This is an absolute classic of Valley bubble thinking: once you have revenues, its impossible for someone to buy you at a price totally unjustified by your present ability to make money.
I imagine the startup/VC|Google relationship to be like my first girlfriend: neither of you is sure what it is exactly you're doing. She knows if you want anything to do with her, you've got to come take it. So you're going for it, but you're pretty sure if you act like a normal dude, she'll pass you up for that scene guitarist. The only option, therefore, is to be totally aloof, so as to create enough mystery that she'll bite.
EDIT: btw, it was a pretty mediocre strategy in the long run. Not sure what that means for Twitter, however
This is so unbelievably backwards. If there are conversations actively going on inside of Twitter or any organization about if it is a wise move to start making money, they seemingly have missed the point of running a business.
At the end of the day if there is some magic switch Twitter can turn to start generating revenue, they'd be fools to not turn it on. Say what you will about ridiculous valuations, but its a much stronger negotiation card to have in your deck at acquisition time if you are actually you know, generating money, and don't need to sell the company because you will run out of cash otherwise. Until then, Twitter runs the risk of the world basically realizing (or at least thinking) the emperor has no clothes and running out of cash before getting bought by someone still drinking the kool aide.
Here's a shiny black box that can potentially solve all the worlds problems......
Our growth is tremendous, so get in now while the escalator flies to the moon!
turn on revenue stream and the revenue plateaus at a negative cash-flow position
Here's a shiny black box that ain't makin' us money. Who wants to buy it?
It's not too difficult to understand why a company with tremendous (most of us here would say overhyped) growth is afraid of generating revenue that doesn't come close to matching the hype (I mean growth).
The company has to decide whether or not to turn revenue on. It sounds ridiculous, but it is a real decision. Once revenue is on, how the company is valued by the market can change dramatically.
So when Twitter talks about turning on revenue, it isn’t such a small decision. They have no idea how much money they can make off the service. Selling data to search engines, display ads. Search based ads. Premium/business accounts, etc. There are no comparable revenue streams at other companies that they can fully rely on.
I think the more accurate revenue dilemma is how any of those items mentioned above are going to generate meaningful revenues.
I don't understand articles like that. They all mention that the valuation for Facebook at $15 billion was from the $240 million investment for a 1.6 percent stake. But the $240 million was not just a purchase in the stake of the company it was also and advertising deal. Before someone can then come up with an evaluation from that transaction they need to break down how much of the $240 million was to purchase a stake and how much was for the advertising deal.
I'd bet they're making quite a bit of money now just in licensing fees to use their logos (among many other possibilities they're not going to reveal).
