The thousands of third-party apps built on Twitter‘s back have made Twitter a much more useful service, and have helped make Twitter worth more money.But Twitter apps themselves are generally lousy investments, as we are seeing once again.
Brizzly parent company Thing Labs, which has raised $2 million in financing, is reportedly being sold to AOL in “the low eight-figure range,” in an all-cash deal. The team of seven employees — most of whom have worked at Google, including CEO Jason Shellen — will reportedly be shipped off to AOL, presumably to give the company some smart social product skills.
It’s great that Thing Labs was able to find a buyer, but no one’s getting rich off that deal — not the founders, not the VCs, and not the rank-and-file employees.
The problem isn’t that the Brizzly guys necessarily did anything wrong, or designed a bad product. Brizzly itself is nice, and the team could go on to build cool stuff at AOL, if AOL allows them to.
The problem is that Thing Labs was a company within the confines of another company’s platform — Twitter — and Twitter just isn’t that big. When the biggest you can get as a Twitter startup is a fraction of the size of Twitter itself, being a Twitter startup is usually not going to be a very good investment.
Twitter is a great social platform to use to build your product bigger, as is Facebook. But it’s not great to use as the sole basis for your company. (And again, to be very clear, there’s a big difference between being a good company/product and a good investment.)
To be sure, with scale, even being a fraction of the size of something can be huge. Zynga is a fraction of Facebook, but that’s still worth a lot of money. And as platforms explode, it’s good to have been on the bottom floor. So we don’t blame the Brizzly team or its investors for trying.
But what we’re seeing with Twitter specifically is that it’s not getting that big, that quick, after all. And it’s very easy for Twitter to steal ideas from its community or buy small companies for not much money when it wants new features. Therefore, most of the dedicated “Twitter apps” that receive funding are either going to have to shift their focus to a bigger market, settle for small exits, or shut down.
As one Silicon Valley investor-type recently told us, “if your company’s name includes the words ‘tweet’ or ‘140’ in it, you’re f—ed.”