Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Twitter Closing $800M Funding Round at $8 Billion Valuation

mashable.com

Post reply on HN
Print view View original

21–30 of 39 posts

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#21

Post by LargeWu »

benofsky wrote: post #10
gabaix wrote: post #2

Why is Twitter so slow to find a good business model, while Facebook is profitable?

Twitter's data set is incredibly valuable; Twitter won't make money from ads, they will make money from analyses of their data [1]. Developing infrastructure and software that can analyse the sheer quantity of data Twitter generates takes time — and money. But, when they finally crack it they will be extremely profitable. It's much easier for Twitter to do this opposed to Facebook (who I would say is also interested…

I'm curious to know what kind of data Twitter has that is that valuable. Just because you have a lot of data doesn't mean it's that valuable.

I used to analyze direct marketing campaigns for a major big-box retailer. They had literally billions of rows of transactional data that they could tie to specific customers, and despite attempting to harness the power of that data, most of their direct marketing campaigns didn't even move the needle.

So, whenever I hear "But, when they finally crack it they will be extremely profitable", I can't help but thinking this is nothing but a bunch of handwaving. I'm sure everybody at Twitter is real smart and they're working hard on this problem, but until they start bringing in some real money, I'll remain skeptical.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#22

Post by damoncali »

jamiequint wrote: post #19
damoncali wrote: post #16

Earlier quoted context omitted.

It doesn't. It's just an implied valuation based upon simplistic math. For example, suppose that $800M had a 1x liquidation preference plus a modest hurdle rate (say its 7%). That investor makes good money if Twitter gets sold for (1.07 x $800M) $856M - a far cry from $8B. The risk of such an investment going negative is quite low (relatively speaking), as would be the investor's cost of capital. I doubt the seed inv…

This is only true if the shares sold in this round participating preferred and earlier investors were not entitled to money back in such a sale, I doubt either is the case here.

The larger point is that 4th grade percentage math is inadequate to value preferred stock. Change the example to one you like if you find mine too simplistic.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#23

Post by benofsky »

LargeWu wrote: post #21
benofsky wrote: post #10

Earlier quoted context omitted.

Twitter's data set is incredibly valuable; Twitter won't make money from ads, they will make money from analyses of their data [1]. Developing infrastructure and software that can analyse the sheer quantity of data Twitter generates takes time — and money. But, when they finally crack it they will be extremely profitable. It's much easier for Twitter to do this opposed to Facebook (who I would say is also interested…

I'm curious to know what kind of data Twitter has that is that valuable. Just because you have a lot of data doesn't mean it's that valuable. I used to analyze direct marketing campaigns for a major big-box retailer. They had literally billions of rows of transactional data that they could tie to specific customers, and despite attempting to harness the power of that data, most of their direct marketing campaigns did…

Just as an example from my own experiences: I was able to predict the winner of the XFactor within 1% of the final vote, two hours prior to the final [1]. I've also written an algorithm that can with 80% accuracy detect a news story will come out of a group of tweets. There is a lot that can be done with this data.

[1] http://www.irishtimes.com/newspaper/ireland/2010/0115/122426...

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#24

Post by rokhayakebe »

nodata wrote: post #3

Why does selling a 10% chunk of a company value the remaining 90% at the same price?

They value the entire chunk, then base the 10% on it. Your question makes it sound as if they said 10% is worth 800M, then 90% is worth 9 times as much. The logic would be 100% cost 8B, so 10% cost $800M.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#25

Post by carbonica »

thematt wrote: post #18
swombat wrote: post #4

Earlier quoted context omitted.

Because Twitter is innovative, while Facebook is just f'in huge?

That's ridiculous. Facebook is incredibly innovative as well, even more-so than Twitter. They're solving huge scalability problems that nobody else has encountered before.

The only new scalability issue that Facebook has tackled is how to scale one enormous MySQL database. They've primarily done this by sharding it thousands upon thousands of times and putting over 10,000 memcached instances in front of it.

Most everything else they've confronted was done by Amazon and Google years before Facebook had to.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#26

Post by vaksel »

nivertech wrote: post #9

$8B is still in the acquisition range. Google was ready to pay $6B for Groupon. The next round (if ever) will make twitter un-acquirable. IPO, lower valuation or die.

well to be fair Groupon was actually generating cash...Twitter generates god knows what

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#27

Post by fatalisk »

dotcoma wrote: post #15
benofsky wrote: post #10

Earlier quoted context omitted.

Twitter's data set is incredibly valuable; Twitter won't make money from ads, they will make money from analyses of their data [1]. Developing infrastructure and software that can analyse the sheer quantity of data Twitter generates takes time — and money. But, when they finally crack it they will be extremely profitable. It's much easier for Twitter to do this opposed to Facebook (who I would say is also interested…

ok, but do they really need 800 million (or 400 million) to turn backtype and other companies and/or ideas into a working business?

I think they do need this amount of money in order to stay competitive with the big guys Google and Facebook. They could be more easily outbid in acquisitions if they weren't competitive with capital.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#28

Post by fleitz »

vaksel wrote: post #26
nivertech wrote: post #9

$8B is still in the acquisition range. Google was ready to pay $6B for Groupon. The next round (if ever) will make twitter un-acquirable. IPO, lower valuation or die.

well to be fair Groupon was actually generating cash...Twitter generates god knows what

They were generating losses, that's like saying at least pets.com was generating cash. Twitter does generate cash but like Groupon not enough to pay their expenses.

Re: Twitter Closing $800M Funding Round at $8 Billion Valuation

#29

Post by fatalisk »

forgottenpaswrd wrote: post #14
gabaix wrote: post #2

Why is Twitter so slow to find a good business model, while Facebook is profitable?

Because they don't need to? You know, if you could get 800M$ who cares about revenue? They are getting money while they can before the bubble burst, the early investors are getting money selling to a greater fool and the greater fool are putting money over the table betting someone else will be even bigger fool. Facebook is profitable but "not that profitable", they need to be much much more profitable at the current…

"This time is different" because people have learned a lot from the first bubble. For the most part, investors are people who really understand the economics of technology, the economics of the deal and the mistakes of the past. I think there is a long way to go before any major burst. Granted with the amount of hype in the market and massive over-subscriptions (i.e. greed) there's bound to be a correction at some point. But, I don't think it will be as bad as before.
Post reply on HN