All That Twitters May Not Be Gold, Analysts Say

By Cyrus Sanati March 17, 2009

Twitter seems to have gone from obscure to mainstream in about the same time it takes to send a “tweet” over the network. Despite the fact that the three-year-old microblogging service doesn’t generate revenue — never mind profits — there is already chatter about who might want to buy it. However, analysts at Sanford Bernstein believe that potential acquirers for Twitter should think twice. In a research note published late last week, the analysts argued that the Web 2.0 model of building a product and then figuring out how to monetize it has been largely debunked. The Web is littered with examples of promising but ultimately value-destroying acquisitions, they wrote, citing deals such as AOL’s $4.2 billion acquisition of Netscape, and eBay’s $4.1 billion acquisition of Skype. The analysts said that monetizing Twitter “would be difficult at best and likely unsuccessful.” People who sign up for free services tend to resent a company for trying to wring revenue from the business later. Subscription fees are out of the question, they said, and advertising-based revenues don’t seem to have yielded enough cash flow to make a Web 2.0 property viable.

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