There has been way too much chit chat recently about how Twitter doesn’t have a business model or that Twitter is going to take on Google. I’d be really annoyed of it all if I wasn’t so busy trying to juggle all of my tweet reading with my actual work. My thoughts are that these are the wrong questions to ask about Twitter. I’m pretty sure they folks at Twitter and their investors will come up with some legitimate revenue generating ideas, and I’m also rather convinced that Twitter isn’t going to put Google out of business. I think the real question to ponder is this:
Can Twitter make money without ruining the startups who are building off of the Twitter platform.
I’m talking about the Tweetdecks and Twhirls of the world. These companies are quite dependant on the Twitter platform, much like many Facebook application vendors were crushed by FB’s capricious ways. A meaningful % of Twitter users use an outside application to do their tweeting (see a report from Hubspot to learn more -Hubspot is the source of the chart below.)
Like it or not, Twitter is not the preferred interface for many Twitter users. I don’t think that I could use Twitter without TweetDeck; it would be information overload. (I wish I had TweetDeck for my email – anyone working on this? Don’t say Xobni – my computer didn’t like it and it was a pain to uninstall.)
How can Twitter create revenue without damaging these users experiences and destroying these application providers?
Julien Wallen has just put out a blog post on the VC fund raising process that highlights some of the better blog posts by fund raising experts.
Forrester, as mentioned in Adweek, recently found that 75% of advertisers have budgets of less than $100k for social media in 2009. However, the study also suggests that just over 50% of advertisers intend to increase their spend on social media this year, while only 5% will decrease it.
Startups seeking venture financing need to realize that VCs are pretty skeptical these days around using destination social media sites with ad-driven business models. Advertising focused startups that are succeeding in raising financing are like Quattro Wireless (just raised $10M) – infrastructure type plays that are providing platforms or tools used to advertise across multiple sites.
Nivi and Naval over at Venturehacks have a great presentation on what it takes to become a successful angel investor. (I was going to say what it takes to begin a successful career as an angel investor, but angel investing isn’t really a career – it’s more what you do once you’ve had a successful career!)
While the presentation is directed at high net-worth individuals who are investing in small companies, I think that enterperneurs may also gain something from listening to the presentation.
- Naval speaks for a bit on how angel investors should source new deals – reverse engineer that to “as an entrepreneur, here is how I can find an angel investor.”
- They talk about the sorts of materials angel investors should ask to review – a 10 page pitch deck and a simple elevator pitch, plus a product demo if possible. Now you know what to prepare for an angel investor
If you are looking for funding I encourage you to spend a bit of time on the Venturehacks site – the guys know what they are talking about!
Broadstuff (a blog that I follow) has a good summary of a recent McKinsey article on the differences between how technology winners and losers navigate a recession. The key take away, besides the fact that technology spending falls really fast during a recession, is that successful technology companies are smart about how they cut SG&A and thoughtful on core vs. non-core investments. I’ve listed the McKinsey findings below (as quoted in Broadstuff); see Broadstuff’s site, linked above, for a more detailed explanation of each.
Successful technology company tactics during a recession
- Manage working capital aggressively
- Rationalize SG&A expenses and overall headcount
- Make frequent, significant acquisitions (later)
- Divest non-core assets early in the cycle
- Maintain a stable level of leverage relative to equity
An important point to note is that for #2, the rationalization of headcount, successful companies actually slightly increased their headcount expenses (relative to their loser technology company competitors) during the recession.
This speaks to the need to focus on what works, get the right team on board and focused on the goal and get rid of non-core/distractions. This is very similar to what I am hearing board members say to portfolio company executives right now – figure out what the market needs now/what will be needed and cut out any other projects that are not aligned with this core task. Focus is a good thing.
It’s tough for me to give solid advice during these times. I’ve only lived (during my working career) through the dot.com downturn, and the current recession feels more dangerous/more wide spread. I welcome any suggestions/advice from the Startable readership on how smart technology executives navigate this market.