Why Twitter Could Be Worth A Billion Dollars

The number sounds like pure froth. After all, you don’t have to go back as far as the dot-com era to come up with laughable valuations of Web-based companies (Skype, anyone?) And this is one that has yet to turn a profit, or even articulate a plan to do so, at least publicly. Like others, I’ve gone on record about the hype surrounding Twitter and its limitations as a communications tool. So, when I read about the new round of funding that values Twitter at a whopping $1 billion, I settled back for a fresh round of snark.

Then I happened to notice a Wall Street Journal item quoting Anant Sundaram, finance professor and recognized valuation expert at Dartmouth’s Tuck School of Business. Don’t ask me to dissect his analysis; my skills don’t go there. But, Prof. Sundaram based his calculations on Twitter user numbers taken from internal company documents leaked earlier this year. Then, he reduced the user number by 75%. He assumes that Twitter can grow its user base to ten times its current size in the next four years, then applies Google-like multiples to reach a valuation of around $1.3 billion.

Of course, Twitter’s no Google, and there’s still the small problem of revenues. Plus, there’s no telling what new competitors will pop up to steal its thunder, and users. But Facebook, which is valued at $15 billion, will make $500 million this year, and it’s only just started to figure things out. And, about those investors – they include not only the typical ones, but the stodgy T. Rowe Price group. That’s a name usually linked with retirement funds, not Internet start-ups. Those mutual fund guys don’t strike me as fad chasers. Yet, plenty of smart investors have been hoodwinked by hope, or hype, or even their own greed.

Then I stumbled on a little study conducted by Penn State in September. Researchers from the College of Information Sciences and Technology examined half a million tweets to look at how products and brands were discussed. They found something startling. It seems that fully 20 percent of the tweets were brand-related. Think about it. That’s a huge slice of what some have called the “senseless babble” that is Twitter. It translates into maybe 600,000 tweets of relevant brand information every single day. Maybe not so senseless.

Talk about greed…that’s a pretty impressive data set, especially considering what major brands spend on market research. And, even if skewed, an analysis of relevant tweets can’t be less reliable than traditional surveys, coolhunting, eye-tracking, and other tools companies use to gauge their market. In fact, it may be more valuable, because the Twitterers are likely to be the more engaged consumers – for better or for worse. (The good news is, the Penn State researchers say many of the brand tweets are about positive product experiences.)  It’s no secret that Twitter feels its best asset lies in offering companies ways to monitor, analyze, and monetize relevant brand mentions. It seems they may have a lot to monetize.

I don’t know nearly enough about finance to do more than speculate about the current calculation, but I know a little more about brand marketing and public perception. Only time will tell if Twitter’s the next Google…or the next Flooz.com. But, suddenly, I’m not laughing quite so hard.

Why Twitter’s Fuzzy Follower Math Doesn’t “Follow”

Since the rise of Facebook and LinkedIn, online connections have become a visible form of social currency. But, given its one-way follow model, where anybody can basically follow anyone else, Twitter has taken the numbers race to another level. In fact, Facebook may be about to change its follow set-up to be more like Twitter.  Mashable points out that an option button has appeared that allows us to be notified when another Facebook user “connects to me as a fan.” Hmmm.

Yet since the hype around Twitter has gone mainstream, consistent usage has lagged.  Despite that, follower count has become a barometer of status. And, there’s been a lot written about the proper “ratio” of friends to followers. If you have too many followers relative to those you follow, you can look snobby. But, if you’re following more people than you have followers, maybe you’re not very influential.

Do you follow?  Me, neither, because it’s mostly nonsense. Mark W. Schaefer has an entertaining take on the “real” math behind the Twitter follower counts. He dissected the follower list of an unnamed blogger and social media consultant who bragged of his influence over his 80,000 followers. When Mark examined the consultant’s follower list, he estimated half weren’t real – they’re bots, porn stars, spammers, etc. Then, after an extrapolation based on the “Twitter Quitter” research from Nielsen, the Harvard study stats about Twitter usage and presumed demographics for qualified followers, the “real” following of the Twitter king dwindled from 80,000 to…well, one.

Exaggerated, yes, but the point is valid.  Followers aren’t a viable metric of anything unless they’ve been qualified, which requires a continuous, daily time commitment.  Another metric – the number of updates on someone’s account – might tell you something about their history, but it’s very fungible, and early adoption doesn’t guarantee influence.

I admit to engaging in a half-serious “race” with a former colleague, where we challenged each other with mock insults and poached one another’s followers to reach different benchmarks (note: I got creamed.) But, we’ve both settled into a more serious and curated approach to building a following.

I’ve made this point before about the “echo chamber” nature of Twitter but didn’t address the absurdity of the fuzzy follower math. Followers as a badge of status – or, more importantly, social media reach – is great if you’re Ashton Kutcher, and, a quantity-over-quality follower strategy is probably worth it if you’re broadcasting price deals or news updates. But, it honestly makes no sense if you believe, as I do, that Twitter should be about real engagement.


Has Twitter Jumped The Shark?

It’s a running joke among people in communications that, today, everyone’s a social media expert. Those who aren’t experts are usually self-proclaimed evangelists, mavens, gurus, specialists, advocates, or at the very least, enthusiasts. It’s striking, isn’t it, how quickly so many have become so adept at using new networks, platforms, strategies, and tools?

My point is, while there are plenty of skilled and talented professionals around,  the buzz around social media has become a little too noisy, with the result that we in the public relations profession might be accused of running after every shiny new tool or platform. Some of this is understandable, even natural. In the midst of the downturn, we’re scrambling for budgets, along with our advertising, digital marketing, and sales promotion colleagues.  And, even more than the dollars, we want ownership.

Public relations, the longtime marketing stepchild, has always craved respect. And it’s true that social media plays to PR’s traditional strengths.  The PR focus on content creation, the flexibility of the message, and its ability to open not just a one-way communications channel, but a two-way dialogue with end users, are just a few of the reasons why many social media programs are closer to PR than to advertising.  (For more, check out the excellent post by PRSA Chair Michael Cherenson here.)

The problem is that, in our zeal for ownership, we’ve lost some of the objectivity that clients value. There’s even a tendency to confuse social media tools and platforms with actual communications strategies.

Take Twitter, for example. It’s a powerful research and communications tool, and a vibrant social media platform.  And, yes, still a media magnet. In fact, whenever I’ve thought the Twitter media craze was about to die down, it seemed to grow, as with the Time magazine cover story last week.  And, Twitter-based marketing campaigns, or even just stunts, are still catnip for the trade press. But, Twitter’s a tool, for heaven’s sake. Putting a corporate or consumer brand on Twitter doesn’t a campaign make. Not even close.

Which leads to my next point. There are unmistakable signs that Twitter requires more time, energy, and strategic resources than many corporate users can give it. The user churn that’s been documented by recent research is also problematic. And then, there’s the ubiquity of the “fail whale.” So, has the bird (or whale) jumped the shark?  Is it done? Over the next few blog posts, I’ll be exploring the social media wave, with an emphasis on Twitter, to try to determine how much is hype, and how much is here to stay.

I can’t predict the future, but a thorough analysis of the user data and PR/marketing best practices is a decent starting point.  Stay tuned.

Facebook Tears Down The Wall

At over 200 million monthly users, Facebook is vastly more popular than Twitter, but the micro-blogging service seems to be a growing public and media obsession.  Even Twitter-hater Maureen Dowd recently penned an interview with its co-founder, which, while ostensibly satirical, only fanned a Twitstorm of interest.  Remember when Facebook drew that kind of love-hate?

Now Facebook is set to announce tomorrow that it will permit third-party developers to build applications and services that will access user videos, photos, notes, and comments, with users’ permission.  According to the Wall Street Journal, the service will be free and will work within current open standards.

That’s a big change for Facebook, which has always insisted that developers work within its site to keep its content, and its users, firmly within its walls. But Facebook is both following in Twitter’s footsteps and recognizing that it can leverage its enormous user base to fill a need….basically, to allow people to update and search with far greater flexibility than before.  For those on Twitter, according to PC World, that means being able to copy tweets to their Facebook status in a single click.

And that’s just the beginning.  Look for more Twitter-like tools and applications in the coming months as Facebook flexes its muscles. Even though I think both services can and will coexist, the social-media battle is entertaining, and it only makes things more fun for us, the users.

Getting The Twitter Religion

I was all set to blog about all the fun Passover action on social networking sites – the constant tweets and updates, the Facebook Haggadah, the Twitter widget for locating a seder in your zip code, when another holiday use of social networking caught my eye.

Trinity Wall Street Church in New York will “Twitter the Passion” by performing what it calls the first Passion Play performed through Twitter.  The Church invites a far-flung congregation to follow “a contemporary recreation of Christ’s passion” and be part of a global audience by following www.twitter.com/twspassionplay via cell phone, Blackberry, iPhone, or other web connection.  The content lasts for three hours and includes photos, Biblical passages, prayers, and music.   When I started this blog, there were under 75 followers for twspassionplay, but it’s now grown to over 300 and no doubt will pick up steam by Easter Sunday.

Great concept.  My Southern Baptist grandma is probably rolling in her grave, but, if some of us put our faith in social networking, why shouldn’t others use social networking to show faith?

Twitter and the Memphis Blues

First the Motrin Moms bring down an ad campaign, now an entire city’s a-Twitter over an ill-advised post!  The flap over the Ketchum executive who  used Twitter to insult Memphis, corporate headquarters of FedEx , which happens to be one of Ketchum’s larger clients (while on the way to deliver a presentation  to FedEx execs about digital media, no less) still has me amused.  Read details here.

It’s a good lesson about use of digital media and Twitter in particular.  It’s an even more painful lesson about  big-city myopia. I don’t agree with some of the Adrants comment s blaming thin-skinned Memphians, nor do I buy his lame excuse that his post was “taken out of context” even at 140 characters.  But, mostly, it’s offensive because I thought (naively) that new communication platforms like Twitter should make our regional differences less relevant , or at least less divisive.