The Twitter bubble
By Laurie Segall @CNNMoneyTech May 10, 2011: 5:09 PM ET
NEW YORK (CNNMoney) -- Is Twitter worth $7 billion as some people claim? Its top investor doesn't think so.
Union Square Ventures' Fred Wilson, called that valuation estimate "ridiculous" at Startup 2011, Silicon Alley Insider's annual conference.
"It doesn't make any sense," Wilson told Business Insider's Henry Blodget "Twitter didn't put that value on itself... the process by which people put that number is ridiculous," he said.
At the conference, industry insiders transitioned from talk of a tech bubble to talk of Twitter's growing pains. And the message is clear. Everyone's concerned.
For years, Twitter has been viewed as a darling in the startup world. But even as its valuation continues to climb, the company has struggled to transition into a moneymaking business,
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Twitter's latest management shakeup is also raising questions about the company. Co-founder Evan Williams is taking a step back, while former CEO and co-founder Jack Dorsey has returned after being ousted in 2008.
As for the bubble talk? Feelings are mixed.
"It's ridiculous to think this is a bubble," Gilt Groupe CEO Kevin Ryan said, noting that his definition of a bubble is when valuations are ten times too high.
Ryan doesn't think the soaring valuation of Twitter is its main problem. It's the inner struggles of the company that concerns him and its inability to push forward on the product side.
"I just don't see the general execution level they should be seeing," he said. "They should be able to monetize better."
When asked if Twitter would be able to build a business to support its valuation, Wilson responded, "I hope so."
But EDventure's Esther Dyson is more concerned. "I think there is a bubble... you can start a company with so little money, but what you can't do is grow and scale the company."
Dyson says the signs of a bubble are here. Companies are acquiring startups to scoop up talent, and too much money is going into too many deals.
As for Twitter, Dyson said the company has "underinvested in the platform."
"It has great potential," she said. "Right now I wish it would succeed, but it's an open question.
Dyson, who says she uses Twitter more than Facebook and other social networks, is hoping that Twitter will be here to stay. But she said the company is not invincible.
As she grimly puts it: "Most companies don't' get murdered. They commit suicide."
Credit: CNN (www.cnn.com)
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