Twitter as the new Facebook

February 2009 might well go down as the month when the paradigm shifted and Twitter replaced Facebook as the hottest and coolest company in Silicon Valley. First, Twitter closed a $35 million round of venture capital investment at a valuation of around $250 million – not bad for a revenue-less start-up in the depths of the worst liquidity crisis since the Great Depression.  Secondly, research from Pew Internet and American Life Project revealed that a whopping 11% of Americans have used a micro-blogging service like Twitter. Thirdly, in a survey of 200 top digital marketing mavens, Abrams Research showed the upstart Twitter trounced the established Facebook in the all-important question of which social media service is the most effective financial investment for businesses  – Twitter getting 40% and Facebook only 15% of the vote.

The 29 person, two-year old Twitter, of course, is in that pre-adolescent stage of development when it can do no wrong in the eyes of the Silicon Valley cognoscenti. The aphoristic instant-messaging network has experienced phenomenal growth with active users growing 900% in the last year. Anyone who is anyone is on Twitter these days: Stephen Fry, Barack Obama, Shaquille O'Neal and Jonathan Ross, even an alter-kocker like myself. Best of all, the advertising free Twitter hasn’t had to worry about the inconvenience of revenue with the San Francisco based company only last month getting around to hiring its first head of sales.

The five-year old Facebook, on the other hand, has – to excuse the teenage metaphor – collided head-on with the pimples of adolescence. While Twitter was having a miraculous February, Facebook’s month has been gruesome. It all began when the Consumerist website, in an inflamatory post entitled "We Can Do Anything We Want With Your Content. Forever" noted a number of significant changes in Facebook’s terms of service (TOS) and suggested that the company intended to keep the information of users who quit the network. “Facebook owns you!” cried tens of thousands of paranoid members, thereby forcing Mark Zuckerberg, Facebook’s 25-year old CEO, to publicly rescind the changes and limp back to his original TOS.

The storm is really about how the company transforms the information of Facebook’s current 175 million social networkers into dollars and cents. Having been valued at a ludicrously inflated $15 billion when Microsoft invested $240 million in the social network in October 2007, Facebook is now under immense pressure to prove that its free service can generate significant revenue. And given the huge premium paid by advertisers for personal information, it isn’t surprising that the real fear of the change in its TOS was about Facebook selling the data of its ex-members to the highest corporate bidder.

Ev Williams and Biz Stone, Twitter’s two young co-founders, should learn from Facebook’s growing pains. In a year or two, Twitter will have inherited all the uncomfortable growing pains of today’s Facebook. The micro-blogging site will have been replaced as the start-up darling of the Valley by a fresh-faced new new thing. It will probably also have to quell the digital rebellion of Bolshevik users who will claim “ownership” of the service. Most of all, Twitter will, in the not-too-distant future, have to prove to investors that the company has a viable strategy for transforming its millions upon millions of Tweets into hard cash.