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Tuesday, October 20, 2009

Twitter Powerful, but Keeps Going Down - More Infrastructure Necessary!

We were skeptical of Twitter before we hopped aboard perhaps a few months ago to share blog posts and anything else that strikes us as worthwhile.

Now, we've bought into the idea that the instantaneous networking power of Twitter is incredible, especially as the number of "followers" increase. For example, some extremely well followed columnists and politicians have more than one million followers that they can instantly reach with minimal effort -- they can share news, views, or ask questions if they need assistance on a certain topic.

We're not commenting on the durability of the business model or enterprise value. Like all companies, we think valuation should be supported by current/future free cash generation to owners. Yet, we must say that the microblogging platform is arguably powerful and transformational in terms of sharing information.

Unfortunately, the popularity is seemingly leading to network overloads for Twitter as we've seen this message several times in recent days:

Another message also popped up about being overloaded -- we don't recall the exact wording. It appears as though Twitter needs to invest in additional infrastructure to support growth, a potential negative for Twitter, but potential positive for IT hardware/networking companies. However, contrary to the error messages, a recent media report noted the following: "The September numbers from market watcher comScore show Facebook Inc.'s U.S. user number grew 4 percent to 95.5 million as Twitter Inc.'s numbers flattened out at about 20.8 million" (i.e. slower growth should mean less network strain).

Happy investing,

Jeffrey Walkenhorst
CommonStock$ense

Disclosure: no position.

© 2009 Jeffrey Walkenhorst
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