Information & Communication Technologies


Nest Egg: What Twitter's $8 Billion Valuation Means to You

by Jake Wengroff 26 Jul 2011
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The article below was first published in Social Media Today on July 21, 2011.

 

With Twitter about to close a two-stage $800 million round of funding, as reported yesterday in the Wall Street Journal’s All Things D blog, one might ask:  what are they going to do with all of that cash?

According to several sources, roughly half will be used to cash out current investors and also some employees, and the rest will be spent on ‘basic funding needs,’ according to the Wall Street Journal.

The funding round values Twitter at $8 billion, which is more than double what Twitter was valued at when it received $200 million in venture funding from Kleiner Perkins in December, at a $3.7 billion valuation.

Once the funding closes, Twitter’s total cash haul since its founding five years ago will be $760 million.

More importantly, what will the new, richer, Twitter look like, and what will it mean for us social media managers and marketers?

More Ads?

For starters, everyone knows that Twitter has been desperately trying to sell advertising, through its Promoted Products – Tweets, Trends Accounts.

For any marketing or advertising manager who has investigated Twitter’s eye-popping ad rates, perhaps few are surprised that we don’t see more ads – the tiny ‘yellow pills’ with the word ‘Promoted’ -- laced throughout the micro-blogging service. 

Without breaching confidentiality, as I have had a few conversations with Twitter, all I can say is that the price for a Worldwide Promoted Trend on the homepage of Twitter is in the low six-figure range – out of reach for most companies and a hard sell for companies in the B2B or non-technology  space.

A Premium Twitter, Possibly

One route Twitter hasn’t quite explored is the ‘freemium’ model favored by social networks LinkedIn and SlideShare, in which power users or those wishing for access to more features can buy their way in. 

(Multiple revenue streams – advertising and premium subscriptions – are what make Internet companies attractive to investors, propelling them further to IPO.)

Currently, it is free to join Twitter, and Twitter does not charge users or companies any more for having a high number of Followers or Followings, or a particularly heavy volume of tweets.

With new financing and more scrutinizing investors, premium Twitter accounts might be on the way.  Companies, especially those with large, recognizable consumer brands, which rely on Twitter as an additional channel for customer feedback and warnings of service issues, would gladly pay up.  I’m curious to know how Twitter will price its premium subscriptions.

Buying Spree

With Twitter’s purchase of TweetDeck, for about $50 million in May, along with the roll-out of its own URL shortener and photo-sharing service, it is clear that Twitter wants to control more of the native environment for its users.

With the new funding, expect Twitter to go on a buying spree and purchase smaller apps and companion services that will make the Twitter experience richer and (hopefully) more user-friendly for all.

(Does anyone remember how odd and low-frills the ‘Old Twitter’ was?)

Twitter will also probably have more oversight on the development of its mobile apps, ensuring that its advertisers – or future premium subscribers – resolve properly or more vividly on smartphones and tablets.

While most of Twitter’s decisions catch us all by surprise, I remain curious as to what the Big Bird will do next for revenue – and how that will affect the everyday social media manager.

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