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On the Web, Growth Costs Real Money

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Twitter, the San Francisco-based micro-messaging startup, has been growing like a weed, thanks to generous plugs on mainstream media. Data collected by comScore shows that the number of unique visitors to grew from 1.6 million in April 2008 to 32.1 million in April 2009. All that growth is sucking up Twitter management’s attention, along with a big chunk of its investors’ money.

“For the entire [three-year] history of the company, most of the resources have gone to managing growth, and that is still the case,” co-founder Ev Williams tells The Wall Street Journal. The company will have about 90 employees by year’s end, many of them helping keep the (proverbial) lights on. For Twitter, that problem isn’t going away anytime soon. In fact, it should look towards a future where a big portion of its resources are dedicated to its web infrastructure —  just like Facebook, its perceived competitor.

Facebook, the Palo Alto, Calif.-based social-networking platform operator, has been growing exponentially. In order to keep up with that growth, the company is spending between $20 million and $25 million a year on data centers alone. (These costs don’t include the price of the actual gear.) These costs will go up, when it adds more data center space later this year, according to Rich Miller, who has poured through various SEC filings and has come up with good guesstimates on how much Facebook is spending on data centers.

Bonus link: Tim Bray, director of Web Technologies at Sun Microsystems, lists eight things you have to worry about if “you’re building web technology…But if you’re building applications on it, mostly you don’t.” Bray’s bio.

13 Responses to “On the Web, Growth Costs Real Money”

  1. I guess we all are very eager to learn what their revenue model will be, whatever it is, I am sure it will be a well thought out. This is a great lesson in innovation as we watch it unfold right before our eyes. One thing is for certain, the web “now” is here to stay.

  2. “thanks to generous plugs on mainstream media”?

    Sorry, Om. You were around in the 1990s when every TV mogul thought they could light up Web traffic by turning the firehose of users on it with idiot box plugs and tie-ins. Unless you were in a drugged-out stupor, I can’t imagine you missed that lesson.

  3. When will people learn – nothing is free. Giving something away means it has no value. It’s nothing more than a TARP style bailout. 90 people cannot figure out how to make money off Twitter. The worlds press can’t figure out how to make money off Twitter, the blogger’s can’t figure out how to make money off Twitter, the VC”s can’t figure out how to make money off Twitter. That should tell you something. There is only one hope for Twitter – a buyout. That’s it.

  4. Yup, this is another facebook in the makings. A service that is wildly popular, but has no hope of ever making enough money to break even without investor help.

    They can try to succeed, if they get off their high horses and start to put advertising and/or premium services in the mix. Having 90 employees plus hosting, bandwidth, etc, is a recipe for disaster if there is no revenue motivation.

    My hope is that a big player will buy them out and bring them to their senses.

  5. Its time twitter needs to change its business model, what they need to think next is flow of funds.which business model suits them is a question which can be addressed only by them. So lets wait and watch which way twitter moves so as to fit with the growing user base.

  6. maira

    Isn’t this investment a pure craze? Investing so much money for visitors just “to have fun”? I mean really I love Twitter myself, but hey the world needs help elsewhere, all the more so given that the service still has no apparent way to make a profit.

  7. It’s frightening especially for Twitter guys. If they don’t find a way to monetize and profit from Twiiter that fits this particular business model, Twitter will suffer a blow from the inside out.