Tuesday, August 25, 2009

Why Twitter isn't making money

Twitter – an innovative micro-blogging service - has become the new darling among social media marketers and internet geeks. According to comScore, over the last year, Twitter's traffic has exploded 15X to 44.5 million worldwide unique visitors in June, according to comScore. But Twitter's growth story isn't just limited to the U.S. and North America, where only about half its traffic comes from, according to comScore. In June 09, Twitter attracted 11 million visitors from Europe, 7 million from Asia Pacific, and 4 million from Latin America -- a total 22 million unique visitors from those three regions, up from about 2 million the year before.

Everyday there are more than 100+ stories circulated across various news and blog platforms highlighting how companies are leveraging Twitter either to increase sales or to raise awareness or just to be visible. Unlike its other counter parts like Facebook or LinkedIn, every now and then people raise questions like…

“Do they make money…how do they survive?”

“There aren’t any ads or subscription fees, how these guys manage their salaries?

“Is it a charity…Google is the most generous of all but still it knows how to make money”

So…the big question is Why Twitter doesn’t make money if it is an industry synonym for Web 2.0 or Social Media????

According to Daniel Riveong, an Internet Marketer working at e-Storm International in San Francisco, California, twitter has to start making money else…
“Maybe Twitter won’t be around to see 2010, yet many major brands have moved in to communicate with consumers and the world via Twitter. He categorized some of these companies under three types of twittering brands:
# 1 Conversational Twitters: H&R Block, Zappos, 10 Downing Street
# 2 News Item Twitters: Amazon.com, New York Times
# 3 Reputation Monitoring Twitters: Radian6 & GeekSquad”

There are many well wishers of Twitter on the web who suggest various way through which twitter can make money. On such supporter is Mashable blogger Adam Ostrow, who feels that Twitter could “couple e-commerce with advice from other shoppers, an element that most search engines do not offer.”

Steven Verbruggen feels that if they want to make some money quick, premium services like Google Analytics could generate quite some cash flow. He further suggests that Twitter can make money by:
1. Acquiring a company that is interested in data and relations and leverage Twitter as a research platform.
2. Advertising route
3. Turning it into a commercial service, let users pay for the use, or let them pay if they want to go over a certain threshold like following xx people or posting xx tweets per month.
4. Introducing commercial features
5. And last but not the least, by introducing Twitter Analytics.

Sarah Milstien, program founder for Just Food, a local-food-and-farms non-profit, and co-founder of Two Tomatoes Records, feels that
“Twitter could make money in a number of ways, from selling data to selling services (it recently posted an ad for a Business Product Manager, calling the role "Twitter's first product manager focused on revenue generation" and then describing a product that sounds like competition for Yammer and Present.ly). Indeed, Blog posts and articles speculate constantly, and comments around the Web range from curious to seemingly angry that Twitter is not yet generating serious cash.”

Is too late for Twitter to monetize from its business model which has already been copied aped and experimented by different companies.

Few companies are already experimenting with business models, creating a situation where these sites have monetized before Twitter itself (Mashable, for instance, launched the Twitter Brand Sponsors ad format recently). The ad network Federated Media is taking a shot at making money from Twitter; FM has launched ExecTweets. A site created by Federated Media, in partnership with Microsoft, ExecTweets is a platform that aggregates the tweets of top business execs and empowers the community to surface the most insightful, business-related tweets.

Even more interesting: Twitter will officially endorse ExecTweets today and encourage brands to create portals like this.

There are several such sites floating around leveraging on the Twitter mania. In an interesting development, Twitter’s legal team sent a cease and desist order to New Yorker Dean Collins telling him that his mytwitterbutler service has to go because it has the T word in its URL and the domain must be handed over before August 24 or else.

So...what’s stopping Twitter to start making money???

I would like to draw an analogy on Google’s growth in the recent times. Be it Google’s business model, industry buy-ins, favorable developments and later on the migration of its services from a free-for-all to a money making machine. Google started off as an innovative concept and introduced its marvelous search engine, on similar lines Twitter introduced an innovative service that gave the birth of the new buzzword Web 2.0. Google had an instant hit in its kitty with its search engine and suddenly VCs, companies and investors were knocking on Google’s door. Twitter’s story is very similar as well. Twitter has already received funding of $20 million (initially) and $250 million (recently). Like Google, Twitter recently turned down a half-billion dollars from Facebook.

After this phase, Google instead of adopting the traditional money making business models waited patiently and used initial funding to ensure that salaries and sustainability are not serious concerns. They used this grace period intelligently to conceptualize and design state-of-the-art innovative technologies. The company knew that it has struck gold with its most innovative web technology of the decade, so they have to live up to their expectation.

Mantra was to go slow and step by step. Leverage on what they know best and introduce offsprings of the mother – The Search Engine. They invested most of their time on conceptualizing innovative technologies and they took their good long time to introduce them. Today when people talk about innovation, Google, 3M and Apple are always mentioned.

Twitter started off on a similar note. They just can’t follow something that has already been introduced, leveraged and exploited. What would be new (read Twitter) about it? I strongly feel that Twitter is not in a rush as of now and would be using this honeymoon time to do its home work properly and thinking about new innovative web 2.0 technologies and platform.

Twitter will definitely start making money but only with its own innovative tools and applications. To my mind, it will introduce something else to make money only if it can take the legacy of Twitter to the next level of innovation – something that is quite synonymous with its brand name.

I am not an expert in web technologies but I strongly feel that Twitter core mantra is sharing information and all its future endeavors would be around this core concept only (after all Web 2.0 is about it as well). Going forward, I feel Twitter could be thinking of something on these lines: -

1. Authentication – Today anyone can create a login and start using Twitter. Twitter can think of introducing the authentication or verification angle to it so that the analytics chalked out using Twitter would become more reliable.

2. Subscription based tweets – Tweets are the main weapon in its arsenal. All successful case studies on leveraging Twitter had one thing in common i.e. Tweets. Twitter may club it with its Authentication service and start offering specific and customized user tweets for specific reasons. It could be either surveys, analytics, customer service, sales etc.

3. Search Engine – Twitter can integrate a powerful search engine that gives the functionality to filter tweets and get only the most relevant ones as per the specific search criterion. This could become a powerful tool for the enterprise users of Twitter that can be made fee based gradually.

4. Twitpic – An interesting service to move beyond the 140 limit on Twitter and add some personalization to a dull Twitter user home page. Taking it to the next level, Twitter could think of introducing a platform for not only integrating pictures but also videos and files.

5. Another out of the box concept could be “Breaking News” service – Most of active Twitter users will validate this statement that Twitter has become an internet channel which gives them the news faster than any other news channel or resource. In real world we have plethora of TV channels and print media resources but as we are moving to the new internet world with Web 2.0, news about people who aren’t known to many, news that the whole world may not be interested in but you would, news about your friends, families, peer-group…will make the difference and who else can do this better or is equipped to do better than TWITTER.

Will surely love your thoughts and ideas on my thoughts. In case you have something interesting, not done before and goes well for Twitter, lets connect and suggest some good and innovative ways through which our dear friend Twitter can take its legacy to a new height – “Google of Web 2.0”

1 comment:

Maverick Buddha said...

you're my man bro. will see u at MIT soon ;)