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Executives having low-level discussions, but reports say offers of $8 to $10 billion on the table
Executives at both Facebook and Google have expressed ongoing interest in acquiring Twitter for somewhere between $8 and $10 billion, according to the Wall Street Journal. All three companies involved declined to comment.
Negotiations are by no means approaching the final stages, but it’s interesting to see that the (still fledgling?) microblogging startup continues to attract a prominent crowd of potential buyers.
The funniest thing about this story is that it’s a rerun. Discussions to sell Twitter to one of those two bigger Web entities go back as far as November 2008, when Facebook had offered to purchase the company for $500 million, largely in stock. Though the deal reached late stages, Twitter supposedly walk away because of the meager cash portion offered. Then in April 2009 reports said that Twitter was in late stage negotiations with Google, which was rumored to be offering the startup over $250 million in combined company stock and cash.
That was all before Twitter’s epic growth spurt in mid-2009, when the mainstream media fell in love with the site’s ability to be both a gateway to celebrities and a mouthpiece for revolutions. More recently, in November 2010, sources said Google had “casually” offered Twitter between $2.5 and $4 billion.
It’s worth noting that throughout all these discussions--and this is still the case today--Twitter’s revenue has never matched its valuation, for the most part. At least on a fundamental level. The site has lost money every year it has been in existence. Promoted Products--Promoted Tweets, Promoted Trends, etc.--were introduced last year, bringing 2010 ad revenue for the site to around $50 million, according to eMarketer, but the company still lost money in 2010. The company's revenue could triple to about $150 million this year, but that's just an estimate. In the end, it depends on whether advertisers stick with Promoted Products or not.
In spite of that, Twitter has a knack for attracting investors as prominent as Kleiner Perkins Caufield & Byers and Andreessen Horowitz because it hosts so much user data. The company just announced last night that users have broken another record; during the last minutes of the Super Bowl on Sunday, fans sent 4,064 tweets per second, the highest for any sporting event. (It still doesn’t beat the 6,939 tweets per second seen on New Years.)
Obviously, not all tweets are created equal, but the big question remains: how much is a tweet really worth?
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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 Twitter.com, 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 Twitter.com, 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 Virginamerica.com 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.