Twitter May Have Found Its Business Model
Twitter...what is it good for? It turns out this little service is good for a whole lot of things, despite the loud objections of people who've never really tried it. Even among true believers, though, it's been hard to figure out how this much loved company is going to afford to stay alive. How will Twitter make money?
A number of people noticed a new change made to Twitter today that could show just how it's going to happen. Of course this is just speculation, but we believe it's a pretty good guess that this could be what goes down.
Selling Friends
Professional hustler turned CEO Jason Calacanis spelled it out on Twitter tonight. The new Twitter "suggested friends" feature (first blogged by Pete Cashmore) is a natural place to sell friend connections between users and companies wanting to communicate with them.
Who says you can't buy friends? $1 per user who takes the suggestion and opts in to getting messages from @JetBlue or @Zappos? That could happen. Could those companies keep their freshly purchased friends? Only if their Twitter output stayed interesting!
In order for this to work, Twitter is going to have to make these recommendations a lot more prominent in the user experience and it's going to have to increase the quality of the non-paid recommendations. Right now they don't look very exciting to us. We like to search Twellow to find interesting new users to follow.
A Logical Opportunity
It's a common tactic among Facebook apps for the little ones to buy introductions to users from the big ones. It's pretty traditional lead sales, in fact. We'll see if something like that works with Twitter - it's certainly better than advertising that you don't have any choice about receiving!
Outside reports indicate that many Twitter users struggle to find friends on the service. Almost 10% of users haven't added anyone as friends at all, in fact, something that would make the service fairly pointless. Put that together with the fact that, according to a study by trademark attorney Erik J. Heels, 93 of the top 100 US brand names don't appear to have control over their brand names on Twitter. Put those together and what have you got? An opportunity for Twitter to make money.
Would this be enough money to make Twitter viable? That we're not so sure about. Outside reports put the number of Twitter users at 4 or 5 million users, and that after everyone from CNN to Britney Spears to The_Real_Shaq has jumped on board. How much bigger is it likely to get? We don't know, we just know we like using Twitter a lot.
When Evan Williams started Twitter, he didn't care. As Sarah Lacy explains in Once You're Lucky, Twice You're Good, Williams had enough money in the bank from the sale of Blogger to Google that he didn't have to think about Twitter making money and he didn't want to think about it. That changed quickly when scalability required backing from investors and Twitter became a real business. Now it's the biggest question many of its users have about the service they love so much.
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This concept is not too far fetched - ecommerce companies, loosely defined, have been buying email addresses since the beginning of the Internet (for better or worse).
I still think Twitter's business models will end up being a combination of the following very simple things:
- ads against PUBLIC pages, such as http://search.twitter.com or the public timeline. This probably won't be huge, but I suspect done well could generate very real income (I'd suggest ads every 50 or so results, in the result flow BUT clearly different in look
- sale of analytics & data analysis. Stuff such as "trends around brand mentions" especially combined with link tracking, competitive landscape, and perhaps "tone" analysis. This would all be done in the aggregate and probably only against public twitters (i.e. not against private accounts, DM's, or deleted messages. Twitter themselves are probably in the best position to do large scale trend analysis against their entire corpus of twitters
- sale of premium services. The first (and related to my second suggestion above) would be a return of Tracking but only for premium accounts - ideally with a range of realtime feed options + alerting criteria (perhaps something like "send me an SMS if my brand gets mentioned by 10 or more twitterers in a 15 minute window - i.e. there's some breaking/trending news).
My guess is that the above type of features would have a large audience for a "pro" account (I know I'd probably pay something
- a fourth possible business model would be for Twitter to add a formal method for third-party applications to have deeper/higher limits access to Twitter. i.e. to bypass the current limits on the API - but instead of as today on a case-by-case whitelist basis on a formalized business transaction (which might in turn allow for say iPhone apps with a "lite" but API capped version and "full" version that has much better/unfettered access to the full Twitter streams
- a fifth but perhaps unlike possibility I could see if for Twitter to find a way to partner with a range of cellphone carriers to capture some portion of the vast revenue Twitter is helping generate via all the folks adding SMS plans (though since those same carriers get revenue from Twitter at the moment for short code use/sms messages this may be a hard route to achieve)
anyway those are my ideas, should be a fun 2009 to see which if any come to pass.
Shannon, I agree with you and I'd love to see data mining be monetized by Twitter. That would just be fun, though it could complicate the free API.
better demand an apology :p
As people build out their social currency on twitter {and other social networks} companies are going to be looking for ways to reward those with substantial networks for delivering word of mouth advertising.
Rewarding anybody for following would just turn twitter into a mess of people following for not other reason than the money.
I see the possible revenue stream for twitter being more like an agency...they can identify power users that could most likely deliver the most relevant messages based on user profiles and followers....
For twitter to generate revenue ultimately the users need to be able to monetize their 'service' as well other wise why else would they want to be a marketing puppet?
I kept thinking that Twitter should acquire/buy Twiterrific or TweetDeck or Twhirl (mainstream clients) and monetize from them. But monetizing data mining is a great revenue model.
This strategi suprised me, in a good way, and Twitter should be able to generate some serious revenue in 2009.
I'm all for Twitter making a buck, especially if that means that thy can deploy XMPP for the rest of the world.
My only gripe is that they should have name this feature a little differently. Perhaps "Featured Users" instead of "Suggested Friends" I know it's picking flies our of horse shiitake but when i think suggested friend i think facebook's friends you may know feature.
eh, Twitter may have found its business model, but you're right -- the recommendations have to be seriously improved. I'm pretty easy - I'm a one-trick pony on Twitter... I rock climb, and tweet about rock climbing) are presently completely meh. I didn't add a single one of them...
I have yet to see a tool that does a really good job of recommending others to connect with. I still have the best luck meeting interesting people by reading tweets, and by clicking through to see who my friends are following.
Naw, this is too good for Twitter to implement, instead, it would be a third party app that wildly successful and maybe make money on its own.
Not hatin, just smirkin.
Selling connections isn't the right way for Twitter to monetize itself. Twitter currently succeeds among early adopters and digitally savvy networkers.
Charging for connections only makes sense for not currently connected. Yet, this implementation would form a barrier to entry for the masses.
Arguably this would alienate Twitters base and prevent mass adoption.
This article is so good for apart of Twitter users. But I have not found my own Twitter business model yet.
Looking for other comments and suggestions.
This is how I think Twitter should make money:
http://tinyurl.com/8va779
Twittacause.com
www.twitter.com/twittacause
Saw this before - can this guy/girl do it?
I agree with some of the comments this is a bad way for Twitter to monitize.
Frankly, probably the best way, albeit irritating for some, is to send random "ad" tweets periodically in a targeted way. Someone else tried to do this in a service, which people complained about because they got a bunch of the same ads from many peeps. BUT if Twitter themselves did it, then it could prevent duplicates like in the other model which did it by person.
Just had this brainstorm as I wrote this, and it may actually be a good one!!
Warmly,
Pam
Human Behavior Expert
http://www.AskPamRagland.com
sorry this is a stupid idea. They will make money from things like adding partner themes from coke and nike to the theme gallery or premimum services for users and developers not this.
There is zero chance this would be a business model for Twitter, as it is simply a feature to make the service more usable to newcomers and/or less tech savvy folk.
Twitter is a very elegant implementation with a very simple and powerful experience. My guess is that the entrepreneurs behind it are more capable than most of determining how best to generate revenue without pissing of their users.
P.S. Any chance *we* can stop the "what's Twitter's business model" meme? It's so 2008 :)
Interesting article. Most original way of monetizing Twitter thus far. I still feel they should charge licensing fees for the million other twitter apps out there!
Yasser
http://www.jobstaxi.com
We set up a twitter for our users to follow and read up on the latest Celebrity Gossip and Hollywood News and our followers from twitter have caused our site http://www.gossipcraze.com to increase its traffic two fold. Twitter is the next big application that we hope will be here for a long time. You can follow the Celebrity Gossip on twitter here http://twitter.com/gossipcraze
That could be one way of doing it, but before you do it, there needs to be a counter that tells how many suggested friends are in that list, and a confirmation, otherwise you're opening yourself up for people closing accounts left and right and that'd be bad.
You really need to think about courting some advertisers or running google ads at the bottom or the sides of the pages to monetize things. You sort of have a captive audience. Everytime they refresh the page, the ads could be different and eventually people will click as they always do and monetize the site bit by bit.
Prime real estate advertisers will also pay to be on the page and you can set how long or through how many page refreshes their ad will stay visible. Something to think about.
Mike
selling friends? That's a preposterous idea. It doesn't make any sense if you want to have a dynamic and conversational twitter.
Posted by: Richard Azia
|
January 16, 2009 12:45 AM
Twitter is the platform.
The services running on the platform should generate money.
Twitter should invoice these service providers.
I really do not think that twitter users will appreciate this model. It is more like advertising on the face of user and users will no longer have control over the number of their friends.
It will be cool if they provide contextual recommendations for friends ... like google adsense.
Let users choose! not advertisers.
Pretty much what I thought 5 hours before Jason ;) Maybe he does read other ppl's tweets http://twitter.com/styletime/status/1122045002
No biz model needed. After the National Twitter Act of 2010, twitter will be part of the overall homeland security blanket- a rapid, real-time, collective consciousness network designed to keep the elusive web 2.0 glow while working feverishly to hardwire the entire nation into one conversation. Searchable of course on multiple levels, allowing various agencies and paid partners the ability to farm out insight in real time.
@LEADSexplorer, the way Seth Godin puts it, "Twitter is a protocol, of course, not a company or even a platform."
But more likely, it's something new that can't be appropriately labeled yet. "Give us this day our daily bread..."
http://twitter.com/relenta
We have been selling the Featured User spot on twitterCounter.com for months now and are making good money off of it. People pay $200 a week and gain about 200 to 400 followers in one week. There id definitely demand for this model as we are sold out for the following 2 months.
I'm not sure that selling names for $1 a pop is a viable option. Twitter works because there are real and authentic conversations with people you know, not because you want to hear about the latest deal from Jet Blue. This is just a new form of email list buys. I don't see it having any real staying power.
As some of the other users have stated, I think there are other business models that twitter could employ. One option I'd love to see is a subscription model that incorporates exclusive features like file hosting and sharing for videos, music, photos for say $5-10/month. I wrote about some other options back in December.
http://onehalfamazing.com/2008/12/creating-a-twitter-business-model/
~Bob
When I saw this, it felt like a poor man's @MrTweet, to me. http://mrtweet.net does that and more, and I have asked them if they could do the bulk follow with checkboxes to make that easier. I never thought of this being a place where Twitter could charge brands to appear & get users, but I guess they could. Interesting scenario.
The only major hole I see in this possibility is how versatile twitter search is; especially when using a third party app like Tweetdeck. I see this as an issue because the community will continue to evolve, become more educated, and use more ways to improve their experience. This will include setting up ways to find people quickly using the search functions.
Could they automatically add text links for advertisers into what people post to Twitter? This might be a little much, but they could make the link a certain color or use some other identifier to clearly distinguish it as an ad. That way, anyone reading it would know it was an ad, so they could opt to click it or not. It seems like people kinda do this anyway, mention something they like and then add a link to their post linking to what they said they liked.
My thoughts from a few days ago... didn't have friend suggest. Had full network ad-pushed tweets, Pro version with video and ad opt-out, expanding services to full social network.
The one I think makes the most demographic sense in terms of marketing, though it would have fall out, is that Twitter becomes an agent between a corporation and a top 20 user to offer direct tweetvertising to that person's 20, 30 or 50 thousand followers. The uberuser gets a big cut to make it worth their while and Twitter takes their own cut. The offers could expand down in cost and cut to users with a smaller number of followers.
I suppose the question is, would you accept one tweet a day from someone like Leo Laporte that is essentially an ad for Dell, Apple or MS?
My full post on this idea is here: http://is.gd/fRIR
Based on a consumer, small biz, NY Times (media co) and procter & gamble (big brand) segmented universe, here is my view of âstructuredâ tweet offering that twitter should work towards.
The idea is a tiered model whereby 'basic' twitter remains free but a premium "structured" service is offered for online brand builders and commercial businesses.
Twitter-nomics: Envisioning Structured Tweets
http://thenetworkgarden.com/weblog/2008/05/twitter-nomics.html
Check it out if interested.
Mark
sorry, but of all the ways twitter might make money, buying friends or followers isn't one of them. there isn't anyone on Twitter that I would pay even $1 for access to listen to their rants/raves/links to cool things.
and it's certainly not scalable--who is going to pay to have thousands of followers?
This will not happen.
Who the hell wants tweet spam from advertisers?
It destroys the premise of efficiency.
Twitter will never make money on its own.
They'll make cash if they get aquired.
Maybe they'll make some cash from desperate telco's.
Otherwise, this has been and will be a massive FAIL.
This doesn't sound like a very promising revenue stream. However, Twitter might be looking at a multi-level revenue generation model, so why not integrate this one.
I don't see how this could work. It sounds a lot like email marketing - you pay to get access to people who can then opt out from receiving communications from you if they find it irritating or unwanted. I don't see how the $1 price point can hold at scale - it's simply too expensive.
Email marketing is not such a bad business, but it's characterized by low effectiveness and low costs. Why would Twitter be any different.
Twitter Schmitter. What the heck is all this talk about twitter?
www.privacy-web.us.tc
I think twitters value is inversely proportional to its network size.
So how much social media can one person handle? I mean, we have to earn a living, right. I like Twitter, but it takes all my time to keep up with my website, blog, Facebook, Linkedin... I'm tired already.
Companies also face the problem inherent in invading Social Media spaces. Younger generations aren't so wild about it so I read. I mean, I'm 44 and could care less to follow Starbucks, Home Depot or any others..what can they offer.
Remember, it's all about "relevant" "content"
Somebody PLEASE rename the headline for this article to warn people what this is really all about:
"Failed Internetist Jason Calcanis proposes another horrible, horrible idea that will make no money"
Seriously, why does anyone listen to this retard?
@35. Email marketing is actually among the most efficient ways to market if we're talking PERMISSIONED email marketing where you've built a list yourself. Buying lists is less efficient by a good margin.
However, I don't see this working. First I and other people would need to see the recommendations. Then we'd need them to be interesting enough that I'd follow some. And then the price point would need to vary based on effectiveness. But how do you measure effectiveness? In emails you can measure open rates, clickthrough rates on links, you can embed parameters on links that are picked up in analytics, etc. You can even segment the email addresses and test different creative approaches, subject lines etc. You'd need similar capabilities to measure this and then you'd need a model that lets people pay what a follow is really worth TO THEM. And, of course, you might want more for a follow from, say, Marshall than I since if he retweets it the RT will be seen by many more people.
Things like this, a Twitter created version of Magpie, etc all are betrayals of the reason most of us are on Twitter in the first place - conversation and connection with other people. That's the value and the right way to determine a model and pricing of that model is to identify who's getting value, how much value they feel they're getting and then find a way to get some money from them for that value. Lots of people have links in the profile to their business or have that information on their home page background - that's VALUE. Why should they get that for nothing? IF a web designer lands one small job per year from that... that's hundreds to a few thousand dollars. Why should that promotion be free?
If Twitter is as valuable to as many people as I hear it is, ask them for some money. Do a Flickr - X for free, unlimited for a reasonable annual fee. Make X small but useable, make the annual fee small but reasonable. If someone screams how valuable Twitter is to them but won't ante up, say, $25 per year... they've been lying about the value.
And yes, this is yet another riff on something that shows in my comments a lot - we need to get away from the idea that everything should deliver tons of cool stuff to us, but be free.
No surprise that you can't click on the users name and then follow them: Twitter needs to track who follows people after using the service, and make sure they get paid!
I like the idea of Partnered Themes... I just got the Twitter app for my iPhone and it works great.
www.rvcountry.com
Hmm... I'd be happy if they just reinforced the Find User feature.
And frankly the business model I want from twitter is private groups, private deploys for sm biz & enterprise, and a dedicated mobile app function that lets me find other twitterers in the same location as me.
I noticed the new feature yesterday and immediately thought of http://MrTweet.net. MrTweet or some other service is likely to always do this better than twitter can. To make money, Twitter has to focus on 3 things:
1. "Monetizable" features and services that cannot be implemented outside of Twitter... otherwise other more nimble and focused companies will do it cheaper and more quickly.
2. Grow user-base to astronomical proportions. Seems like there's a lot of headroom here. Doing this has many obvious advantages including making it easier to monetize "smaller" ideas.
3. Developing business model whereby they charge application/service providers not users. Basically, focus on increasing the value of your assets(users) and let other companies discover ways to make money. Twitter charges them or shares in their revenues. (1) and (2) make (3) work.
on monetizing twitter http://bit.ly/VNe
@Darren. I read somewhere that 80-90% of twitter activity is done through API. So theme charge is not a good model.
"93 of the top 100 US brand names don't appear to have control over their brand names on Twitter. Put those together and what have you got?"
...An opportunity to register those names yourself, then sell them back to the companies at a tidy profit! :)
I agree that twitter is the platform; I had assumed that the twitter folk must somehow be involved in some of the extra twitter applications out there. If you don't build out or cannibalize your own strongest products you can be sure someone else will do it for you.
Seems to me that the obvious freemium basic-for-free/pay- more-get-more model would work well for twitter; it has a great support base and many of us might pay for extra capacity or utilities.
Whatever grows next I'm looking forward to it.
Wendy
I read somewhere that 80-90% of twitter activity is done through API. So theme charge is not a good model.
But still twitter rocks....
Yogindernath
http://www.softwaretestinggenius.com
I love the idea of twitter, but will the credit crunch munch twitter?
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