So Twitter has turned down an acquisition offer from Facebook. While many hardcore users of the short messaging service will rejoice, and though Twitter questioned Facebook’s ridiculous $15 billion valuation (rightly so), Twitter should start thinking about its own ability to make money and avoid being bombastic.
Here’s three reasons why Twitter should have accepted the offer (which was for $500 million of Facebook stock), or should at least seriously entertain any further plays by Facebook if they up the ante.
1. Facebook Has More Diverse Revenue Opportunities
Facebook’s business model is by no means perfect. And like Twitter, Facebook still brushes off the assertion it must start making money anytime soon. But Facebook certainly holds a clearer path to profitability, given the size of its platform, its user base (130 million active accounts) and the many ways in which it can potentially deliver advertising to a wide range of people.
And, despite the rhetoric by industry leaders, a social network’s ability to make money matters.
During the Web 2.0 Summit, Twitter co-founder Evan Williams alluded to charging companies that Tweet (post a message to Twitter) as a means to generate revenue. But it’s hard to imagine how much growth potential that could yield, given Twitter’s audience (see point #3). With budgets tightening during the next year or two, it’s not like “Twitter outreach” will be a top priority for companies and their marketing dollars (and yes, that’s factoring in the well-worn examples of JetBlue, Comcast and other major players interacting with customers on the service, which has all been for free).
Over all, the percentage of companies tweeting with their customers is low — and will likely remain low for the foreseeable future.
2. Ugly for Twitter, but true: Status messages are just a feature within the larger social networking experience.
John Battelle, the founder of Federated Media, put it aptly when questioning Facebook Founder and CEO Mark Zuckerberg at the Web 2.0 Summit in San Francisco a couple weeks ago: “Isn’t Twitter just a part of Facebook?”
Zuckerberg smiled and paused awkwardly, his reaction evincing laughter from the audience. But Batelle’s question was spot on. Status messages represent just a part of the social networking experience. Twitter mastered this function of social networking by focusing on it entirely. They deserve immense credit for what they’ve done.
Twitter has brought an elegant design to the process of posting a status message and checking out a friend’s status. Moreover, Twitter improved what humans get from status messages: it became an intellectual exchange rather than a simple repository for “I’m running to the store” or other types of purely utilitarian messages. Today, you’ll commonly find people posting short, pithy thoughts on current events or their enthusiasm (or lack thereof) for particular products. In an age of information overload, they debate these issues concisely — in 140 characters or less.
Bringing that experience to the Facebook fold would be very valuable. Facebook’s status message system right now is boring and not nearly as impressive as Twitter. If an acquisition went through, and Twitter were added to Facebook, the dividends could be huge for both services. Facebook would get the improved design for its status messages, while Twitter, which has been challenged by capacity problems, could access Facebook’s infrastructure and massive user base (Facebook has 130 million active users, while Twitter, most estimate, sports about 6 million users). And since Facebook’s dedicated sales and marketing teams are purely focused on figuring out how to make money in the social networking landscape, Twitter (ideally) could focus on improving its technology and leave the monetary matters to them.
If Williams is right and Twitter can make money from getting companies to pay for their interactions with users, Facebook might have more of the tools at their disposal (via sales) to make that happen.
3. Facebook is Broad; Twitter Is Not (and Might Never Be)
When it’s noted that Twitter’s audience, as the service stands today, is granular (mostly comprised of techies), users will defiantly say they don’t care, noting that they enjoy the service as it currently stands. But Twitter’s investors should care. Twitter and its ability to make money (or not) might trump that proud disregard for business models that so many social media users comically ignore.
In general, early adopters tend to be the technically-predisposed. They buy the first fancy smart phones, cameras and computers before the rest of the world follows suit. But Twitter fans would be foolish to think that their service will magically start winning over broad swaths of the general public or business community. In fact, anecdotally, most of the non-techie people who do use Twitter are members of the media, analysts and PR professionals whose sole purpose it to target the tech community: their involvement is based more on self-interest than a genuine love for the service.
Facebook, meanwhile, doesn’t suffer such a problem. In fact, its initial audience wasn’t “techie” necessarily — it was merely a bunch of college kids, with all kinds of interests. Yes, Generation Y is inherently tech-oriented. But since the initial uptick when Facebook went broad (beyond the .edu crowd,) the service has proven itself sticky enough to attract a wide range of people.
As for Twitter, many of these Facebook users don’t know what they’re missing. They never will, either, unless Twitter comes to where they’re already spending a good portion of their social networking minutes. And we already know where that is.