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Is Twitter F'ed?
Written by Allen Stern - January 2, 2008
The question of business model timing seems to come up weekly with regards to some startup. As Twitter usage has grown, have they f'ed themselves out of a real, sustainable business model? And has Pownce done something right by launching with a business model? Personally I prefer that a startup come out of the gate with a business model -- perhaps it's the accountant in me.
This reminds me of a commercial for UPS where the geeks turned on the ecommerce application and at first one order came in at a time. Then all of a sudden, they received 1,000,000 orders and had no way to box or ship them.
As Twitter usage has continued to grow, when will they need to start to monetize the service? When will Fred Wilson and Union Square come a knocking (they provided a round of funding in 2007)? At that point, Fred noted that they had no idea what the business model was or would be.
In November, I wrote about Twitterific making money while Twitter hasn't made a dime. Twitterific charges $15 for their software.
Most of the heavy Twitter users use the service via the API and "offsite". I actually use the Web site and refresh the page every few minutes while I am at home. How can they monetize the API usage? If a Twitter user already paid $15 for a piece of software, would they then be willing to pay Twitter for their account? It's like paying for mIRC and then having to pay for the use of IRC itself.
Pownce launched with a basic business model -- charging for premium messages and injecting them into a user's stream. I like their idea.
What business models do you see Twitter employing and when? Will an advertising-based model make the Twitter hardcore users leave? Would you pay for Twitter access? Leave your thoughts and I will post the ideas later this week along with my business model ideas.
Our Partners
What are twitter's potential business models? If most of the usage is through the api then they would have to use some form of in-feed advertising wouldn't they?
I see twitter as a game. A fun community to socialize.
I can't imagine users paying for a service, which provides so compact and superficial information (140 characters). Maybe the hardcore users would stay, but the community would lose many users. (Is the 80/20 Rule apply in twitter too?)
Maybe specific software/plugins/stats/whatever could be a way to earn some money. Donations too.
Couldn't they charge for commercial uses of the API? That might allow them to charge companies like Twitteriffic and not individual users.
A big bonus in having an API is the ability to see all the different things that can be done with a service. And Twitter can sit up top at the source and copy or improve some of those ideas. Case in point-- Twitterific: I use Twitter, I have no idea what Twitterific is. I'm sure a lot of Twitter users are the same way. There's no reason Twitter couldn't create a competing application to sell as well.
They don't have to re-invent anything, they can just see what works and do their best to improve on it. Amazon does the same thing, either acquiring or replicating worthwhile services on their API.
I gotta say charging for access to the API would be a bad way to go, maybe charging for more than 70 requests per hour would work. I think my users (twitbin) would pay for that and maybe more than 20 messages in the stream (api limits you to 20 most recent).
But I see them monetizing with promotional methods (paid plugs in the stream like pownce), white label tools for intranets maybe, leveraging their dominance in the sms services.
they are building the underpinnings for a beautiful social graph, its not as strong as other connections yet, but when it gets mainstream you'll see a definite need for more tools to manage your twitter stream. I could see a lot of people paying for a pro account. Scoble and Jeremiah Owyang would be the first to drop a hundred or 2 for a year of pro service. I probably would too.
I don't think Twitter is a business. It's a cool service that's an M&A play - something I posted on earlier this week.
Sure, some start-ups get venture capital without a rock-solid path to make money but Twitter appears to be struggling to come up with something that makes sense for everyone - the company, investors and users.
A Twitter profit model? Try this:
$9.95 a year for 160 character messaging.
$19.95 a year for 180.
$47 a year for 200 chars - & that's the limit!
:)
Dr.Mani
advertising injected into the sms's based on the content of the twit is the only way to go.
example:
I am sitting eating a great burger
ad: MacDonald's Super duper burger now 99c
I think its the only way to do it. also they must get enough eyeballs on the site to make advertising work. Maybe get users to categorize themselves and then on those users page show an ad for that category.
C'mon Allen. You know their business model:
1. Raise as much VC money as possible.
2. Have a good time spending it.
Seems viable to me. What could go wrong?
I 'follow' the feeds from commercial blogs through Twitter/Twitterific. I find this much more convenient that keeping various web pages open.
Because they recode URLs via TinyURL, they could easily convert my 'click throughs' into money. (BTW, they should license the TinyURL algorithm and use TwitterURL.com instead of TinyURL.com.)
Andrew
I have to believe it will end up being something like actually putting advertising on their site. With so much open real estate on the sides of their site and so many pageviews, it seems like a nobrainer to put a few small ads here and there.
I'm down with Pounce. I'd like to use Pounce. Today. So, when will the freak'n endless private Beta end? And why does everyone think Pounce is a Twitter killer when it's not even open to the public yet? I put my email addy in for an invite, butt hay, you need a famous last name and 100 friends to get asked I suppose.
The hell? ~ Keith
You want a pownce invite? I have some - drop me a line.
Rex
I interviewed Leah Culver, lead developer of Pownce, today, and she said they'd open up the site to the public later this month. She also commented on some of the business model issues:
http://www.techconfidential.com/behind-the-money/blog/behind-the-money/leah-culver-lead-developer-of.php
Cheers,
Mary Kathleen Flynn
Senior Editor, The Deal & Tech Confidential
mflynn@thedeal.com
They only distribute tiny pieces of text. They are already sending tidbits in any short text message I get via SMS. If they make a penny in profit on every update/post, that's alot of potential.
the exit is going to be via sale. you dont need a business plan when you have an exit.
Anyone else notice that those suggesting business models haven't made any money, save one who sold his company during the bubble to AOL.
This has been brewing for weeks if not months. They should sit tight, get better, then make a move.
A lot can be done to improve T and paid premium accounts is one of them. Twitter has become the ultimate micromedia tool of the moment. Personally, I push and pull links, info, news and more from T. I'm not even on IM let alone mail anymore.
Twitter for president. But they should absolutely, totally not succumb now and spoil stuff for investors and users and become critics fodder.
By being totally free and early-adopters oriented, Twitter is gathering some priceless data on IM trends (Tweeterboard).
With some smart database management, they could sell golden information to any interested marketing or PR agencies.
They just need to stay the cool kids on the block to keep the Twitterers twitter.
Allen - good analysis but I think you need to look at them from telecom sector point of view.
Telecom players should be partnering with Twitter.
There are so many text mining for expertise possibilities with Twitter, it boggles.
There are so many brand monitoring opportunities for twitter to exploit, that Im boggled.
Will the users allow a crawl for mentions? Can a universal taxonomy of products and lines be created and exposed via a REST or WS service so commercial brand monitors can plumb?
Would the users base care, it's mostly public anyway, right?
See my blog for more ideas. Shameless.
I don't think there is an obvious business model for Twitter. Historically, community sites and communication systems are some of the worst monetization sites on the web. And Twitter is basically both of those things.
Twitter is probably still really focused on growth. In this environment, a growing company will have many fundraising options as long as they're willing to take some dilution. I posted about this awhile back at http://www.charleshudson.net/?p=337.
Everyone loves that Twitter is free - right? If Twitter charged it's users, then some people would stop using it. Once a few people stop, a snowball effect could occur. I like to follow my friends and tech people in NYC, but I doubt I'd pay for it and they might not either. Once my friends were gone, then I'd have no reason to use (and pay), then I'd quit too.
An obvious answer is to throw up some ads on Twitter.com. You might as well do this becuase it will generate some money. I doubt most people would care either, do the ads on TechCrunch really upset you? No, they don't, you just ignore them, but TC is making money. Fine, the simple answer is to throw up some ads.
A more interesting answer is this: how about businesses can pay to make keywords link to their sites? For example, beYOU.tv (where I work) could buy the keyword phrase "fitness videos". Anytime someone typed in "fitness video", it would be converted into a hyperlink that linked to beYOU.tv.
This would only work for regular text phrases. If someone submitted the URL: www.fitnessvideo.com, then it wouldn't link to beYOU, becuase that's already in a link. But for regular text, businesses should be able to buy keywords and links.
Twitter could use this idea as a non-intrusive way to generate money.
Greg Schnese
beYOU.tv
SoUrban.net
I say build out the userbase, market mainstream, then build pieces around it. Twitter is a mobile social network, unlike the other social networks that have "mobile features". If they sell, they should hold out for as long as possible. If they added functionality like file sharing or polls piece by piece (while keeping it simple AND mobile), they'd have something worth what facebook is worth.
We don't have a preference for our portfolio companies to have a business model at launch or not. We do have a preference for a business model that is native to the service and self reinforcing to the usage model. Asking people to pay for a service is not particularly self reinforcing. I get credit for coining the word freemium (although I didn't) and am familiar with pownce's model. It doesn't seem to be helping them acquire new users and grow the service
One more comment and that is that some of the biggest suucesses to date on the web; google, youtube, skype, and facebook all launched without a business model and too years to deliver one
Hope that helps
Fred
Rather than alienating their user base by charging for API access, why not charge those services already profiting from it ( Twitterific, Remember The Milk, etc.) instead?
No real development needs to take place, Twitter stays the same, users stay happy, and those making money off Twitter either inflate the cost of their applications a little or keep their pricing the same and make a little less money.
One thing I've noticed since I jumped on this social media bandwagon about 6 months ago (I know, newbie, non-tech guru, take it for what it's worth) is this:
- Software developers and other big shots don't listen to users enough. They talk to each other all the time.
The only other thing I have to add to this conversation is this: If they put advertising into the Twitter stream I will absolutely leave.
Oh, yeah... one more thing: Since Twitter is *always* open when I'm using my computer, many of my software frustrations and questions and ideas go into my twitter feed. I'm sure I'm not the only one. That could be valuable information.
Ok -- one more thing: Twitter should not go to longer text messages. I sat in on a twitter conversation about seesmic's decision (driven, largely, I believe, by Scoble) to increase the time for video messages. I think that was a mistake. The beauty of Twitter is that it *is* short.
Brevity is the soul of wit.
I think they are getting paid by the carriers to drive SMS traffic. They have a job opening on their site that indicates this.
You talk about pownce having a business model! Without a proper user base their business model is worth zilch.
very true - i guess would you rather have no traffic and a great biz plan or lots of traffic and no biz plan? :)
actually I think pownce isn't getting it's due from the valley because the valley is so in love with twitter - because they have their fan base there.
they do have a BM.
Read: http://pownce.com/settings/account/
Pro Account
Subscribe to a pro account for only 20 bucks a year and get some sweet benefits:
* Send bigger files. You can send files up to 100 MB with a pro account.
* Design a custom theme. You can customize your Pownce page and add your own background image.
* Eliminate the ads. When you're signed-in you won't see ads on your profile.
* Get a sweet badge next to your name. Kind of like a Scout badge, only different.
How does it work?
We use PayPal for payments, so you can pay with any major credit card or with your PayPal account. After paying through PayPal your account will be converted to a pro account right away. Then you'll get all the perks of being a pro!
Is this a perpetual subscription?
We get annoyed by never-ending gym memberships too. Don't worry, we'll ask you next year if you'd like to resubscribe for your pro account. We might nag you a little in a friendly way, but we won't lock you in.
Note however that you can't cancel your pro account in six months and get half your money back. Your payment gets you a whole y
Charging for the API is the dumbest suggestion I've seen in a long time.
Charging for features, on the other hand (i.e., the classic monetization approach), is far more sensible. Charge for SMS delivery over a set threshold; charge for the ability to receive additional types of message (MMS delivery for those who opt in, TinyURL links for those who don't, etc.).
Not to mention, of course, advertising: Twitter already tacks short messages onto the end of tweets delivered by SMS. Anybody who thinks those are anything other than a placeholder probably isn't looking deeply enough.
The math just doesn't work for them to pull in ads via SMS. Who knows what it will be. They need to charge companies to be the SMS layer between their web apps and users. That's a utility worth paying for.
Allen,
I couldnt agree more. Last week during the last twitter outage I expressed similar views. http://tinyurl.com/3da2bm Mainly I was questioning the ability of Twitter to sustain what they have started, adn if they cant even keep the service up, how can anyone expect to use it as anything but a simple social messaging tool and not the new marketing and social power many are proclaiming it can be.
Great work as usual
jimmy
www.eastcoastblogging.com
In general, I think it's better to have a business plan and a clear path to profit. That said, if I had to place a bet on either Twitter or Pownce, I'd pick Twitter, because Pownce is going nowhere fast.
I really think eventually twitter will be purchased by a major player (google, Microsoft) after that happens who knows.
What business models do you see Twitter employing and when?
I see inline ads and mobile text based ads, you know it's coming. I would say by Q4 2008.
Will an advertising-based model make the Twitter hardcore users leave?
I would say know, hardcore users see the value in twitter and will stay, but then it may only leave a twitter elite community.
Would you pay for Twitter access?
Yes
I would be perfectly content if the gang at twitter inserted a paid post for every 20 or so posts.
This is what the free version of twitterrific does and it's perfectly reasonable. Heck - I've even responded to some of those ads and paid green dollars for the services offered.
Regards,
-jf.
--
John Federico
http://www.odmcast.com
why not use a modified version of Gmail's ads-in-feed? I noticed how Twitter adds tips to short posts. Why not use this tip space to show ads? Its non intrusive and feels right in place.
Their business model is building a brand called "Twitter." Everything else is secondary.
If Allen thinks Twitter is f'd, he's not a very good internet analyst. Many (most?) of the successful internet companies came out of the gate without business models (Google, Yahoo, Ebay, Paypal, Skype, Myspace, Facebook, etc). Business models become fairly apparent *if* your able to create a product/service that people like. It's far easier to find a business model than it is to create a service that lots of people want to use.
If you get updates via SMS, you're already seeing the testing of this ad model. It starts with "Tip:+text+", but as Darren and others have pointed out above, it gradually changes to "Ad:+text+tinyUrl".
I approached Twitter about using it with some software my company develops for intranet use. My idea was to use it as an "in/out" board. Probably would do something like Snitter/Twitterific to deliver it. Imagine a manager - he tweets "I'm behind close doors - no calls please" - crystal clear what the boss wants. Or "I'm off-site, but call me via cell if you need me." Or a SCRUM effort (I think some folks use the Twitter stream for this, but I'd want the security of my own intranet - no www.twittertale.com for my clients!) where developers interact with each other.
Why not SMS or IM? Twitter is short, concise, and you have options of DM or open to everyone.
So sell it as software or a biz solution. It could be hosted by Twitter, but only available on a corporate intranet.
Oh, and I wouldn't mind ads on the Public Twitter, but I'm not paying to use it - guaranteed.
I assume that you've seen Biz Stone's response to Shel Israel's post, in which Biz says (in part):
"With regard to revealing our monetization plans I can tell you honestly that we are far more focused on growth and reliability in 2008....[We are] adding great ideas to a list of revenue solutions which we will visit in earnest when we are ready."
Frankly, this is putting the cart before the horse, since the monetization model that is chosen will impact the growth model.
My "best" new idea so far is for Twitter to sell insurance. Hey, the AAA and AARP do it, why not Twitter?