Facebook Offered $500m in Stock to Buy Twitter in 2008

Say you were Biz Stone, the co-founder of Twitter, in 2008, and Mark Zuckerberg (you know who he is) offered you $500 million in stock to buy you out. Keep in mind that it’s now 2011, and you’re still running at a loss. What would you have done?

Stone said no. He told the Financial Times, “”We’ve created something that people are finding value in. But we haven’t yet created a business out of this [Twitter], and we really wanted to do that.”

And value they have created. For a service only used by roughly 8% of Americans, Twitter is widely used by media to break and disseminate news, and it is an open channel for customer service and emergency communications. The future is promising, but the problem is sustaining that future. Twitter is now estimated at $3.7 billion (at valuation), after raising $200 million in latest round of funding, but still operates at a loss. Twitter is hoping to profit from the recently introduced promotional tweets that appear in search results, which major brands pay for.

But does Twitter have a little too much pride? Startups like about.me may have sold out early, but they are one of the ones that may have seen the light (or, really, the shadow of the looming giants like AOL and Facebook.) Twitter has not gained a substantial user base, nor actually seen a profit. However, Twitter users have created quite a bit of content, which has some intrinsic value. The question is, will Twitter be a YouTube, that takes a major company like Google to legitimize the business value, or is it just a feature that can never be a real business without rolling it inside a bigger product?

Do you think Twitter can be a solution to a business problem that generates substantial revenue on its own? Or do you think Facebook will make another offer to acquire Twitter sometime in 2011?