Did Twitter Just Buy Revenue?

Twitter has been in the news a lot the past few days. Besides the various reports and commentary regarding their rejection of the Facebook offer, they also bought a company, closed its services and kept the founder. This seems really odd at first, until you realize what they have done. First, according to his own blog, Rael Dornfest has been consulting at Twitter for a bit. He also states that Twitter has purchased the intellectual property of his Values of n company:

While the company and services will be shutting down, Stikkit and Sandy’s DNA will live on; the intellectual property behind both has been acquired by Twitter, Inc.

That is fairly typical, but closing the services in the next few weeks is not so typical. In most cases, this means that the applications or technologies in those services will be integrated into the purchasing company. The Twitter blog also reiterates this point:

Values of n will be shutting down existing products. However, the technology behind the scenes will live on and potentially re-emerge as part of Twitter’s systems, services, user experience, or open source libraries. Nothing specific in this regard is planned but there is some smart work in there by the newest member of our engineering team.

If they were just looking to grab a smart engineer, they could have just hired him. However, by purchasing the company, it shows they have plans. The features within I Want Sandy and Stikkit are not enormous, but they are just the right type of features that can be integrated into a service like Twitter. These features are also “value added” features. How much would you pay for a reminder service from that is fully integrated with your Twitter experience? These features could absolutely be used as part of a premium account. Granted this is just a theory, but I would not be surprised if we start to see subscriptions available for extended features like these and the popular “track” feature that went missing so long ago.

Maybe this is why Twitter did not want the stock offer from Facebook. Maybe their revenue plans are coming sooner than people expect.

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One thought on “Did Twitter Just Buy Revenue?

  1. > If they were just looking to grab a smart engineer, they could have
    > just hired him.

    Actually, its fairly common to buy a small company just to get the developers. Its particularly common when there is a small, cohesive team: it can cost a few hundred thousand dollars per engineer to pay the headhunter fees, signing bonuses, etc. If one can buy a small company for a few million (with suitable guarantees in the purchase agreement that key employees will stay or forfeit the gains), it works out to be cheaper to buy the company and discontinue out its products.

    This obviously only works if the developers realize their existing product isn’t winning, and are willing to see it go. A long phase-out is also sometimes done.

    Acquiring a company to get a single superstar developer does happen, though it is less common and there is an upper limit to the amount of cash the company would offer. Generous stock options would be thrown in as the cherry on top. Perhaps Rael Dornfest is that superstar developer, and ownership of the IP is just a nice secondary benefit.


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