Three months ago, one of New York’s hottest tech startups was turning down acquisition offers from giants like Twitter and Google. Now it’s in a fight for its life.That startup is Betaworks-funded Bit.ly, one of those services that takes long Web addresses and turns them into shorter links that fit better into tweets, Facebook messages, instant messages and emails.
In January, Twitter approached Bit.ly seeking help with spam.
Those talks went well, and soon, according to two sources familiar with the discussions, the Twitter guys were talking about a closer partnership or even a merger.
But then talks stopped.
Why? Price, of course. Bit.ly’s was too high for Twitter. One source tells us Bit.ly’s asking price was under $100 million, but still a “big f—ing number.”
Twitter and Bit.ly were far apart on price in part because the people running Bit.ly view it as a service that extends beyond Twitter. One source close to Bit.ly tells us that of the 3.5 billion clicks on Bit.ly links in March, 100 million went to Facebook.com. This source tells us that only 30% to 40% of Bit.ly’s traffic is Twitter related.
Another reason Bit.ly probably felt like it could demand a high asking price is that four months prior to its talks with Twitter, it turned down an acquisition overtures from Google.
(The reason Google would want a popular URL shortner like Bit.ly is that Bit.ly tracks the number of clicks on each of its shortened URL. That kind of data could help Google make sure its search results include Web pages that only became relevant very recently. Selling such data is also a potential revenue source for an independent Bit.ly. Bit.ly currently makes money selling $1,000/month pro accounts which provide publishers detailed analytics.)
Meanwhile, the people running Twitter scoffed at Bit.ly’s high asking price because they view it as a service that can be built instead of bought. In early January, Twitter bought the domain Twee.tt. In a post last week, top Twitter investor Fred Wilson wrote that URL shortening is a feature that should probably be done for user by Twitter, not a third-party.
In our view, the only reason Bit.ly exists is because Twitter forces its users to keep messages under 140 characters. Likewise, the only reason Bit.ly is popular is that it is integrated in many of the most popular Twitter clients.
Now that Twitter has decided to both launch its own URL shortner and own its own Twitter clients (Twitter acquired Tweetie-maker atebits on Friday), Bit.ly has, at best, seen its growth prospects diminished.
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