Twitter rejects Facebook $500 mln stock offer

Bambi Francisco Roizen · November 24, 2008 · Short URL:

Fast-growing social network plus fast-growing micro-blogging site in talks?

 Will the fastest-growing social network buy the fastest-growing micro-blogging site? It would seem to be a killer combination. But the two sides can't agree on such a deal, just yet.

Twitter turned down an acquisition offer from Facebook of $500 million in stock, at the inflated $15 billion valuation it once pulled off. If Facebook offered cash it would certainly be a different story.

Apparently both sides were discussing a deal three weeks ago, reported Kara Swisher, of AllThingsD. Here are the reasons a deal fell through.

-The Twitter team felt Facebook's current valuation was inflated, establishing a value of $150 million for Twitter at the offer. Twitter was valued at $98 million in the last round

-The Twitter team believed Facebook's value should be more in the range of $5 billion

-The Twitter team wanted cash

-Facebook has to assume costly SMS fees, and Twitter lacks a revenue model to pay for them

(See my interview with former CEO Jack Dorsey about how he thought Twitter should make money) 

-Facebook may have to assume an SMS fee of up to $75 million, if Twitter were offered to Facebook’s 120 million users, Facebook execs estimate 

-The Twitter team believes it should take a shot at building a business

Here's more from Swisher:  

While some sources at Facebook said [Mark] Zuckerberg was becoming frustrated by the buzz Twitter was getting–a market that should have been dominated by Facebook–others at the company said he was interested in buying Twitter because of his respect for its progress.

Indeed, at the Web 2.0 interview, Zuckerberg called Twitter an “elegant model” and that he was “really impressed by what they’ve done.” Indeed, with about six million registrations, as reported in October, up 600 percent over the last year, the San Francisco-based Twitter–launched in 2006–has had impressive growth. 

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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on that were only accessible through the link in the @earlybird tweet.


What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.

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