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Silcon Valley Story: Twitter Please Don’t Be Web 2.0 Pointcast – Don’t Pull a Pointcast November 25, 2008

Posted by John in Technology.
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Twitter was offered $500 million from Facebook as reported by Kara Swisher (who has an accurate reporting record).

Let me get this on the record: I love Twitter. From the day that my friend Dan Bricklin showed me Pyra I’ve been watching Ev and his team at Pyra, Odeo, and then Twitter I have been a big fan of those product guys.

Twitter has been a ‘whale of a hit’. I remember when I started PodTech we moved the needle with Twitter at SXSW in 2007 not only was it fun, but it was effective. Since that time in early 2007 Twitter has gone and continues to go mainstream. Many people use Twitter as a way to communicate to peers and friends while some use it to promote their wares (PR firms and social media wannabees).

Here’s my point: I hope that Twitter doesn’t become the Web 2.0 version of Pointcast. For all you not familar with the storied company they were a big Web 1.0 company with massive hype and viability. In fact their product paradigm was awesome. Except for some minor fatal flaws – like price of bandwidth and massive changes in clients software (browser) – it was a great product.

The final nail in Pointcast’s coffin was their blatant turn down of a $300 million+ offer from News Corp. Pointcast’s hubris reject the News Corp offer. Why? They were drinking the Web 1.0 kool aid – they thought they were on the verge of riding the wave of the Dot Com gold rush. That bubble popped and Pointcast was sold for like $2 million (mainly IP) a few years later.

Now here we have Twitter having a ‘whale of time’ enjoying their success and constant outage. Facebook offers $500 million and they turn it down. I love Twitter but I think that you’re on the verge of pulling a Pointcast.

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Comments»

1. David - November 25, 2008

I so remember Pointcast. IT managers nightmare. It’s all about Push.

2. Denny K Miu - November 25, 2008

No one should turn down $500 million cash. On the other hand, it is not nearly as difficult to turn down $500 million stock swap from a private company in a bad market, especially from one that is also non-profitable.

3. Rob Bazinet - November 25, 2008

Agree with Denny 100%. It s not at all like Twitter turned down $500 million, it was all on paper. If Facebook showed the cash then I would have had shake my head and wonder what they were doing but Facebook’s fantasy valuation of $15B really doesn’t have any traction if they are not showing the money.

Just my 2 cents.

4. Erik Schwartz - November 25, 2008

As has been discussed… Not all $500 million offers are the same.

If FB’s value is REALLY $5 billion then the offer was $166 million (still not liquid). Twitter raised their last round at about $100 million valuation (for about 20%). That means the VC’s would get back $33 million in illiquid assets for their $20 million cash investment.

That’s not a home run.

5. John Furrier - November 25, 2008

Great comments guys. I agree. I love twitter but I also remember how intoxicating ‘push’ technology was aka Pointcast. My point is to remember how fast something can be the ‘thing’ to becoming irrelevant.

Twitter has to be mindful of their sustainable competitive advantage both on the business and product side. Can Twitter become a large company with multiple products or are they a one trick pony.

6. John Furrier - November 25, 2008

Also it’s not like Facebook is swimming in cash right now…

7. Dave Peck - November 25, 2008

Heck If I wast twitter I would take the $500 in stock and hope for the best. Are there any other offers coming their way? Take what you can get at this point. I dont see twitter with any positive cash flow at this point. Plus there are a lot of other companies trying to move into their space.

8. sash - December 4, 2008

Totally agree with Denny on this one.

9. Mark - March 18, 2009

Personally I wonder on the business models of many of these companies – Twitter, Facebook, etc – show me the money? Where is even the potential business streams coming from..? Web advertising..?

For a $5B company I simply dont buy that…
cool yes, but they need something to sell…!!

And as everyone knows whats ‘cool’ this year, can easily be replaced by a new model next year,
or can be subsumed into standard offerings in the market, making their competitive advantage null and void…

(look at instant messaging for that..)


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