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February 10, 2011

Facebook and Google secretly bidding on Twitter... or not?

By Ai Lung Nguyen - February 2011.

TECHNOLOGY - It really boils down to a battle for market share...

Facebook and Google have been conducting "low level talks" concerning buying up Twitter (a website which has yet to make any money from advertising or any other revenue scheme).

In December 2010 however Twitter raised $200 million in financing in a deal that valued it at $3.7 billion, even though it has yet to monetize the website and churn a profit. Twitter, which allows users to broadcast 140-character messages to groups of followers, had 175 million users as of September 2010 (although seriously, most users only posted a couple times and then got bored. Even regular users like myself (twitter.com/charlesmoffat) don't tweet all that often.

Its really more of a celebrity / news buzz and comment feed. That is it. Its definitely not worth $200 million, let alone the $3.7 billion they claim it is.

The Wall Street Journal meanwhile today said that Twitter executives however meanwhile are quietly trying to sell it to executives at Facebook and Google. But so far neither Facebook or Google seem to be interested.

Could it be because they have concluded the same thing 92% of the population has already concluded? (Namely, that Twitter is twits. Only 8% of North Americans actually visit Twitter daily according to Alexa.com.)

According to WSJ Facebook and Google aren't the only companies they are trying to sell it to. Microsoft or Yahoo maybe? Or some other company?

Speculation of Twitters 'speculative value' ranges from $8 to $10 billion USD... but seriously, we doubt it will even turn a profit from anyone who buys it. People post comments and ideas on Twitters. Often its just nonsense crap about what they did today or did earlier. Or are currently doing. They don't really browse on there that often.

And browsing is where you can actually put ads and make a profit. People post on Twitter, they don't browse. Ergo, you can't make a profit from any advertising on the site even if it was monetized.

My thinking is that the Twitter executives have realized this and are now trying to sell the company off and hoping there is a moron out there with a big cheque book who will be dumb enough to bite the bullet for them.

And Facebook? Well that is another matter... they are barely profitable themselves. They cannot afford to be making acquisitions. The only companies making major profits in the online advertising industry are Google, Yahoo and Microsoft. Everyone is else is small time. Peanuts. The leftovers.

The next step is not the acquisition of Twitter. That is a complete waste of cash.

The real next step is when Google, Microsoft and Yahoo starts buying up newspapers, TV stations, cable networks, etc.

According to the Wall Street Journal the "low level talks" so far have gone no where. All the players are refusing to comment.

Our guess? They've gone no where because everyone knows Twitter isn't profitable and never will be. Its the same fuss Second Life got years ago, but they never even broke 1% of the population.

Twitter meanwhile is refusing to disclose their financial situation. They could be bankrupt for all we know. eMarketer claims Twitter could be churning a profit of $50 million / year in advertising revenue based on visitor hits (except they don't have ads on the site anyway), but since 40% of visitors only stay a single pageview and their time on site is an average of 7 minutes (and dropping about a minute per year!!!) then that is proof that people on Twitter don't really browse much.

See http://www.alexa.com/siteinfo/twitter.com for more statistics.

Meanwhile Google generated roughly $29 billion in revenue in 2010 and Facebook produced about $1.9 billion, according to eMarketer. The idea that Google would pay one 3rd of their yearly profits to buy crappy Twitter is preposterous. And Facebook couldn't even afford to buy it at such a huge price.

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