A few thoughts on a sustainable business.

A couple of hours ago I argued why Twitter needs to make the changes it’s making to stay independent.

Now I’d like to write down a few thoughts on why I agree with what Twitter is doing.

You know what happens if you don’t make enough money to sustain your business? One word: Instagram.

Everyone loved Instagram, most still do. But let me ask you: Do you really believe that Instagram will be better, having been bought by Facebook?

Let me remind you that Facebook is the company that IPO’d a while back, and to date has managed to wipe out billions of dollars, closing at the lowest valuation since said IPO just today. From $38 to $19,88 in a few weeks. Wow…

I’ve said this before: Facebook has no sustainable business model. They have 500 million mobile users and make no money off of them. How long do you think this will go on? What does that mean for Instagram and Facebook’s own mobile apps? Right. You know.

This is a point where I agree with Brian S. Hall: Almost all VC-backed/funded ventures are there to make them money, not you. Preferably by selling to a huge tech company. Nobody builds a business anymore to stay in business. They’re being built to be sold.

And this is why I understand what Twitter has to do.

Fact check fail: Zack Whittaker (ZDNet) style.

Zack Whittaker for ZDNet on why Apple’s Phil Schiller left Instagram:

A senior Apple executive quit Instagram because it “went to Android,” according to reports. Did he jump, or was he pushed? Apple’s closed wall nature points to corporate paranoia.

Apple’s Phil Schiller on why he left Instagram:

Instagram is a great app and community. That hasn’t changed.
But one of the things I really liked about Instagram was that it was a small community of early adopters sharing their photographs.
Now that it has grow(n) much larger the signal to noise ratio is different.
That isn’t necessarily good or bad, it’s just not what I originally had fun with.

Yep.

Q: How does Instagram make money? Answered.

Kyle Baxter at Tightwind:

I don’t begrudge Instagram’s founders for selling their company. There’s nothing inherently wrong with acquiring businesses or selling one. What I think this shows, though, is what Silicon Valley’s venture capital-fueled motto—”build now, get big, and figure out how to make money later”—does to companies. It ends up meaning that getting acquired is the only viable means of continuing the business, or ending it. It means that the business isn’t long for this world.

This is sad, but true.

I get what FaceBook gains by buying Instagram: Our photos, including our location. Probably pretty valuable. I also get what Instagram’s founders get: A cool billion.

What the idealistic part of me doesn’t get: Why are people building businesses that have no chance of ever turning a profit on their own?
I recently asked this question on GigaOm:

How does Instagram make money btw? It seems everyone and their brother praises them, yet no one talks about their business model…

It seems to me that this includes most businesses out of Silicon Valley. Food for thought.