Twitter’s business model (or rather lack of one) is a topic of endless debate. Like many successful startups that came before it the company has been successful in getting users and usage when it doesn’t charge a cent. But ramping up revenue is a different matter. And Twitter is now in the process of doing just that.
Most startups in this position simply sell themselves before it becomes too much of a problem and let their new parent deal with it (see YouTube). A nice side benefit of having no revenue is that the MBAs can’t use your actual financials to determine your valuation.
Twitter is likely to do the same, but these uncertain financial times mean Twitter can’t count on a definite exit anytime soon (although I’d bet money Google buys them within six months).
When I interviewed CEO Evan Williams last July he gave a few hints about what Twitter might eventually do to monetize:
MA: What is your revenue model? Do you know yet? Have you thought about it?
EW: We’ve though about it. We had to do some thinking about that to raise a bunch of money, but it’s not actively in development right now. The broad strokes on the matter are obviously Twitter is being used for a lot of commercial purposes right now, in addition to social purposes. We think that works pretty well. We think there’s a lot of companies that we’ve talked to that seem to be getting a lot of value out of it. If that continues, if that becomes a rich world for users and the companies, we think we can extract some revenue from that.
MA: It might be difficult to define commercial activity versus not, right?
EW: It might in some cases, but in a lot of cases it will be really clear. I mean Woot.com is selling stuff. So maybe we just say, this is commercial usage and you need to pay for that and maybe there’s some features you get on top of that, that wouldn’t be as meaningful to personal users. There’s other cases, like yours, is that commercial or personal?
But now’s obviously the time. Twitter recently posted a Product Manager job description at Jobscore.
The primary responsibility: “Define products and feature sets of commercial-oriented Twitter applications.” The description goes on: “As Twitter’s first product manager focused on revenue generation, you will play a defining role in the formulation of Twitter’s business. Your job will be to lead the definition and execution of the products and features that will lead to monetization of the Twitter platform.”
Got an idea as to how Twitter can turn on the cash spigot? Send in your resume.
i would think having vip tweet page where you must pay to follow would garner revenue.
Who says they don’t have a business plan … http://tinyurl.com/6qjtmp
why not just throw one line of google ads on their online version? as long as they arent as annoying as all the crap say like Techcrunch has, it wont be a problem.
Very Good so Thanks You Twitter http://www.jugargame.com/
qualifications: “be an active twitter user.”
lol
that’s really demanding and so hard to do
i like google ads. who doesn’t? pop em’ in there. bam! product manager right here.
looking for angels.
http://www.bett...rthanthevan.com
I’ve been reading “The Google Story” (awesome, awesome book) and two similarities struck me as I read this post:
1. Google, according to critics, wasn’t going anywhere because it was just about simple search. Search was old and tired, and the main players like Yahoo knew that the real ticket was going to be a rich front page including news, weather, gossip, etc.
But the Google guys focused on having the best search ever… they focused on their core, simple, basic and boring product.
And look who won.
2. The Google guys didn’t understand how they were going to get revenue in the beginning… their main focus was the technology, and solving the problems of search. The revenue model we all know and (cough cough) love came later…
Not to say that you can ignore revenue models, but just because a company doesn’t have revenue models to begin with but does have a popular, useful, even simple application/function/purpose, doesn’t mean it’s going to be a flop.
Yes, too many have no idea what they are going, and I’m not saying Twitter is going to be Google, but it seems like they are doing some very good things.
The Google book is awesome.
Jason Alba
CEO – JibberJobber.com
@jasonalba
Jason you are right. And I am really thinking if these guys at Twitter can come up with a new Business model that has never been around. Like when Google introduced Adsense, Adwords programs.
Still regular models can work for Twitter. But, I think it will be a great issue if they just develop their own, new, unique and ultimate business model.
Geesh, you guys ever heard of Overture? They’re the company (the massively, massively profitable company) that provided all of Google’s search ads, and Yahoo!’s, and MSN’s, and AOL’s, etc.
Overture was the first successful company to use the pay-per-click advertising business model (debatable whether they can claim to have invented it).
Long story short – Yahoo! bought Overture, that made Google decide to roll-their-own version of the service, and then MSN thought they could too. Google obviously succeeded in copying the business model and improving the profitability of it by applying superior technology. MSN failed miserably. And Yahoo!, well those chumps have talked about switching to Google’s ppc ad platform instead of the one they bought for a kabillion dollars just a few years ago.
So don’t give credit where credit is NOT due. Google did not invent the business model that drives almost all of their revenue – they copied the business model of their former partner, Overture.
That book is fantastic, I wanted to get it for a friend but it’s all sold out, in bookstores. I bought Founders At Work instead. I do see similarities, but at the same time, the timing isn’t the same, i don’t see twitter lasting that long without any revenue in the next few years. Plans should be in place, and as a communication platform, i think they got technology in place.
Yasser
http://www.jobstaxi.com
c’mon…tell us how u *really* feel about the Google book
I think ms will buy this as google already have jaiku and ms have missed out before.
They should develop a Twitter Analytics specifically for businesses and charge to use. Every company would easily pay for the analytics. I think they need to focus more on businesses and offer packages to incentivize them more to utilize Twitter to connect.
I wrote a solid PRD on monetization for the Twitter platform.
I’d love to share it with the Twitter community, but unfortunately there’s a 140 character limit on tweets, and my PRD is 107 pages.Doh!
Sounds like a great opportunity, and it must be nice to have TC promoting the job post…now that’s visibility.
This shouldn’t actually be that hard if they’re smart and realistic about how much revenue they can generate given their value proposition. And if they look at their leading users to figure out what they want.
Google is Search; Users want to find something; Advertisers want to pay to be found so they can sell something;
Yahoo is an Information Hub / Community Hub; Users can good info and to be a part of a community they like; Revenue is good around branding good info and brands associating themselves to communities they want to identify with.
MySpace is a Music / Entertainment Hub; Users want to connect with musicians and entertainers; Musicians, entertainers, and brands want to build relationships with users, so they should pay for that (not for adds above their inbox, those are worthless).
Facebook is a Socializing Hub; Users want to connect with real life friends and find out about social events; You would think people throwing said social events would be willing to pay, plus advertisers would be willing to associate with the right events. Instead I think their revenue model is something about taking over the world.
Twitter is a Communication Platform; Users want to follow people they want to hear from; Some users have a very strong reason to want a lot of people to follow them. You would think companies, professionals and would-bes trying to build their reputations would be willing to pay for one of the world’s best PR platforms…
But maybe they’d rather be Facebook and think they’re going to be worth as much as google when, fundamentally, no advertising will ever be worth as much as search advertising that connects would-be clients with advertisers selling products they might purchase.
Lorem Ipsum
Creating a commercial version of Twitter is a mistake. It adds too much complexity to a service that relies on simplicity. I’d happily deal with ads over sifting through corporate crap.
really, a post about a job post…..sometimes i wonder why i even visit this blog…i mean, really, a post about a job post…..maybe TC is in line for a recruiter’s fee?
Your sharpness overwhelms us.
Sorry I couldn’t stop LOLing after reading Robin’s comment.
banned.
one possible model – use twitter as a transport for the information systems in business: http://servlets...of-twitter.html
It is painful to comment on the Twitter revenue model because it can only come across as being negative.
Being popular does not necessarily mean you can monetize that popularity unless it is part of your core function. Comparing the Google model of not knowing how to monetize when they started with that of Twitter is too much of a stretch for me. Even if Twitter was to get as large as MySpace or Facebook monetizaton would be an order of magnitude harder. To monetize you need real estate AND relevancy – just look at YouTube – you with think with so much traffic you could break out of the $3-$5 CPM but you can’t – because it is not relevant content.
Search is the ultimate funnel for leads which drive conversions which provide more $$ to fund more advertising and the circle goes round and round. Interruption or Billboard advertising has nowhere near the conversion rate search marketing does. If every 10th. tweet was “Eat at Applebees” or something like that – sure that might plant the idea – yeah I want to go to Applebees – but that is pretty hard to turn into real conversions for the advertiser.
Mike you nailed it on the head with “A nice side benefit of having no revenue is that the MBAs can’t use your actual financials to determine your valuation” – it is great to lean back and dream of the revenue when no model is in place – however when a model is in place you see just how hard it will be to make a buck.
I really hope I am 100% wrong and that Twitter slugs a line drive up the middle with a completely new revenue model – that would be seriously inspiring. Having said that – the fact that they are advertising for someone to come up with a plan all of a sudden makes me worry. Maybe they can pull a rabbit out of the hat like TripAdvisor and see that they can be an affiliate referral site and make commissions – who knows – good luck Twitter’s first Product Manager.
Cheers – Eric
Mike you didn’t get the memo about charging you and Scoble per follower?
Or maybe, as several people have foolishly implied recently, Twitter can charge Dell many millions to generate a paltry million in Dell revenue.
“. A nice side benefit of having no revenue is that the MBAs can’t use your actual financials to determine your valuation.”
Are you for real? If they have zero or negative revenue, their valuation is zero times a trillion, which is still ZERO!
The censorship was HOT!!
Requirement: Knowledge of a feasible business model for a zero revenue pseudo instant and very addictive messaging system.
Hiring someone to start making money. What’s wrong with that statement?
I think that the applications for mobile barcode adverising are not only endless, but incredibly lucrative.
Check out http://www.BarcodeAd.com for the latest ideas in custom barcode scanning in mobile and web applications.
Hey Mike, thanks for the FB Connect.
Twitter’s revenue model:
1. Put banner ads on twitter users’ page layout.
2. Give a tweet of ads per 10 of users’ tweets. (for example)
3. Charge all commercial spammers there with bucks. Not embargo.
4. Let me think about it later
to be continued …..
But don’t hire me please.
Mabye twitter’s CEO should beg for money ? like wikipedia ? – the proper word is donation.
Getting revenue out of twitter shouldn’t be too hard.
Getting enough revenue out of twitter to justify the amount of venture capital that went in will be impossible. A lot of very smart people have attacked this problem openly, and no one has come up with a $100M idea. $20M maybe, but no way are they going to get the ROI of a VC hit. One wonders why the heck the VCs were willing to plow in money given the usual constraint on a fundable plan being able to get to a $100M company in five years. Or a 20x ROI.
Twitter is a poster child for the excesses that lead to the current economic climate. Their public attitude towards revenue is still that of a VC darling that thinks they’ll be able to raise additional rounds. Somebody better wake them up and tell them they’ve had their last round and they need to be profitable ASAP, because the party ended months ago.
I’m not sure if my first post went through but here’s my idea of some Twitter revenue model idea.
Bare with me as this is my first TC post.
One way I could see Twitter making money in a new way (Without adds or without corporate layers added on top of that simple service) would be in making partnerships with phone companies in establishing text messaging plans which Twitter would get a share from.
For instance, a few months ago when they announced that they would stop serving Australia and the likes (SMS), people went a bit mad. This could have been a good opportunity for phone companies to start offering the “Twitter SMS Plans” Perhaps some cheaper plan but one that would let you use twitter as you want.
Considering the amount of Twitter users in the world, a small percent taken from a monthly plan could be a good recurring income for Twitter.
Makes sense?
@David – that’s a great plan, but it illustrates Twitter’s problem. Let’s say they could get a half-cent commission on every tweet. How many tweets would people put through SMS? Let’s be generous and say it’s something like 100% of their traffic – 10M/day. That’s $50K/day in revenue, or $18M/year.
And let’s be realistic. No way are people going to pay that much just for SMS access. That particular revenue stream would be doing well at $1M or so a year.
There are tons of cute little ideas out there for how twitter can extract value, but none of them will feed the bulldog.
@Don I don’t want to start a war since I’m not product manage or don’t feel like applying for Twitter.
Here’s a bit further on the idea I had. I added some figures and 2 SMS plans (Which I’m sure people would actually pay for this) And also added an idea for the long term for Twitter in order to bring more “revenue”.
Considering that I do not or can’t seem to be able to find the amount of Twitter users I had to make up a number looking at the previous trends from twitterfacts. Consider that Twitter has reached 5M users.
Phone companies could make two “Twitter Monthly SMS” plans:
1) €$etc 18.95/month (As many Messages from and to twitter)
2) €$etc 8.95/month (100 Messages from and 100 messages in per day)
Twitter could get 15% of those monthly plans. So for 18.95 plans, it would turn out to be about 2.85 per user and for the 8.95 plans, it would be about 1.35 per user.
Considering that this would not be adopted by the majority of the user let’s say that 25% of the Twitter users adopt the cheaper plan. Taking into account that the number of user is about 5M by now (probably more), that would mean that 1,250,000.00 users would bring about 1.35 to Twitter so about 1.7M/month (1250000 * 1.35 ~= 1,687,500.00).
Then I’ll make the most realistic prediction I could make, only about 5-7% of the top usage users would use SMS and pay the 18.95 per month bringing in nearly 1M per month (300000 * 2.85 ~= 855,000).
Considering that now you are covering not on a daily SMS plan but more on a monthly plan, this could be very attracting to many users and yet you are only reaching about 30% of the users. I would say that after 6months to 1year it could easily reach 50-55% of the Twitter-population and when events like the american elections happen, people want to know what’s happening and would definitely be willing to pay.
Hmm did I make any sense? Moving on.
A better alerting system could also be used by twitter (A solid school/organization/population) international real time alerting system (ala twilert or tweetbeep).
Hmm oh well, so much for reinventing the world, I think we have done our part for twitter for now, just have to keep using it and I’m confident they’ll find something sooner or later.
Actually I have to comment on my own comment… when I said an alert system I meant something that people from a certain organizations could register to (or their emails/numbers are added to a list on say alert.twitter.com/orgName) and when the org needs to send a message to everyone on the list, they could send a real time alert.
This could generate revenue because the organization that want to use that “sms newsletter email” twitter service would have to pay a monthly or per-message fee covering SMS charges and software development. Once this is done it’s simply recurrent revenue really.
Imagine the local sports team registers themselves on twitter alerts, sign up their users as if it was a newsletter, type in their message, send it along and everyone receives it by SMS and Email (Ex: Training cancelled tonight, Your Coach)
Did I just give some people ideas to create that? Go knock yourselves out
@David – I agree that’s a good plan, but even with your projection of $32M/year it’s still not nearly enough to justify the VC investment. If the best they can do is come up with a company that’s in the $30M range, then the people that are saying twitter is like google are several orders of magnitude off. Given the current economic climate, can we really expect valuations to be more than 2x revenue? If that’s the case, then a 3x guaranteed return will completely take out the founders equity.
And why exactly would anyone pay for an SMS plan when just about any developer could put out a client that takes your incoming tweets and sends them to your AIM account? Part of the problem twitter has is their open architecture. It helped them get a lot of early adopters, but it ceded the client space to outside developers.
Play with the numbers. Your plan is a nice variation of the “charge twitter users for service” idea, but they all come out to this being a $20M-$30M/year company. Twitter may be growing, but the second people have to get out a credit card to use it usage will plummet.
Your alerts idea is cool tool, but it was tried during the first bubble: alerts.com. They raised a bunch of VC money and crashed on that idea. There’s another company that now has the domain that appears to be trying something similar. What value does twitter bring that would require people to funnel through them instead of using one of these competing services just for alerting? Competing with free is very hard — there’s a huge difference between free and a penny.
Given the lack of opportunities for future funding rounds, the Twitter team has exactly one shot at creating a revenue model and getting profitable before the burn rate overwhelms them. The fact that they’re just now starting to think about that seriously doesn’t bode well for them.
I love twitter and use it regularly (http://twitter.com/lt_draper), but there’s just no way the VCs did anything here other than invest in hype. The mere fact that Twitter is publicly trying to figure out a revenue model shows the level of excess the VC community was engaging in before this second bubble burst.
I’d recommend Adsense since it’s the best and good looking ads.
You may want to also check out Yonky. It’s the first “create your own microblog” to integrate with Twitter
http://yonkly.com
Why would Google buy out Twitter?
Seriously, I really doubt the revenue model is going to be all that ground breaking. There will probably be a banner or two on each page. And possibly a sponsor link or ad at the end of a tweet.
1. ask comcast and whole foods what they need.
2. develop walled api + applications
3. ???
4. profit!
@ev. hire me!
If somebody knows how to make Twitter millions of dollars why in the world would they be willing to come on as a salaried employee? They could take their ideas and start a new company from scratch and keep it all to themselves and their new, more reasonable investors who didn’t go overboard with the funding.
I think this job posting is ridiculous. The only people who will apply won’t have good ideas for how to monetize Twitter. Nobody who does is going to accept a salaried position. The very idea is preposterous.
A product manager is actually an executive function, meant, at the start at least, to carry out the vision of the founders. Founders in a tech startup are often more technical and need a business guy or guys to do the marketing work and stuff. And no, Twitter has a critical mass in this space, it would not be easy to “start over from scratch.” Why would you, when you have a salaried sandbox to play in?
I’ve actually had 2 interviews at Twitter for this position. I’m interested in the challenge and the opportunity to work with a company that has as much potential as Twitter. I also would expect to get good equity in the company so the financial success I would be bringing to Twitter would benefit me as well. In fact, I would expect to set up performance bonuses based on that success, in addition to the company equity.
What Twitter has created would be very hard to duplicate. I’m sure that Jack, Biz and Evan had no idea of how hot Twitter would become when they initially had the idea. Companies like Twitter are a result of vision, luck and serendipity. They’re at the stage now where they need very good planning and execution from people who have experience in forging successful businesses. That needs to be combined with a real understanding of social media. Throw in a lot of hard work, creativity and fun and they could revolutionize online communications and business.
I’ve been saying all over that the best way twitter and the other microblogging lot can make money is by selling their product to corporations and charging fees such as federation licenses to connect private twitter/ff/whatever instances to the public ones – maybe on a per user basis.
Software sales, CAL’s and juicey support contracts are perfect ways to harness a product.
Their userbases on the public version are nothing more than a feature or a draw to their system.
Advertising is not a real business model and will hidiously restrict your revenue generation power.
To give you an idea on how this can fit into the market I suggested a way of using friendfeed as a layer of monitoring software for corporate IT – http://www.alph...xion.com/?p=600
And it doesn’t have to stop with monitoring systems, twitter is good as a press release/product announcement system. They can use it as another avenue for support.
Revenue generation does not start with eyeballs on adverts when you have an actual product/service.
Hell, they could even host private, managed, instances of it too.
“$20 a month for your own x.twitter.com network” then bundle in many other features you can bolt onto the service.
It doesn’t take a genious to figure out many different ways of generating money from this without going cap in hand to the advertisers.
OK… if Twitter needs some help with business plans, I know how to do one– on one page.
Interested Twitter? Click my link.
the business plan is in the hash tags. they need to link tweets based on #pubcon and nouns in general like they do already for user names like @techcrunch. once they get good at correlating the data, they become the google trends of the social space and text messaging. free reports + pay for more like a compete.com
done. that wasn’t hard, and this is my first comment here.
I’m really intrigued to see what direction Twitter take.
To me it sounds like Evan Williams is planning on offering stats, tracking and broadcasting facilities for businesses (at a fee) which may ultimately kill the appeal of Twitter.
Great article Michael, keep it up.
I would have thought that Twitter’s strategy from here on out would be a no-brainer. Search with ads is a proven business – they should concentrate on providing the best possible real-time search. Rather than recruiting a marketing strategist, perhaps a few more search engineers would be a better investment – Twitter’s search is woefully unsophisticated, it doesn’t even stem for crissake!
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Twitter got enough VC funding already. Where have you been man?
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Ä° hate twitter.
Bad share.
3530K readers.
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