A business plan for Twitter

There are a lot of Twitter experts out there.  You can tell who they are because they say so on their profile pages.  Many take jobs as research and insight analysts at major corporations and major publications.  Presumable these appointments are made largely on the strength of a persons profile page.  It’s a pity that few of them can actually grasp a salient or thoughtful business plan for Twitter to make some money.

Most of them scrape towards advertising as the source of revenue.  They are probably right, at least partly.  But often they then fall at the first fence by indicating that ads in the side of the page will be the solution.  Or perhaps messages in-between tweets (ala Spotify) will be the solution.  The first is not a good business model.  The majority of serious Twitter users do not use Twitters web pages to access the service, so that’s a no go.  The second is perhaps feasible as it would provide a method for some clever targeting.  But it would also kill the service.

Social network users are fickle beings.  Thus far, the average shelf-life of a social network seems not to be more than a few years.  Friends Reunited was big news for a time, but now its back up for sale at a loss of over £100 million.  MySpace and Bebo were both purchased for large sums not so long ago, but they are already looking at decline in the face of newer rivals, such as Facebook.

Being in the social networking game is a fickle business.  The answer for Twitter is simple.  Get out of the social networking genre.  There is a free web service, with mass enduring appeal which seems to making a few bucks in a business genre which Twitter might also be able to occupy.  It’s called Google.

Twitter should be Google’s biggest threat.  For me, if there is one big flaw in Google’s machinery its speed.  Google is frankly slow when it comes to updating its search results.  They have made moves to address this with services like Google News, but for the main body of a search, the rate at which things change is slow.  What Twitter does, which Google struggles with, is real-time search.  And Google makes more than $10 billion a year from its advertising services, a figure which eclipses even the most optimistic Facebook revenue estimates.

If I want to know who has mentioned the word “elearning” in the last 10 minutes on Twitter, I can get that information presented to me on a single page.  And that page of information will update every time someone else says my keyword.  Twitter users are pretty good at collectively creating a method to identify topics which are “trending”; that is those terms which are being posted a lot at a given point in time.  Typically users will create a hashtag which they mark their post with in order to have it appear on a page with everyone else Tweet in the same genre.

Take the recent TED event in Oxford.  The hashtag “#TED” was used to highlight any Tweet that was connected to the event.  Then all the Tweets with the hashtag “#TED” can be made to appear on a single page.  So if I want to know the very latest, second by second happenings of the TED event, I could access the page that listed all #TED tweets and read away.  I could even keep that page open all day and watch the latest information stream in as it happened.

Now link this to Google’s main source of income; AdWords.  With AdWords users pay to have their advert come up at the side of the normal search results.  The adverts that displayed are not banners which have nothing to do with anything, they are very targeted at the keyword(s) I have searched for.  And they are bid on by the advertisers, competing against each other for top position.  The market sets the price.

So now we have an opportunity where, by using an AdWords type system, Twitter users could be served targeted, relevant text based ads, based on hashtags or keywords.  Take the #TED event.  I could be an Oxford restauranter, only a few minutes walk away from the conference and I’ve got a lunch time deal on.  It would be well worth the money for me to pay for a text advert to appear on the #TED trending page.  But I could be more savvy than that.  I know I’m going to make my money at lunchtime, so maybe from 11am till 1pm, I increase my trend word bid to 50p per click through.  I make sure that anyone who is watching the #TED trends and is in Oxford will see that my restaurant is doing a deal for lunch and it’s just around the corner.

This is taking targeted advertising to a new level.  Real-time offers so much power to advertisers as they are not bidding so much on the keyword, but on the keyword at a moment in time.  You can even go as far as saving your adverts until your keyword reaches a certain trend level – not until loads of people are talking about your subject do you wade in.

There remains a problem with this approach, largely because Twitter has dug itself a little hole with just how open it’s been.  There are a massive range of tools out there which users can access to see trending information.  Twitter has the advantage if it wants to take it.   By setting its own search engine as the default, the majority of people will probably use it, regardless of the adverts.  If the advertising is done well it would almost be beneficial to users to have it there.  But there will remain a percentage of users accessing the information from 3rd party apps, like TweetDeck.

TweetDeck makes the whole Twitter experience a joy from my point of view.  Without it, Twitter is barely worth the hassle.  If some of the millions Twitter raised isn’t used to buy TweetDeck, it’s a crime.  But Twitter does need to do something to get these apps under control.  I love the openness, but not even Google, those of “don’t be evil” fame, give away the farm.  There probably isn’t a lot Twitter can do about this now as its API is already out there.  But perhaps its time to look at “premium” partners, whose products Twitter promotes and endorses.  These partners would need to pay a licensing fee to get this status.  But that licensing fee could come as a percentage of the advert revenue they help to generate.  So we could be using TweetDeck for our trending topics, but as it also puts in the trending advertisements, TweetDeck splits the revenue generated from these with Twitter.

So now Twitter is making other 3rd party developers rich.  I’ve always been a big believer in this technique as a business plan: If you can create a product which makes other people rich, it will sell.  Apple is currently rinsing the iPhone application world in exactly this manner.

Twitter is also a bigger advertisement draw than other social networking sites in my opinion.  Twitter users seem to be of a different demographic to their Facebook/MySpace/Bebo counterparts.  Namely, Twitter users tend to be older, professional types.  These are people with money, unlike the majority of other social networking users.

Those who say that getting money out of a social network is tricky are right.  It is.  But what they aren’t recognising is Twitter’s ability outside of this closely defined genre.  Twitter shouldn’t compete with Facebook, it should be taking on Google.  And that is frankly somewhat more exciting.

*UPDATE*  Since I wrote this piece a few days ago Twitter has launched its new homepage.  It is quite focussed on trending topics with the tagline “Popular topics by the minute, day and week”.  Could this be the first move…

  1. #1 by Patricia at September 14th, 2009

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