Andreessen Has It Backwards on Facebook vs. Twitter

IDG News Service — Tue, 07 Jul 2009 09:56:29 -0400

It's interesting that Facebook board member Marc Andreessen is willing to comment on the company's revenue potential--he says it's $500 million in 2009 and billions in the future.

With 225 million users, I would think Facebook could generate a lot more than $500 million in revenue. That is less than $2.25 per user. What the Netscape founder has not been quoted on is the more important number: profits, which I think will elude Facebook for years to come.

Taken out-of-context, Andreessen's $500 million figure is pretty meaningless. But, it's all we know about Facebook's numbers, given the company's secretive nature. When he is not talking to reporters about profits, Andreessen also does not talk about something else: Expenses. Facebook must be very expensive to operate.

Andreessen is a good guy and a talented entrepreneur. He started with a big win when he founded Netscape. Then had some hard times after leaving Netscape (at that time owned by AOL), but seems to have learned from his mistakes.

Andreessen is in the news this week because he and a Netscape buddy have started a venture capital firm, funded at $300 million. That is big news in this economy.

I am, however, a concerned about Andreessen's investment sense. According to news reports, he sits on Facebook's board and is an investor in Twitter.

I think Marc Andreessen may have it backwards. Facebook seems to be the far better investment and Twitter needs help discovering a road to profits.

How can I say that, having just said Facebook is nowhere near earning a profit? Because Facebook is, wisely I think, building a platform and user base. The company assumes that somehow it will manage to monetize these users in the future. Advertising hasn't worked so far, but I think something will--eventually.

Twitter makes me much more anxious. Its user base is growing, but is not likely to match Facebook's 225 million users and is more likely to top out at a much lower number. Twitter does not really work as an advertising vehicle, so revenue will have to come from someplace else.

I have a much more difficult time imagining Twitter as a huge moneymaker than guessing that Facebook may eventually find profits. Granted, Twitter is not as big a play as Facebook, so the pressure is not as intense on Twitter to perform.

I do not know about Andreessen, but given the choice, I'd much rather own a piece of Facebook than Twitter. If I could invest in one or the other, I would choose Facebook.

Both companies may eventually turn a profit, but I am much more a fan of Facebook than Twitter.

Tech industry veteran David Coursey tweets as techinciter and can be reached via his Web site at www.coursey.com.

Image: Mark Andreesen in an interview with Charlie Rose.