Category Archives: Twitter should have figured out their revenue model first!

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Not to sound like a broken record, but here’s a great example of what I was talking about in my recent post entitled “5 benefits in thinking about revenue models right from the start“.

A couple of weeks ago, Nambu, the parent company of the URL shortening service, announced that they will be shutting the service down. You should read their entire post because it is very well written and makes some very good points that should serve as lessons to virtually any aspiring business out there.

trim-ripI’ve also captured a jpeg image of the page in case they take down the original. Click the image on the right to read the entire text.

Here’s a synopsis of that post.

  • is being shut down.
  • It is good at what it does and is a popular service, but that is not sufficient.
  •’s costs are real, both in terms of development effort and operational costs.
  • Those costs need to be recouped.
  • But there is no way to monetize URL shortening and the quest to find an acquirer failed. [SK – probably because there is no way to monetize it].
  • Users will not pay for URL shortening. [SK – URL shortening is a commodity; a cheap one at that.]
  • The data that collects – what URLs people are shortening and clicking on – is of little value to outsiders because “everyone has that data” as it is harvested by bots. [SK – the collected data is also a commodity.]
  • An 800lb gorilla named Twitter has anointed a competitor ( as the URL shortener of choice. [SK – if your success is dependent on a single larger entity, be the clown fish to their anemone!]
  • This effectively blocks growth prospects for (and by inference, other competitors to

I use I like it. It’s simple to use and gives me some good analytic data about click-throughs on shortened URLs I post around the web.

But I always wondered how they made money. For as long as I’ve used the web, was the only URL shortener that I knew. Then with Twitter, others jumped in, providing extra services, like accounts, click-through stats and simple analytics. Here’s a chart of monthly visitor statistics.tinyurl-bitly-trim

Clearly, it was a losing battle for in terms of traffic. Even the venerable tinyurl, long the king of URL shortening is falling in traffic, with continuing to climb.

So the question is: how will cover it’s costs? The server and operational costs  must be significantly more than that of

How is (or will) generate revenue? Can they sell their data? If so, to whom?

Does anyone have any insight into how does or will create a sustainable revenue stream? And what has Tinyurl been doing all these years to pay it’s bills? I’m genuinely curious.



Tweet wars: The limits of debate in 140 chars. or less

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Over the last day or so there has been quite a little debate about the importance of Domain Knowledge and Product Management Skills in #prodmgmt (most of you will recognize that as the twitter tag for the Product Management topic, folks. If not, tune in!).

While the discussion itself was interesting, I found myself thinking about the medium as much as the message. How can we have meaningful dialog in 140 characters exchanges? We ended up debating in titles and, I think, really missing each others’ points. Any good dialog requires us to walk down something called the ladder of inference. At the top of the ladder is your position and my position. As we walk down the ladder, we meet at the level of positions, conclusions, and actions.

In a good dialog, we offer to walk down the ladder with each other. We examine assumptions, and affixed meaning, and selected data. If we are really lucky, we can take one more step down the

Example use of ladder of inference

Example use of ladder of inference

ladder and look at real world data. (Immanuel Kant argued that real world data can never truly be known, for the viewer always interprets.)

But here’s my problem: In twitter, we are all tweeting at the top of the ladder. There is no real ability to walk down the ladder together. Twitter constrains expression so tightly that real dialog is impossible.

I am a Twitter fan for many things. But not for debate, discussion, or dialog. Give me an ale house any day.

– Alan

PS: to my fellow debaters: I am not nearly as rigid on this topic as my tweets may suggest. I suspect that if we got in the same room, we’d find a lot of common ground. As an example of where PM Skills trump Domain Knowledge, I would hate to hire an IT practitioner who could do IT Systems Management, but not teach the organization to build and sell a product in the field. In my view however it is too easy to say “a good analyst can learn any domain”. I liked Peter Hanschke’s comment that certain broad domains are important. For example, I wouldn’t hire a great B2B PM to run a B2C product.

What was Twitter’s Biz Stone smoking?


You can see the new version of this article at the following URL:

A couple of months ago, Twitter co-founder Biz Stone appeared on The Colbert Report. Watch the interview below and then continue reading the blog post. Pay close attention during the latter part of the segment as Stone describes Twitter’s plans for revenue generation.

Vodpod videos no longer available.

[NOTE: If you don’t see the video in your browser, wait a few extra seconds for it to load, refresh the browser window or view the original here, or if you live in Canada, view it here]

If you were impatient and couldn’t watch the whole thing, here’s a recap of the key parts, starting at about 2:55 into the video:

Stone: Twitter provides a new way of messaging. It’s really the messaging service we didn’t know we needed until we had it. You send out 140 character bursts of information to anyone who wants to receive it; they receive it in real time and that’s when some of the magic happens.

Colbert: [looking perplexed] It’s the what? It’s the what?

Stone: [matter of factly] The messaging system we didn’t know we needed until we had it.

Colbert: [astutely] That sounds like the answer to a problem we didn’t have until I invented the answer. [audience laughs loudly]


You can see the new version of this article at the following URL:

Analysis part 1

I do agree with Stone on his first sentence. Twitter does provide a new way of messaging. I wrote about it previously in Twitter: The Napster of Messaging. But after that, Stone starts speaking mumbo jumbo.

The “service we didn’t know we needed” line makes little sense. Thankfully Colbert quickly calls Stone on it almost immediately.

Later, starting around 4:30 into the video, the following exchange happens:

Colbert: Does Twitter charge anything?

Stone: It’s totally free.

Colbert: So I assume that “Biz” in Biz Stone doesn’t stand for “business model”?

Stone: [somewhat sheepishly] No. No it doesn’t.


You can see the new version of this article at the following URL:

Analysis part 2

This in my opinion was the best exchange of the interview. Colbert intentionally asks a question to which he knows the answer, only to follow up with a real zinger; an easy target, but quite effective. This does set up the context for further questions a few moments later.

The interview later continues:

Colbert: How would you make money? Are you going to make money off of this? How?

Stone: Yes we are. We are going to become a strong, profitable, independent company. We are going to continue to stay based in San Francisco.

Colbert: You and  [audience laughs. Stone looks annoyed.]

Stone: We are recognizing a difference right now between profit and value. We are building value right now.

Colbert: Wait. What’s the difference between profit and value?

Stone: Well right now we are building on value. That means extending the service worldwide, globally, so that more people have access to the real-time network. And not just on the internet. There are over 4 billion mobile phones and when we network them together it is very transformative especially when you realize it works over both texting and the web.  As we grow that network it becomes more valuable; as we add features to it, as we make it more robust. When we get to a certain point where we feel we’ve gotten there, we’ll begin experimenting with revenue models. This is not unlike how Google approached their revenue.


You can see the new version of this article at the following URL:

Analysis part 3

This last exchange is where I think Stone goes right off the rails. His line about “value” and “revenue” is utter rubbish.

Extending the service – taking it global etc. — has nothing to do with value. That’s called “extending the service”. Value is not added with new features and capabilities. To quote Warren Buffet:

Price is what you pay. Value is what you get.

Value is delivered or derived, not added through code and new functionality. Newsflash Stone! Millions of people are getting value today out of Twitter. Even with the frequent appearances of the Fail Whale, people continue to use the service.

And what’s this about Twitter networking the world’s 4 billion mobile phones together and being “transformative”. That’s just more mumbo jumbo.  I guess with 45 or 50 million users of Twitter today, that’s just not enough to figure out how to generate some revenue?

Finally, what’s with the line “When we get to a certain point that we feel we’ve gotten there…” Huh???? Biz, could you just be a little more specific? And, hey VCs who’ve invested MILLIONS into Twitter….is this what passes for intelligent business speak from the founder of one of your portfolio companies?

But the interview continues:

Colbert: How long out is that?

Stone: How long is what?

Colbert: Before you experiment with revenue.

Stone: We’re going to start experimenting this year. But we don’t have to hit a home run right away. We have patient investors. We have time to work it out. We’re going to be exploring and experimenting starting this year and we have time to figure out what the perfect revenue model is.


You can see the new version of this article at the following URL:

Analysis Part 4

Hold on a minute. Almost immediately after saying “When we get to a certain point that we feel we are there…“, Stone indicates that “this year” is when that certain point will be reached that they will feel they are there. Wow. So why didn’t he say that in the first place?

So in summary what is Twitter?

It’s a free service that solved a problem people didn’t know they had. They’ve raised tens of millions of dollars in VC money, and the company’s goal is to be a strong, profitable, independent software company based in San Francisco. They’re currently in a phase of value building but later this year they will start “exploring and experimenting” with revenue models, but there is no urgency to find great model because they have patient investors.

For those you reading this, I’d love to hear your thoughts. Personally, I find the whole interview rather amusing; and not in the typical Colbert way. Stone seems like a nice guy, but his comments in the interview truly leave me suspicious about Twitter ever generating sustainable revenue, and also leave me wondering, what he was smoking when he went on the show?

But maybe I’m wrong. What do you think?



Announcing ProductCamp Toronto 2009

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The time and place for the next ProductCamp Toronto has been set.

It’s Sunday October 4, 2009 @ the Ted Rogers School of Business at Ryerson University in downtown Toronto.

This is the same location as the very successful first Product Camp in November of last year.

It’s a chance to come and meet, brainstorm, learn and network from your peers in a casual and engaging setting.

Here are some links to provide you with more information

We’ll keep you updated as things progress. Look forward to seeing as many of you as possible in October.


Embracing New Media

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I’ve written about the CBC radio show “The Age of Persuasion” before. A recent episode entitled “Embracing New Media” is worth listening to.

By looking at how people reacted to and dealt with successive versions of “new” media (like the telephone and television) when they first came out, the host, Terry O’Reilly, teaches us some lessons about how to deal with the current slew of new social media in our lives. Enjoy.


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.


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.


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!


Ideas for Twitter’s Revenue Model – pt. 1

Twitter logoThe survey I ran last week is now closed and here is a summary of the ideas and comments collected. Some are fairly traditional and some are rather novel. Take a look, see what’s interesting and leave a comment on which ones you like or dislike.

NOTE: My comments for each of the ideas are not criticisms of those ideas, but simply additional commentary and context.


Google and Microsoft logosAdvertising Revenue Model – Twitter should figure out a model where brand owners pay Twitter to get in front of all those eyeballs. Seems to be a very prevalent Ad driven model in todays economy.

[Saeed] Looks like Google and Microsoft are already all over this idea. Outside of advertising, there are a lot of options for Twitter. As Biz Stone said in a WSJ article recently:

…Twitter recently hired a product manager to oversee the development of commercial accounts. The accounts would offer users more features in exchange for a fee, but Mr. Stone says Twitter hasn’t set a launch date for them.


Wireless carriers logosRevenue Share with Carriers: Tie up with operators worldwide and crack a revenue share deal on the SMSs sent to Twitter. Most people who’re using Twitter from mobile would find this capability useful and since there would be just the regular charge there’s no mindset barrier to break.

[Saeed] – This is an interesting suggestion though I wonder what would convince carriers to give up revenue to Twitter that they can keep for themselves right now. Twitter is driving SMS traffic but has no control over the carrier the user has.

Other SMS related services charge those who create the SMS traffic (e.g. mobile marketing companies). Perhaps the idea could be reversed, where carriers provide specific Twitter packages and branded clients and then split the revenue back with Twitter.


stack of coinsPer Tweet Fees: Charge per tweet, leave following and view tweets free, or just charge per tweet from cell phones.  5 cents a tweet. Or if yearly it depends, If I was using it for promoting my business $250 a year, personally no more than $20 a year.

[Saeed] – Charge per tweet would be hard to justify given tweeting is free right now. On the SMS side there might be a possibility for some fees or packages similar to what the carriers provides for SMS.


Account Analytics and Social Sphere Recommendations: Track, monitor and analyze your twitter account for $5.99/month. Tell me how many followers I have over time, how many of them are talking with me, and with each other. Show me my social sphere as well as historically. Show me my reach, my depth, my breadth. Show me people I should follow because we know the same people and might be interested in each other. Give what you give now for free and charge for all the extras.

[Saeed] – These services are starting to emerge. TwitterCounter, Twitter Analyzer, TweetStats etc. are starting to provide this functionality as are firms that provide analytics (Omniture), but this is certainly an area where more can be done.

Perhaps users might pay 3rd parties for this, but it’s also something that Twitter could support as they are the platform owner. In the end, Twitter will have to play nice with the more established 3rd parties who provide more than simply Twitter statistics, such as reputation management and social media monitoring companies. Twitter is certainly the center of attention right now, but that won’t last forever.


Ask the Expert on Twitter: The ability to ask questions and receive answers from an individual or group within an industry who are designated as experts on Twitter. Would pay anywhere from $1-$10 based on the quality of the answers received. Would be useful to anyone who is searching for specific information that is not readily available via a Web search.

[Saeed] – This is an interesting suggestion. I guess both the question and the answer have be extremely short 🙂 or else the conversation has to leave Twitter and go elsewhere. Yahoo! Answers currently addresses this need for free, as does the Q&A on LinkedIn, as do many other services. Google Answers has been shut down but they were one of the pioneers who tried to enable a “pay-per-answer” service.


I’ll post other ideas submitted in the survey in my next post.  In the mean time, what do you think of these suggestions?


Related Post

Ideas for Twitter’s REvenue Model – pt. 2