When it hit the market last week, Twitter (NYSE:TWTR) stunned most observers when its stock priced jumped from $26 to $46. The social service is just over seven years old, has been through numerous leadership changes, and it's still never made a profit. The utter lack of revenue has been a sticking point for many investors, and is a recurring theme in the history told by Nick Bilton in his new book, Hatching Twitter.
Bilton has clearly done his research, and the resulting book is a detailed account of how a few guys from a failed start-up turned around and made Twitter the behemoth that it is today. The summary of that journey is given by former CEO Evan Williams who, in chastising former CEO Jack Dorsey, says, "People don't invent things on the Internet. They simply expand on an idea that already exists." Twitter end up being just one version of that expansion, but ultimately, it's an expansion on two very different ideas of communication.
Twitter fights itself
Bilton's journey through the history of Twitter isn't short on tense moments. The small group of founders and early employees are constantly at each other's throats, wielding board member votes and claims to the business like weapons. It only takes a few chapters for the two main players -- Williams and Dorsey -- to fall out over the future of the business. Will Twitter be a way to relay the world as we see it, or to announce our own feelings and views?
All the action and squabbling takes place against the backdrop of plenty of venture capitalist cash. Williams had made a name for himself with the creation and sale of Blogger, and he used his knowledge of the industry to slowly accumulate backers for Twitter. After three rounds of funding, the business had yet to earn a dollar in revenue, but it had managed to spend millions.
As investors became more impatient, the founders turned on each other in order to try and shape Twitter into the business that they had envisioned. In late 2009, the infighting secretly spilled onto the site, when Williams -- then CEO -- changed Twitter's prompt from "What are you doing?" to "What's happening?" Dorsey had originally come up with "What are you doing," which focused the site on his view of Twitter as a way to share his personal status. Williams had always believed that Twitter was a way for news to travel, or for individuals to share what was going on around them.
Jack versus Evan
Bilton ultimately paints a portrait of Twitter as a combination of the two philosophies -- internal reflection and external observation. In getting to that point, though, Bilton also makes his bias known. In the war of Jack Dorsey versus Evan Williams, Bilton comes down heavily on the side of Williams. In the book's "where are they now" moment, Bilton paints Williams as a happy homemaker, who always clears his schedule for his family. Dorsey, on the other hand, is cast as a lonely CEO, staring out the windows of his multimillion dollar home and wishing for something more.
The reality of that portrayal was the subject of much debate leading up to the book's launch. A New York Times piece by Bilton was countered by an alternative history in The New Yorker. Both sides have taken to fighting, not over who was right, but over the role another founder actually had in the creation of Twitter. Noah Glass was with the business early on, and both contingents agree that he was important. Views on Glass diverge from that point, with Williams' supporters giving more credit to Glass than to Dorsey, while Dorsey's camp largely dismisses Glass's input. To this day, Glass's Twitter bio reads simply, "i started this."
A worse understanding of the business
One of the biggest benefits of reading Hatching Twitter is that it gives investors and outsiders a glimpse into the problems that the business has. Almost all of them stem from this recurring misunderstanding of what the business is. Is it a social network? A microblogging platform? A news outlet? Or some previously undefined combination of all these things and more?
Of the many reasons that Twitter has had difficulty in generating revenue, none may be more important than the business's confusion about its nature. If it wants to make money, then it needs to have a selling point beyond "We got lots of folks using it."
Reading through the company's IPO registration filings, it's not clear to me that it has a definitive answer to that question. The company calls itself a "global platform for public self-expression and conversation in real time." That sounds grand, but doesn't seem to lend itself to monetization. It also gives me no insight as to what the business looks like in five years' time. Bilton's book makes it fairly clear that the higher-ups at Twitter don't have that insight either.
Where Hatching Twitter succeeds
Bilton may ultimately be right about the role each of the founders played, but reading through Hatching Twitter it's hard to get too caught up in the details. The constant drama, the celebrity sightings, and the scent of VC money make this book a page turner. For readers interested in the pros and cons of taking other people's money, I can't think of a better cautionary tale than Hatching Twitter.
While the drama plays out between characters, the whole thing is fueled by board members, eager to see their millions pay dividends. The story's unwritten conclusion was sprayed across the media, with Business Insider reporting that the IPO created 1,600 new millionaires. In the end almost everyone wins. The few losers don't seem too beat up about it, either.
Bilton's telling is a deep look into the power and politics of Silicon Valley, and it's certainly a better production than Ben Mezrich's laughable The Accidental Billionaires, which was fodder for the much better movie, The Social Network. Sharp readers may be put off by Bilton's heavy use of bad metaphors -- at one point an employee plays with his beard "like a baker squeezing the last drop of frosting out of an icing bag" -- but Hatching Twitter has enough insight and tension to keep anyone interested.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.