Stardust Global Ventures

First, and foremost, I’m a Twitter fan. That’s common knowledge. I’ve been using it since it began as Twttr in 2006. I’m one of those “over three years” avid users, and I’m active still. All the time. Every single day.

Those of us who use Twitter, and other service like it, have watched for a long time wondering when the business opportunity will present itself. When we’ll see the big launch. This morning on Posterous, our friend and tech pundit Robert Scoble posits a dollar value for Twitter that I think is simply beyond absurdity. You can read Why Twitter is underhyped and is probably worth five to 10 billion dollars for yourself. I encourage you to. And I encourage you to make your own judgements.

I began this by trying to dissect Robert’s points, but it begs for me just a question really. Nonetheless, Robert’s points are highlighted and addressed below.

Robert, you gave a handful of reasons. I’m responding to the reasons below. But what are you using to substantiate those numbers? Where did they come from? Is there a reputable tech sector analyst anywhere who agrees in any way and has published a statistically viable report that remotely backs that up? Or are we basing all this on feel-good hunches and our gut? And yes, I believe many analysts in the industry evaluate Twitter and the like with gut feel and statistical inaccuracy.  I know I have. I simply don’t see it, and don’t understand where that wild dollar value comes from.

1. Twitter has taken over the business world and this should be very worrying for other companies like Google, Yelp, Facebook, Microsoft, Yahoo and others.

Really? Twitter has taken over business? Or has it simply captivated as much as 3% of businesses attention. Scoble far too often seems to equate his window on the tech sector as all of business. Then he points out 3-4 major companies who are forward thinkers and looking to leverage trendy fads and proclaims facts not in evidence.

Let’s think about “the business world” Robert says has taken over. Think about your business world. How does your bank use Twitter? Your grocery store? Your auto mechanic? Your insurance company? Your health care provider? Sure your cable company is Comcast and you can get a rise our of @Comcastcares, but what percentage of businesses you do business with each month are through interactions on Twitter?

Some businesses in some sectors are indeed trying to use Twitter as a competitive tool. To say Twitter has taken over business is improbable speculation. I consider Robert a friend. I also consider Shel Israel, author of Twitterville a friend. And while we agree on many things and the potential power of tools like Twitter, let’s not make a mountain out of this molehill. In the global economy, and in North American business, Twitter is an interesting blip on the radar that continues to grow. But so far, that’s still what it is. A blip with the potential to be much more. Potential value isn’t market value. Not yet.

2. Twitter is underhyped. I’m now convinced that Twitter has locked up a whole raft of businesses and that Twitter is actually worth five to 10 billion dollars.

Twitter’s underhyped?. It’s only on Conan, Oprah, CNN, mobile carrier commericials and every place we turn. Underhyped? Give me a break. It’s more like the H1N1 pandemic. It’s all the talk, lots of buzz, with precious little substance. Funding for flu pandemic response really doesn’t exist. But find a dead bird, mad cow, or sick pig, and it’s all the buzz. It takes the center of conversation. In some ways, Twitter’s a bit like that. While the flu hasn’t reached pandemic levels to date, Twitter might be argued as having hit epidemic levels. Pandemic? I don’t know. I don’t want to quibble over term definitions. Instead, I’ll grant that when the celebrity of the week signs up, or the governor of a nearly bankrupt state visits Twitter HQ,  we will absolutely talk about it and little else. We are indeed a fickle, yet pliable flock of sheep.

Valued at 5-10 billion dollars?????? I have to repeat that – 5-10 BILLION DOLLARS???? Good God Robert, do you know what you’re saying? I really do want to know where that number came from. And who on earth you think is queuing up with something in between the GNP of the Bahamas ($4.92B) and Bahrain ($10.3B) is another interesting area to consider.

Amazon just bought Zappos for $928M. That’s a pretty nice chunk of change for a profitable company that’s got worldwide viral love from customers. But it’s a mere tenth of the kind of money in question here.

eBay bought Skype for $2.6B in 2005. It has been highly acclaimed since as one of the largest wads of money flushed down the toilet in the tech sector. Overhyped, overvalued, inadeqaute return. In short a financial catastrophe that nobody ever really owned as such. In the acquisition of a company that actually sells services, has a business model, makes money and is still growing. Skype is solid, growing, viable and measurable in financial worth. Is valuing Twitter at four times what Skype went for really reasonable?

Maybe we should get a little different perspective. Where do we look? Cisco bought Linksys for $500M. They bought Flip for $590M. Those don’t compare. Let’s move up the food chain to a substantial company – Scientific Atlanta. That acquisition was about $6.9B. I guess that puts us in the right financial range but isn’t a fair comparison really. Scientific Atlanta makes actual products, They opened doors for business in 1951, before Robert and I were born. Here’s some Wikipedia background:

Scientific Atlanta is a leading supplier of transmission networks for broadband access to the home, set-tops, cable modems and digital interactive subscriber systems for video, high-speed Internet, voice over IP (VoIP) networks, and worldwide customer service and support. Products for the cable TV industry, such as fiber optic network equipment, digital cable boxes (as well as universal remotes to go with them), and cable modems, dominate Scientific Atlanta’s sales. Scientific Atlanta also supplies distribution technology to networks such as Bloomberg Television, CNN, ESPN and many others.

So how on earth can we fairly, accurately and honestly say Twitter is worth that kind of value?

3. Silicon Valley tech bloggers haven’t yet put together this pattern, other than by watching traffic numbers which continue to zoom up. Why? Because most of them don’t travel very often and don’t actually meet with real businesses like restaurants or like the Fiat/Yamaha racing team I’m hanging out with this weekend. When race fans and companies that serve them are excited about Twitter you know the world has shifted.

Race fans are excited about Twitter? Sure, lots of people are. To say Silicon Valley tech bloggers haven’t put the pattern together is a slap in the face. I’m far removed from the Silicon Valley, but I have a sense of the impact of the Fiat/Yamaha racing team on the world economy. Yes, I recognize racing is a huge sport, with millions of fans and lots of money. But to say the world has shifted because rabid fans are excited about Twitter? Overhyped, overstatement, and out of balance in my view, but this is simply my viewpoint.

4. A new understanding of Twitter by businesses is now here, thanks to a raft of new books like Chris Brogan’s Trust Agents or Shel Israel’s Twitterville.

See above. Yes, there’s a new understanding. By some businesses in some sectors. Yes momentum is growing. As a Twitter user and believer, I don’t actually think critical mass has yet been achieved. But when I read how digital natives, the next generation of users are using Twitter, or not (see Why Don’t Teens Tweet? We Asked Over 10,000 of Them.), I do wonder if critical mass for Twitter will reach its potential.

There’s a sliding window of opportunity for any business idea or technology. The window is moving and Twitter hasn’t been terribly fast to move with it. Broadband and mobile services are growing, and the reality of the 140 character microblog for information may be changing. Facebook, FriendFeed (now Facebook), Posterous and others demonstrate the value of threaded conversations, metadata and longer (or perhaps more substantial) interaction. Given Twitter’s past evolution, responses to the user community, and rate of change, they may well be missing the window of opportunity. They’ve missed multiple windows in the past three years.

Twitter is an innovator. They were first to the space. They brought us something viral, powerful and amazing. We love them for it, although it’s often a love-hate relationship. Scoble will acknowledge this as openly as anyone. And like all of us who were the early adopters of Twitter, there have been times we have our doubts. Scoble’s are well documented too. In his zeal for FriendFeed, he moved away from Twitter. He’s never been a big FaceBook proponent openly, although he uses it. But FB acquired FriendFeed and now Twitter’s the rage again in his view. even given his admitted lack of fondness for the management team.

So why? We want substance in answers, and Robert, beacon of new ideas that he is, doesn’t always give the substance. But he has it in his head. Getting him to articulate it requires pinning him down and not letting any shiny new things cross his field of vision for a few minutes, and that’s hard with Robert <g>.

5. Businesses are seeing real ROI but aren’t sharing that publicly and, really, they don’t have much else that is working to reach the richest and most educated customers.

I struggle a lot with this. Maybe because I’ve spent thirty years in businesses very different from Robert.  If a business is seeing ROI, they make substantial investment and they change. Business process re-engineering (or whatever 2.0ish term you want to call it today) is an industry supporting businesses. Change is where huge volumes of money are made. Ask Accenture, DeLoitte, Ogilvy, Price Waterhouse Coopers, et al. These are companies that have made money selling and implementing change.

I’m not saying it isn’t happening. But the bellweather indicators either don’t exist or they’ve changed vastly. And I don’t buy that Tony from Zappos, or the CEO of this company or that can be seen as the canary in the cage that’s signaling all this positive karma. So Robert, what specific bellweather indicators, confirmed by which analysts, backed up by “deep dark secret ROI” do you base this on. I really want to know. And you know I can be convinced. You and I have been down this path before.

6. In each city there are a core group of Twitter evangelists that aren’t pushing anything else to their businesses. In Hollywood one of these evangelists, who wants to remain unknown so asked me to keep his name off of the blog, took me to a set where they were shooting Criminal Minds (you can see my interview with the director of photography here) and while there this guy told me why celebrities won’t use anything but Twitter. Other services are too hard for the celebrities to use, particularly from their mobile phones. I’ve been using the new Facebook app on my iPhone, but it has some severe limitations for businesses and celebrities which I’ll go into later. Because these influencers aren’t pushing anything else, nothing else will get adopted.

In some cities there are core groups of Twitter users. Some of the most rabid are evangelists. In big cities, this is far more true than a lot of smaller ones. Sheryl and I recently moved to Walla Walla, and on day one became the top two Twitterholics in the area. By a country mile. In major cities, that’s not the case. But if we extrapolate the fact that more jobs are created and more revenue is generated by small amd medium businesses than any other source (a well known fact of north America), we might reasonably extend our understanding of facts to the reality that just as Twitter hasn’t fully penetrated (think of the telephone networks penetration and the universal truth that real infrastructure for any communications or utility service delivers what’s called “5 nines reliability”) and the penetration of the evangelists is a sparser density than stated.

And look at the article mentioned earlier about teens use of Twitter. You’ll see too hard to use, too geeky and such as reasons why they avoid Twitter. Simplicity, like beauty, is in the eye of the beholder. Twitter isn’t simple or even interesting to a large mass of the populace.

7. Facebook wants into this market (and so do others) but they aren’t understanding what makes Twitter attractive to businesses.

I’ve got multiple responses here. First, Facebook already has this market. They have it huge. They have the metadata Scoble knows is vital to success. Metadata and demographic information that Twitter doesn’t have and can’t add without rendering the service far less useful. Facebook’s already there – in Twitter’s face, in their space and fighting for attention. In many ways successfully and in many wayss badly. To many Facebook is little more than Evil Empire 2.0. Scoble says they don’t understand what makes Twitter attractive to business. I think they understand better than Twitter does. That’s why we see businesses and apps and commercial advertisting on Facebook. They make no bones about being in it for the money, having a plan and wanting domination.

Facebook doesn’t want Twitter. Facebook wants to be the aggregation portal for the Internet. Facebook may be a tad late to the game, but they’re aiming at being Portal 2.0, the gateway to the Net. That’s a role we’ve  seen Google and Yahoo both take. And AOL’s still stuck there. Facebook may be the next iteration that actually makes that work. But this post isn’t about Facebook.

Listen Up Twitter

I have no delusions that @ev or @biz will read this or listen. They’re a couple of the most unresponsive Twitterers online. In short they don’t listen. If you’ve been around Twitter for a while, you might have noticed, they don’t listen to users. They decide for users and break things that work. More than once they’ve flipped us the bird and gone on to make changes that detract value with the promise of something to come.

I’ll ask a simple question, from the perspective of a sales guy. You know sales guys. They’re the ones who drive the economy and bring in the revenue. That lubrication that keeps the economy rolling – money. The questions a simple one, and every salesperson on the planet has heard it more than once – what have you done for me lately?

Twitter’s community of users comprises several thousand years of business experience, communications experience, technology experience, revenue generation experience. When you have that much expertise at hand, sometimes, every now and then, maybe the crowd should be fed and fueled rather than misdirected and held at bay. How many ideas have you personally seen that would make Twitter, bigger, better, stronger, more sustainable or profitiable? And how often have you seen Twitter leadership even acknowledge that we’re here? I know my answer? What’s your answer.

AT&T can and will ignore customers and dictate what they think customers should have. It was a stupid move when I worked there and it’s still stupid. They’ve gotten away with it for a very long time. They still think the customer doesn’t know what’s right or what they want. That they know best. Here’s a variation on a cartoon that circulated through the old Bell System during my entire career there.

While many would argue that it’s invalid, I’m here to tell you that the reality portrayed here is still running amuck at the new AT&T. The new AT&T put back together by Ed Whitacre from the remains of the old AT&T. Everything old is new again. The mentality is still there. And it’s at Apple too, but unbridled euphoric optimism has extended Apple’s free pass on customer accountability a while longer. Free passes run out eventually.

If you build it, they will come. Those words were true in a popular movie, and they’ve been true for many a tech startup. They’re certainly true for Twitter. They built it and we came. Many of us are still here.

Let me ask another question. If you don’t sustain it; if you don’t take it forward; if you don’t listen, do you think we’ll stay forever? There’s a sliding window of opportunity, and I believe Twitter has repeatedly missed seizing big moments. I think they’re continuing to miss. And while I’m here, and not going anywhere today, I am still watching to see the Twitter team seize the big moment. The ship has come in more than once, and each time, they were apparently at the airport. So Twitter, how on earth are you going justify Robert Scoble’s bold statement of your worth? How’re you going to justify investors from a future-thinking, forward moving business plan. You’ve said you’re infrastructure. How’re you going to prove it and deliever infrastructure caliber utility?

I don’t expect answers really. I imagine Robert may answer at some level. He’s great that way and I think he enjoys some of our debates as much as I. And I think we both learn from them. I know I do. I expect Twitter to take another opportunity to not react to the community, their users, the crowd. Sadly, I expect Twitter to keep watching windows slide by a while longer.

Free passes run out.

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