Search:
Recent Posts
Categories
Archives
How Twitter could become a real business (and why they won’t do it)
A buddy just sent me this article from Mr. “Fake Steve Jobs” - Dan Lyons - on the death of Web two dot over (as he called it). Welcome to the party Dan. I’ve been saying this for years (here’s my latest post). Real journalism can get tricky when you have to also manage your celebrity. Just ask Kara Swisher.
Regarding Twitter, Lyons writes:
“To get an idea how crazy things have been, consider that Twitter, a “micro-blogging” site launched in 2006, earlier this year raised a reported $15 million in venture funding at an undisclosed valuation—even though the company hasn’t made a dime so far and its managers aren’t trying to. “We’re prerevenue. We’re focused on growth,” CEO Jack Dorsey says, although he adds that Twitter intends to start generating revenue next year. How it will do that remains to be seen: Twitter lets people send 140-character bursts of text to a list of friends, telling them where they are and what they’re doing at any given moment. That’s it. That’s the whole idea. Like Levchin, who was a cofounder of PayPal, Dorsey says others will suffer in this downturn, but not him. “It’s going to be painful,” he says. “There’s going to be a lot of fallout.” Some of that fallout might involve the dozens of firms that make software that works with Twitter. There are also loads of companies doing some or all of what Twitter is trying to do, including Tumblr, Publr, Chatterous, Posterous, Yammer, Streem, Pownce, Spoink and Plurk.”
Here are my thoughts on this:
1. The “we’re pre-revenue” attitude is exactly what will kill Twitter. You guys have been around for a couple of years now. You’ve built a good user base. You’re no longer a start up. Twitter is the perfect example of bay area corporate liberalism at its worst: We can give it away for free and become millionaires by making someone else with real brains try to figure out how to turn our crap (read: app, ajax thing, widgit, feature, etc.) into cash. That truly is “web two dot over”.
The big guys with deep pockets no longer want to try to figure out a revenue model for you after they pay you hundreds of millions or even billions for your eyeballs. Those days are over. Go ask the Google guys if the YouTube acquisition is meeting expectations. It isn’t. So you’ll need to figure out a revenue model, Mr. Dorsey.
2. Twitter might have a lot of money but it won’t last for ever. Even so, Businesses Ideas like Twitter don’t require a lot of overhead to manage and they are growing now based off the sheer number of users they’re on-boarding via word of mouth.
3. Still, if Twitter hasn’t figured it out by now they probably will never figure out a real ad model. Even if they did, ad revenue is going to take a serious plunge next year and won’t recover for a very long time (I predict five years). I don’t think Twitter has enough money to make it but they might be counting on an acquisiton. Again, see #1.
4. All the other “me too” Twitter knock offs are done for, but micro-blogging is a cool idea and someone has to make it work. I’ve been playing with the Facebook status updates and I think its a lot of fun. Plus there are tons of cool marketing uses for micro-blogging.
5. The game is over. The gig is up. Twitter has no choice. They must figure out a real business model or they will eventually die as well.
So, if Twitter is going to be forced to figure out how to make money then what should they do? Here’s an idea and why they won’t do it:
Twitter should evolve into a paid SaaS platform for private group SMS. So, for example, a school could use the Twitter platform to send opt-in, private messages to parents, staff, and students. A city could use Twitter to send emergency messages to their townspeople. An HR group could use Twitter to send out important short messages to their employee base (contrary to popular belief a lot of people now ignore emails but most read their SMS’s). A group of political activist could use Twitter to communicate activities and news to private Twitter group members. Movie studios could use it to send short updates about upcoming film and video releases. The list goes on and on.
No, its not an original idea. Yes, there are several companies already trying to do this. But why not enter the fray, Twitter? Its a revenue model that supports your free micro-blogging system. You already have the technology, you already have something of a brand, and you have cash on hand to build this business. Start in San Francisco and sell all your buddies on the platform. Sell to your current users. They’re already using (and love) the free system. How hard is it to get them to buy the platform for their companies? Come on! Its a freaking lay down! It will spread from there just like your free system did and you’ll make tons of cash.
The point is that Twitter could evolve into a useful paid platform and they would never have to worry about how to “monetize” through ads, which is a dead idea. Governments, businesses and other NPO’s would simply pay an access fee to use the platform as another channel to privately communicate with their Twitter groups.
So why won’t they do this? Because it takes real work. Its hard. Trust me, I know. I’ve been a VP of sales and/or marketing and/or business development in three different software platform companies. Let me tell you, this is where you separate the men from the boys. This is where the rubber hits the road…hard. Its blood, sweat, and lots of tears. It costs a lot of money. Hiring the right sales and marketing people is expensive and tricky. SaaS requires a support team. Start up B2B software has got to be one of the hardest models there is but the upside is huge. Just ask the Marc Benioff and the people at Salesforce.com. You Twitter guys already have a huge head start.
I’ve said the following before but I think its important to say it here again:
I know MBA school is joke to some Web 2.0 types, but how about coming up with a real idea that has a real revenue model and adds real value? Wow, what a concept!
More and more I am convinced that success in business comes down to these three things:
1. Build a process (not a business) around quality lead + closer + high margin product and you will achieve success.
2. You must always be moving forward. If you have too many days where you take two steps back instead of two steps forward then you’re done (think execution)!
3. You must find a way to measure and track results and then you must improve on those results. You really can’t know if you’re taking two steps forward if you’re not tracking results
Web 2.0 was a party that went way too late into the night. Now its time to get out of bed - even though you’re way hung over - and get a real job.
General comment on “Web 2 dot over”: History repeats itself. It’s too bad the deep pockets forgot the lessons of the dot com crash and are financing businesses with no real business! So sad!
I like your idea for Twitter. It needs to be better organized for business use than SMS stream of conciousness to hit mainstream, but it’s a good idea nonetheless!
Left by Scott on 10/13/2008Hello Chris.
Thanks for the write-up and revenue ideas. We have a lot of ideas around revenue and feel the best ones emerge from the network itself. We’ve come across a few of those and are working diligently to make them a reality. As with anything though, these models only make sense if they have a mass behind them. Growth must be a focus. The best models also inspire growth. And that’s where we’re going.
Jack.
Left by Jack Dorsey on 10/13/2008Jack:
Thanks for checking out my post. I agree, you need mass but it seems to me that you have developed a great user base. That user base is ready to pay for your product as a platform SMS tool. I believe that you should use this base as a lead generation source for a paid platform. Use what you have to your advantage. The market will respond favorably.
Left by Chris Knudsen on 10/13/2008