday, but suggested that may not be enough to rescue an economy downturn that continues to defy projections.
The central bank sliced its the trend-setting overnight rate half a percentage point to an all-time low of 0.5 per cent.
You’d expect banks to follow suit, right? Nope. Not happening.
Here’s a letter we got today from one of our many [Canadian] banks:
“The annual variable interest will increase by 1%, this is a result of global credit market conditions that have increased costs associated with lending products”.
Thankfully, we set up credit facilities before the Crash of 2008 and are relatively debt free (apart from a few financing deals for equipment and what not). The reality though is that if you were a startup (or major company, as in the case of John Deere, who is paying 2-3x more for financing), you just don’t have the ability to operate in this environment.
A couple of weeks ago, economist Thomas Friedman urged the government to stimulate the economy by providing VCs with cash. Truth is, VCs’ net value creation is negative. Yesterday, Reid Hoffman, a successful investor and entrepreneur, echoed the importance of keeping startups solvent by providing capital.
Connecting the dots, however, when you the biggest US financial superpower trading for $1/share, you know that financial firms won’t be looking out for the wellbeing of startups. This goes back to my #1 rule for success these days: a low burn rate.
This is also the MAIN problem with any stimulus the US government implements: the beneficiary banks will pocket the aid and let the small fish rot. It’s human nature, you know the saying, “I don’t need to outrun the bear that is chasing us, I just need to outrun the other fella”.
