Ideas for Twitter’s Revenue Model – pt. 2


In part 1, I described some of the responses received from a survey I ran a couple of weeks ago asking readers for ideas on how Twitter could generate revenue. Some of those ideas included:

  • Advertising
  • Revenue share with carriers for SMS
  • per Tweet fees
  • Better analytics and social sphere recommendations (monthly fee)
  • Ask the expert (per question fee)

Here are some more suggestions made by people in the survey.

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Categorizing your tweets/contacts – For about $5 per month, the ability to label/tag tweets by Friends, Family, Work, etc, so that it wasn’t just “everything is visible to everyone”.

[Saeed] – I’ve always wondered why Social Networking sites don’t allow me to collect my contacts and group them into my own categories, like those listed above. To me this is such a core capability it should be part of the base offering. In the real world, I certainly don’t speak to all my contacts identically so why should I be forced to do it online? If I only want to send a tweet to my local Toronto contacts, or my family, or a certain subset of my business associates etc. I should be able to do that.

I like this idea, but I wouldn’t pay extra for it personally. To me, it should be a core capability.

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Enable micro-payments via Twitter – Allow you to make micro-payments to Twitter users / non Twitter users. Basically make a payment to anyone with an email address. Using Twitter’s user base and simple design, micro payments could not be easier. Why is it so hard to pay someone $5.00 on the spot when you don’t have cash ? With the explosion of the mobile web, a lot of users have access to Twitter, now you can provide a small fee based service to capitalize on a simple business that has not been implemented correctly on the Internet yet.There are no fees or charges for the person receiving payment. Charge $0.25 per micro-payment.

[Saeed] – I really like this idea. Anything to bring a secure, simple, cost-effective, P2P micropayment system would find a lot adoption. But perhaps there are regulatory or other reasons why such a system hasn’t already come into play. This capability is something that ANY Social Networking site could enable – Twitter, Facebook,  LinkedIn,  MySpace etc.

My bank here in Canada allows me to transfer funds to someone’s email address. Just paid back a friend in California some money I owed him using that mechanism. It was pretty easy to do but I had to log into my online banking system and go through a bunch of screens to do it.  So, the capabilities are there, some business just has to take the next step and make it dead easy — AND totally secure — to use.

—–

Better tweet filtering – For about $5 per month, allow me to filter tweets. e.g. more from user 1, few from user 2 etc. Also implement a SILENT Stop Follow. I don’t want some folks to know I really think they are boring.

[Saeed] – Similar to categorizing your tweets/contacts, this to me is base functionality. Certainly a good Twitter client could implement better filtering very easily. OTOH, the SILENT Stop Follow is something Twitter needs to implement. But then, with good enough tweet filtering, you’d never have to see tweets from people you think are boring. Good suggestion, but on it’s own I don’t think it’s worth $5 per month.

——

Other ideas – Here are some other ideas that could be used for differentiating the service for paid and unpaid users.

  1. Premium users pay for reduced API throttling
  2. Premium users pay for a real-time, contextualized feed (ala friendfeed)
  3. Pay by # of followers (under 1k or 10k is free)
  4. Pay by # of people followed (under 100 or 1k free)
  5. Every 100th tweet you receive is a relevant advert (location, context, etc).

[Saeed] – All of these are good suggestions, bu IMHO, only #3 really could be chargeable. The value of followers is large. The value of following is small. i.e. if I follow 10,000 people what does that actually mean? Is there any meaningful way for me to actually comprehend 10,000 different tweet streams?

Having followers, like having subscribers to an email list has value, as it allows someone to broadcast their message out and then potentially have those messages retweeted, driving traffic to their website or just having people hear what they have to say. The problem though is that, like listservs and discussion forums etc. before Twitter, the cost of alternative solutions is very low, so it would be surprising if many people were willing to shell out anything more than a small, marginal amount to pay for followers.

Ashton Kutcher has well over 1,000,000 followers. All for free right now. Note that he only follows a couple of hundred people.

Demi Moore has about 800,000 followers. And she only follows a very small number of people.

Oprah Winfrey has well over 500,000 followers, but follows less that 50.

The list goes on and on. What would it be worth to these celebs if they had to pay for the following? And what about non-celebs like CNN (1,000,000+), New York Times (700,000+), The Onion (~600,000), Whole Foods (500,000+), Woot (500,000+) etc.

Twitter needs to find something of true value that people will pay for, not simply something like # of followers.

My Approach – So if I were the Twitter PM, here’s what I’d be thinking.

The base service MUST remain free. There’s no arguing that point.

Segment the users into some rational delineation of users. Look at the top 1000 and see what groupings and patterns can be found. Identify what value-added services these groups need or would pay for and use that as the basis for new offerings.

There are celebrities:  Ashton Kutcher, Demi Moore, Britney Spears, Shaquille O’Neil, Lance Armstrong, John Mayer and so many others. What do they (or more likely their staff) aim to do with it? What goals do they have when communicating to their fans via Twitter? Are there merchandising opportunities that could be enacted via Twitter?

There are news organizations: CNN, the NY Times, The BBC, The Onion, NPR etc. Same questions. How are they using Twitter and what benefits do they derive? Are there joint monetization strategies that could be enacted with these news orgs.

There are businesses: Whole Foods, Zappos, Woot, JetBlue etc. Again, same questions.

There’s a lot of segmentation possible and each group can be queried to provide insight into the benefits they see of Twitter and the kinds of value-add services they’d be willing to pay for.

Aside from some form of search advertising, I doubt there are too many strict horizontal, highly scalable revenue models that Twitter could exploit.  So a segmented approach is needed.

Beyond the audience of users, look at the ecosystem who use the API for extended clients, analytics etc. Do they get unrestricted free access to the API and all the services Twitter provides? What value are they deriving from the infrastrucutre? Is there a shared revenue/expense model that could be defined with those companies?

It won’t be easy. Facebook is still trying to figure out how they can generate sustainable revenue. But then who knows, maybe the PM team at Twitter will find something can turn Twitter into a real business — you know, one that has revenue AND profits, in addition to providing a very popular messaging service!

Saeed

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9 responses to “Ideas for Twitter’s Revenue Model – pt. 2

  1. I think Twitter might be more valuable as a unique source of data than anything else. Companies are working hard to mine Twitter information today – why not charge for it? Right now 3rd party tools do almost all of the user-oriented things you’ve listed above. Perhaps not totally elegantly in a single interface but they are there for free today so it would be hard to charge for them. Advertising is coming of course (that’s what that little definition box is there for 😉
    btw – Facebook is private but the estimates are that they made around $300 million last year. No clue what the expense model is but that’s big enough to count as “sustainable” in my book 🙂
    April

    • Agreed there is a lot of time sensitive information that goes up there…and then there is also a lot of crap! 🙂

      Agreed also that 3rd party tools do a lot of what people suggested. Keep in mind those weren’t my suggestions by ideas from readers of the blog.

      Facebook’s $300 million (as far as I can tell) was a projection the Zuckerberg made early in 2008. They have not released any final #s yet, but it may be lower than that.

      The key questions are:

      1. What is the breakout of that revenue? via advertising? via investment? via other means?

      It’s really important to understand where the revenue came from, how much of it is repeatable and scalable going forward. A lot of the revenue is from the Microsoft deal. Not sure if that is repeatable or scalable.

      2. How close to breakeven (forget about profit for now) is FB?

      At almost 200,000,000 users (not sure how many of them are active!), surely they must be close to finding a path to breakeven? Or do they need to get to 300,000,000 users before that happens?

      Yes they have a ton of money in the bank, but is there a real business there or are they simply a sink for investment dollars?

  2. Saeed, good compilation of ideas. Two questions, how many paid magazine subscriptions do you have and how many paid online services do you have?
    Quite frankly when I answered that question myself I realized that except for online video rental I have none.
    While Twitters use is unique for me its still content generation and there’s eyeballs constantly viewing this content. So I still feel the best way for Twitter to monetize would be to get brands and corporations to pay for getting their content in front of these eyeballs.

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  4. Well, I started to comment on this post, but my comments ended up making an entire blog post…so you can find my complete thoughts here: http://jasonbrett.me/2009/04/twitter-revenue-model-proposals-abound-metoo/

    That said, I enjoyed the post and it obviously got me in gear as well.

    Essentially, I’m a fan of four primary revenue streams:
    1. In-stream advertising
    2. Metered updates
    3. Metered API access
    4. Brand and premium name protection

    As you said, there are many other options, and most of them have merit. I just view these four as highest priority.

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  7. If I were the PM of twitter, I would go for revenue generation through advertisement on auxillery services such as search, statistics reports, public messages etc.
    If you make any service “premium” then there will always be someone who gives that service for free.

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