Twitter may make millions of dollars this year — just not for Twitter itself.
Founders Biz Stone and Evan Williams are reportedly shopping for $50 million in funding for the social media site, touting a $1 billion valuation. That’s despite the fact that Twitter has not yet released or implemented plans for turning a profit.
Meanwhile, other online ventures have already come up with ways to make money from Twitter, leaving the free service in the dust.
One sports entrepreneur, Chris Russo, reeled in a chunk of McDonald’s marketing millions with Twitter. In 2006 he founded Fantasy Sports Ventures, which is now helping the fast food chain reach fantasy football players with a branded product that aggregates “tweets” about the subject.
Russo’s revenue, thanks to the burger giant, is expected to double this year to $10 million.
Countless other small businesses have sprung up to sell everything from Twitter-related tees to tools that help businesses manage their accounts.
Lack of earnings isn’t stopping Twitter’s founders from shooting for the stars. Earlier this year, it was widely reported that Facebook offered to acquire Twitter for $500 million of in stock and cash, but the co-founders said they turned down the offer, holding out for more.
Twitter’s following grows by 900 percent each month, Stone and Williams claim.
A handful of Silicon Valley’s young entrepreneurial gamblers have placed bets on a Twitter windfall. One of its biggest investors isn’t worried about his millions, claiming the enterprise could go for years without earning a dime or unfurling a business plan.
“We have far more cash than we need, so I’m not in any hurry,” Todd Chaffee, a partner at Institutional Venture Partners, told Wired.com.
IVP, an early backer of Yahoo!, is among a half-dozen venture funds said to have sunk a total of $55 million into Twitter, convinced it will eventually wrangle a Google or a Facebook into a deal.
Yet pundits are deriding the newest sky-high valuation on the instant-blurb phenomenon. “Step Right Up! Let’s Play Guess Twitter’s Valuation,” trumpeted MediaPost.com in a wrap-up of bloggers’ quips and digs.
In particular, critics charge that founders and their investors are setting up a quick exit — if they can find an opening.
Even if a $1 billion valuation floated this week by “sources” in the Silicon Valley crowd holds up, it’s not apparent that many deep-pocketed buyers would risk their capital for a company without a profit plan — and a product limited to just 140 characters.
Numerous rumors of acquisitions by giants such as Apple and Amazon rise and disappear like the tides.
Some of Twitter’s other investors include Benchmark Capital, Fred Wilson and Union Square Ventures, Spark Capital and Jeff Bezos of Bezos Expeditions.