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 US$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 US$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.
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