Twitter Playing Hard to Get

November 24th, 2008 at 12:00 am

fail whale twitter facebook

Twitter has been considered by many as the epitome of social blogging.  After reaching more than 1 billion tweets just recently, securing a couple of rounds of funding, Twitter has proven itself to be a web tool that’s definitely here to stay.  At this point, they are like Youtube before the Google acquisition, a startup with a service that has revolutionized the way people use the web.

So like Youtube, Twitter is a hot buy for bigger companies.  Consider them as a trophy wife – the eligible bachelorette.  However, it may take more than half a billion dollars to get her to walk down the aisle.

Twitter and Facebook have been in talks since mid-October this year about the possibility of bringing the two companies together.  Facebook initiated the talks and apparently Facebook also offered to acquire Twitter for $500 million of its stock.  However, Twitter did not accept.

Why?  Well for one thing, the $500 million is not in cash, it’s stock.  Meaning it’s just a promise until Facebook’s indefinite IPO if Twitter did accept the deal.  Moreover, there were also concerns about integration costs.  

Kara Swisher of BoomTown reports:

But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues-there are none right now-as well as it had done at building its growth.

"It’s more about timing," said one person familiar with Twitter’s motivations. "There is a strong feeling that there is still an opportunity-even with the economic downturn-to blow this thing out."

They are probably right.  Facebook is still a privately held company and even if it has a $15 billion valuation, it’s mostly hot air as of now since they don’t have a clear revenue model yet.  On the other hand, Twitter is indeed a viral tool that is proving itself to be indispensable, but it too does not have a clear business model.

So, bringing the two together without both having a clear way of making money might be a formula for disaster.