How Many Ads Make $1 Billion?
Now that Twitter has been able to convince some pretty wealthy folks that their little ol’ 140 character deal is worth in the range of $1 billion it’s time to get down to brass tacks. What does that mean? Since people now have this huge number in their head there will be continued and likely more vocal calls for Twitter to at least reveal some plan to generate revenue worthy of that valuation number. Hey, it’s the Internet though so maybe not!
AdAge is pretty convinced that this is something that needs to be addressed sooner than later.
With the funding, Silicon Valley and the venture community are once again setting their sites on the marketing budgets of American business to support another free “cloud” web service, in this case 140-word bursts of text. Indeed, they’re counting on the exponential growth of advertising revenue in a flat market for a company that — while certainly useful to marketers — has yet to earn its first dollar.
“I think they can build some kind of ad business, but the more relevant question is can they build an ad business worth a billion plus dollars,” said Warren Lee, VC at Canaan Partners. “That would require tremendous volumes of impressions and reasonable conversions. Lots of execution will be needed. Not impossible but unlikely.”
So we have a detractor here. Well, not completely but certainly not thinking that advertising alone will get Twitter from Point A to $1 billion. The trouble is tow fold. First, Biz and the boys have no plans to make any advertising model moves in 2009. As a result there will be more and more time for people to figure out how to use the service for free and then there could be some resistance to having to pay for anything related to Twitter. Twitter is establishing a bit of a mindset that may be harder to break than people think. (Check out Andy Beal’s thoughts on this via BlogTalkRadio).
So what’s next? AdAge’s take is
Mr. Stone said that ads won’t come before 2010 and Twitter’s early-stage venture backers have told Ad Age the ad business, narrowly defined, isn’t that interesting to them. On its site, Twitter touts marketing success stories from Pepsi, Jetblue and Dell, which consist of the brands using the service to connect with fans.
The cash could allow Twitter to make some acquisitions; perhaps one of the URL shorteners like Bit.ly, one or more of the Twitter applications, or one of the many, many firms now making dashboards to manage Twitter for corporate clients.
With a valuation of $1 billion, Twitter’s investors believe one or more of the following outcomes are likely: an IPO or an acquisition at a healthy price.
So can they do it, Pilgrims? If they can do it how will they do it? Put on your Twitter business model cap yet again and tell the world exactly what these folks have hit or miss regarding the future of the world in 140 character chunks.