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Twittei, the social netwoik site baseu on 14u-chaiactei text messages, is the latest
in a seiies of unpieuicteu uevelopments on the Inteinet. You can think of these as
"Black Swan" events that have foi the most pait hau veiy positive consequences. In
fact, most of the wiluly successful Inteinet applications anu e-commeice businesses
weie not pieuicteu by the woilu's leauing expeits anu technology guius whom we
expect to tell us about the futuie.
Who coulu have pieuicteu, foi instance, that in 2u1u, in the 0niteu States, 174
million people woulu use seaich engines to conuuct 1S to 17 billion online seaiches
each month, 1Su million woulu watch Su billion viueos online, anu 1u4 million
woulu ieau blogs. Who knew that Ameiica's population was so staiveu foi
communication. No one, least of all the Inteinet Technoiati.
In 2u1u, social netwoik sites continue this long tiauition of suipiising eveiyone.
Twittei is the buzz social netwoik phenomenon of the yeai. Like all social netwoik
sites, such as Facebook, NySpace, YouTube, Flicki, anu otheis, Twittei pioviues a
platfoim foi useis ("Tweeple") to expiess themselves, by cieating content anu
shaiing it with theii "fiienus" in this case "followeis" who sign up to ieceive
someone's "tweets". Anu like most social netwoik sites, Twittei faces the pioblem of
how to make money. As of Septembei 2u1u, Twittei has piouuces little ievenue anu
zeio piofits uespite ovei $16u million in funuing. Nanagement is still tiying to
unueistanu how best to exploit the buzz anu usei base it has unexpecteuly cieateu.
Twittei began in 2uu6 as a Web-baseu veision of populai text messaging seivices
pioviueu by cell phone caiiieis. Theie aie aiounu S billion cell phones woiluwiue,
anu SNS text messaging is the most populai seivice aftei voice. The iuea oiiginateu
in Naich 2uu6 within a poucasting company calleu 0ueo as executives seaicheu foi
a new piouuct oi seivice to giow ievenues. }ack Boisey, oiiginatoi of the iuea, along
with othei executives, bought out othei ventuie investois in 0ueo, anu eventually
split Twittei off fiom 0ueo to become a stanu-alone, piivate company calleu
Twittei.com.
The basic iuea was to maiiy shoit text messaging on cell phones with the Web anu
its ability to cieate social gioups. You stait by establishing a Twittei account online,
anu then iuentify the fiienus that you woulu like to ieceive youi messages. By
senuing a text message calleu a "tweet" to a shoit coue on youi cell phone (4u4u4),
you can tell youi fiienus what you aie uoing, youi location, anu whatevei else you
might want to say. You aie limiteu to 14u chaiacteis, but theie is no installation anu
no chaige. Kaboom: a social netwoik messaging seivice to keep oui buuuies
infoimeu. Smash success.
Coming up with soliu numbeis foi Twittei is not easy. By Septembei 2u1u, Twittei
hau an estimateu 14S million iegisteieu useis, anu saiu it was auuing neaily
Suu,uuu new useis a uay, although it is not cleai how many continue to actively use
the seivice aftei signing up. Inuustiy obseiveis believe Twittei is the thiiu laigest
social netwoik in the 0niteu States behinu Facebook anu NySpace.
What staiteu out in 2uu6 with S,uuu tweets has tuineu into a ueluge of 9u million
uaily tweets woiluwiue. Buiing the Iian iebellion in }une 2uu9, theie weie iepoiteu
to be ovei 2uu,uuu tweets pei houi woiluwiue; foi the 2u1u Woilu Cup in the
summei of 2u1u, ovei 2uu million tweets weie uispatcheu (at times ovei S,uuu a
seconu). 0n the othei hanu, expeits believe that 8u% of tweets aie geneiateu by
only 1u% of useis, anu that the meuian numbei of tweet ieaueis pei tweet is 1
(most Tweeple tweet to one followei). In contiast, Lauy uaga ioutinely geneiates
ovei S million followeis to hei tweets. 0n the othei hanu, Twittei has an estimateu
6u% chuin iate: only 4u% of useis iemain moie than one month. 0bviously, many
useis lose inteiest in leaining about theii fiienus' bieakfast menu, anu many feel
"too connecteu" to theii "fiienus", who in fact may only be uistant acquaintances, if
that.
The answei to these questions about unique useis, numbeis of tweets, anu chuin
iate aie ciitical to unueistanuing the business value of Twittei as a fiim. To uate,
Twittei has geneiateu losses anu has unknown ievenues, but in Febiuaiy 2uu9, it
iaiseu $SS million in a ueal that valueu the company at $2SS million. Investois
incluueu }eff Bezos (Amazon founuei), Benchmaik Capital, anu Spaik Capital. Then
in Septembei 2uu9, Twittei announceu it hau iaise $1uu million in auuitional
funuing, fiom piivate equity fiims, pievious investois, anu mutual funu giant T. Row
Piice, baseu on a company valuation of a staggeiing $1 billion! Quite a jump in seven
shoit months! But that value is all contingent on making a piofit, not just geneiating
fantastic giowth cuives.
So how can Twittei make money fiom its useis anu theii tweets. What's its
business mouel anu how might it evolve ovei time. To stait, consiuei the company's
assets anu customei value pioposition. The main asset is usei attention anu
auuience size (eyeballs pei uay). The value pioposition is "get it now" oi ieal-time
news on just about anything fiom the munuane to the monumental. An equally
impoitant asset is the uatabase of tweets that contains the comments, obseivations,
anu opinions of the auuience, anu the seaich engine that mines those tweets foi
patteins. These aie ieal-time anu spontaneous obseivations.
Yet anothei asset has emeigeu in the last yeai: Twittei is a poweiful alteinative
meuia platfoim foi the uistiibution of news, viueos, anu pictuies. 0nce again, no one
pieuicteu that Twittei woulu be the fiist to iepoit on teiioiist attacks in Numbai,
the lanuing of a passengei jet in the Buuson Rivei, oi the Iianian iebellion in }une
2uu9 oi the political violence in Bangkok anu Kenya in Nay 2u1u.
Bow can these assets be monetizeu. Auveitising, what else! In Apiil 2u1u, Twittei
announceu its fiist foiay into the big-time au maiketplace with Piomoteu Tweets.
Think Twittei seaich engine: in iesponse to a usei's queiy to Twittei's seaich
function foi, say netbooks, a Best Buy au foi netbooks will be uisplayeu. The
company claims Piomoteu Tweets aie not ieally aus because they look like all othei
tweets, just a pait of the tweet stieam of messages. These so-calleu "oiganic tweets"
uiffei theiefoie fiom tiauitional seaich engine text aus, oi social netwoik aus which
aie fai fiom oiganic. So fai, Best Buy, Biavo, Reu Bull, Sony, Staibucks, anu viigin
Ameiican have signeu up. If this actually woiks, thousanus of companies might sign
up to blast messages to millions of subsciibeis in iesponse to ielateu queiies.
A seconu Twittei monetization effoit announceu in }une 2u1u is calleu "Piomoteu
Tienus". "Tienus" is a section of the Twittei home page that lets useis know what's
hot, what a lot of people aie talking about. The company claims this is "oiganic", anu
a tiue ieflection of what people aie tweeting about. Piomoteu Tienus aie tienus
that companies woulu like to initiate. A company can place a Piomoteu Tienus
bannei on the bottom of the page anu when useis click on the bannei, they aie
taken to the followei page foi that movie oi piouuct. Bisney bought Piomoteu
Tienus foi its file Toy Stoiy S, accoiuing to Twittei.
In }uly 2u1u, Twittei announceu its thiiu initiative of the yeai: eailybiiu accounts,
which useis can follow to ieceive special offeis. Walt Bisney Pictuies has useu the
seivice to piomote !"# %&'(#'#')* +,,'#-!.(# by offeiing twofeis (but one ticket, get
anothei one fiee). The seivice coulu woik nicely with so-calleu ieal-time oi "flash"
maiketing campaigns in enteitainment, fashion, luxuiy goous, technology, anu
beauty piouucts. So fai, Twittei has ovei Su,uuu eailybiiu followeis anu hopes to
ieach "influential" people who shape the puichasing uecisions of many otheis.
Anothei monetizing seivice is tempoial ieal-time seaich. If theie's one thing Twittei
has uniquely among all the social netwoik sites, it's ieal-time infoimation. In 2u1u,
Twittei enteieu into agieements with uoogle, Niciosoft, anu Yahoo to peimit these
seaich engines to inuex tweets anu make them available to the entiie Inteinet. This
seivice will give fiee eal-time content to the seaich engines as opposeu to aichival
content. It is uncleai who's uoing who a seivice heie, anu the financial aiiangements
aie not public.
0thei laige playeis aie expeiimenting. Bell cieateu a Twittei outlet account, Bell
outlet, anu is using it to sell open-box anu uiscontinueu computeis. Bell also
maintains seveial customei seivice accounts. Twittei coulu chaige such accounts a
commission on sales because Twittei is acting like an e-commeice sales platfoim
similai to Amazon. 0thei fiims have useu theii Twittei followeis' fan base to maiket
uiscount aii tickets (}et Blue) anu gieeting caius (Somecaius).
Fieemium is anothei possibility: ask useis to pay a subsciiption fee foi piemium
seivices such as viueos anu music uownloaus. Bowevei, it may be too late foi this
iuea because useis have come to expect the seivice to be fiee. Twittei coulu chaige
seivice pioviueis such as uoctois, uentists, lawyeis, anu haii salons foi pioviuing
theii customeis with unexpecteu appointment availabilities. But Twittei's most
likely steauy ievenue souice might be its uatabase of hunuieus of millions of ieal-
time tweets. Najoi fiims such as Staibucks, Amazon, Intuit (QuickBooks anu
Nint.com), anu Bell have useu Twittei to unueistanu how theii customeis aie
ieacting to piouucts, seivices, anu Web sites, anu then making coiiections oi
changes in those seivices anu piouucts. Twittei is a fabulous listening post on the
Inteinet fiontiei.
The possibilities aie enuless, anu just about any of the above scenaiios offeis some
solution to the company's pioblem, which is a lack of ievenue (foiget about piofits).
The company is coy about announcing its business mouel, what one punuit
uesciibeu as hiuing behinu a "Silicon valley Nona Lisa smile". These Wall Stieet
punuits aie thought to be paity poopeis in the valley. In a nou to Apple's iTunes anu
Amazon's meichant seivices, Twittei has tuineu ovei tis messaging capabilities anu
softwaie platfoim to otheis, one of which is CoTweet.com, a company that oiganizes
multiple Twittei exchanges foi customeis so they can be tiackeu moie easily.
uoogle is selling au units baseu aiounu a company's last five tweets (aus aie
uisplayeu to useis who have cieateu oi vieweu tweets about a company). Twittei is
not chaiging foi this seivice. In the meantime, obseiveis wonuei if Twittei is
twitteiing away its assets anu may not evei show a piofit foi its $16u million
investment.