Tuesday, September 01, 2009

Tweet This! How Much is Owning the World's Collective Consciousness Worth? Scoble Says $5-10 Billion -- Perhaps, But Not for His Reasons

Yesterday, respected tech guru Robert Scoble wrote that Twitter is underhyped and undervalued and is worth between $5 and $10 BILLION. Never mind that Twitter makes no money and has found no way to monetize its services. Scoble believes that Twitter will eventually Tweet itself all the way to the bank by charging for "business services" (although he does not define what those business services may be).

After I tweeted Scoble's post, a good friend (who also is a top executive at a major Internet company) wrote a humorous direct message to me, saying that respected Scoble "is now a lot less respected."

Now, that's a bit harsh. But, Eric Quanstrom (Sorenson Media's VP Marketing & Strategy) and I discussed Scoble's post yesterday and ruminated on it. We considered Scoble's rationale and reached these conclusions:

First, if you are Evan Williams (CEO of Twitter), just sit back and enjoy the ride -- let Scoble and others inflate the value of your company. Don't even try to justify ways to monetize your services, because once you do, then the number crunchers will come in and quickly deflate the value of your company. Gone will be the hype of $5-10 billion -- now, critics will be able to poke holes in your monetization story. So, be patient -- and let Scoble and others speculate. Their speculation, in turn, will lead to real investor speculation and even more hype -- and that ultimately will benefit Twitter investors in a big way.

Second, while it sounds "nice" and "logical" that Twitter ultimately will be able to monetize its services in a big way by introducing "business services", let's take a closer look. Yes, it is absolutely true that virtually every company -- including my own, Sorenson Media -- is trying to harness the power of Twitter to build customer relationships and better market itself, that does not mean that Twitter itself necessarily will be the one to generate real cash from those efforts. Look at the plethora of Twitter-related services and apps out there right now? These aren't Twitter itself -- but they harness the power of Twitter and give businesses many of the services and tools they need right now. And, this Twitter eco-system will only grow and grow.

So, yes, Twitter is a phenomenon -- and its growth is beyond remarkable. As Scoble writes, the entire world (literally) is obsessed with Twitter and feels the need to tweet itself -- "I Tweet. Therefore, I am." And, yes, Twitter is unlike any other service out there, providing the world's collective consciousness at any given moment in time (something that even almighty Google and Facebook cannot do) (how can Google even effectively present real-time Tweets as part of its view of world domination to "search everything" -- how will it rank Tweet X v. Tweet Y?).

But, how much is owning the world's collective consciousness worth?

As a stand-alone business, certainly nothing close to $5-10 billion. Let's not forget that, apart from Twitter's unknown plan to monetize itself (I have doubts that Twitter will ever be able to monetize its services in any meaningful way), its operating expenses must be enormous -- and those will only grow and grow as more and more Tweets will include video and other rich media. (As I just recently wrote, Google's YouTube has precisely the same problem.)

But, whoa Csathy, not so fast! Let's get back to Google's mantra to "search everything." How can this be true when it cannot do what Twitter does -- i.e., search the world's collective consciousness right now? THAT is Google's Achilles Heel! And, that, ultimately, may be Twitter's path to billions and billions. Google needs Twitter (in the words of that classic disco song, "If I can't have you, I don't want nobody baby!). And other tech behemoths (Microsoft, anyone?) need to keep Twitter out of Google's hands.

So, it ain't "business services" that will lead to the salvation of Twitter investors. It will simply be an old-world auction -- supply and demand. And, direct monetization has little to do with it.

(But, Google -- tread cautiously here (I know that is a very bold statement for an individual like me to say to a tech titan). You already lose hundreds of millions of dollars annually running YouTube. If you add Twitter to the fold, you will need to deal with this same issue -- but now doubled.)