Twitter's risk of ubiquity

I continue to marvel at the huge amount of coverage that Twitter gets from mainstream and business press, as well as the huge amount of traffic the service enjoys.

But while Twitter is becoming omnipresent in every layer of the media, the business remains a mystery. Ubiquity without clear methods of monetization can easily result in a situation where free really means free, with no way to make meaningful money.

The recent levels of Twitter adoption, attention, and omnipresence are starting to lean toward a situation where the company may never be able to effectively monetize the user base.

Twitter me this...

(Credit: Twitter)

Don Reisinger wrote on CNET's Webware earlier this week about five Twitter improvements he's still waiting for. I completely agree with all of Don's points, but there is one key item that Twitter users and supporters are really awaiting: proof that the service will exist in the future.

By proof, I mean a business model, or even an inkling of a revenue stream to suggest that there is life beyond free and that users will remain loyal.

Twitter users don't want the company to screw up, but at what point will the company respond and deliver what the users are asking for? Users are not only rooting for the service to be successful, but going as far as providing ideas for ways that they want to be monetized.

This level of community interaction and support is unheralded and goes well beyond sites like MySpace, Digg and Facebook, all of which still garner larger traffic numbers.

Webware's Rafe Needleman wrote in December about a Churchill Club event featuring Twitter CEO Evan Williams in which the business strategy remained fuzzy. Needleman wrote:

I left the talk with more confidence in Williams than I had previously, although I'm still not convinced that Twitter can be as big as Williams says it will become. Not because the concept isn't big--it is--but rather because I am not convinced that a natural monopoly will form in the space.

I think Twitter has the monopoly on the microblogosphere. The big question is if it can take advantage of its hugely dominant position to become a real company with real revenue.

You can follow me on Twitter @daveofdoom, where I continue to enjoy the service and would gladly pay for some additional features. I find the short method of communicating from one-to-many to fit my style and enjoy following and updating my friends.

Side note: For those who have been wondering, I got my Twitter name DaveofDoom from the Black Sabbath song, "Hand of Doom." In the late 1990s I played in a now-legendary Jersey-shore instrumental surf band called The Dungarees that covered the song. One of the guys renamed it Dave of Doom, and the rest is history. This is part of what makes Twitter fun. You can add a bit of personality to your communications.

While I'm explaining things, Negative Approach was a hugely influential band from Detroit. It's also what many basketball coaches call it when you have your back to the basket on the baseline and you back-in to the hoop.

[hymanroth]

I would say the fuzziness surrounding twitter's business model is entirely intentional, for the following reasons:

1) At the moment all they're interested in is usage. Users beget users, as per the network effect. The more users, the higher the company valuation, REGARDLESS of the business model. In other words, I'm willing to bet that twitter's business model is simply to be acquired. They'll leave it to the new owners to work out how to make money from the service. This would explain why there are no ads or other attempts at monetization. Why risk a user revolt at this stage?

2) The API. Twitter allows anybody to build on top of their platform. And now many users prefer to access twitter via third party services. But what if twitter starting applying a usage-based fee to access the API? They would simply shift the monetization onus on to third party developers. Hence, the likes of TweetDeck, would need to carry adverts or charge a subscription. And again, this strategy would benefit from letting usage of third party apps flourish.

So, In my view, there's no vagueness at all. Twitter is executing very rationally.

[thinkjose]

The other interesting issue is that there are quite a few 3rd party Twitter tools that are making money.

Imagine NBC letting anybody run 30sec spots in between their shows and not collecting a dime off of it. The next 6 months will be interesting for twitter and all the other mini-biz models built on top of it.

http://twitter.com/thinkjose

[WeCanDoBIZ]

Are there Twitter tools making money? Which? And isn't this annoying for Twitter itself? What does Twitter get from other companies that have managed to better exploit its platform for commercial gain?

When contemplating revenue models for Twitter I have often thought that charging third party developers to use the API could be one. So I read with interest the fact that later this week Twitter will start restricting use of the API: http://news.cnet.com/8301-17939_109-10147535-2.html

Has this move revealed their strategy for revenue generation?

Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz

[wade_coleman]

People said the same things about Google, pre AdWords. I don't know how they're going to make money... but a massive base of fanatical users is as good a place to start as any.