Twitter: I can be profitable, I swear
Jan 12, 2011
Twitter's struggle to become profitable and Wall Street's skepticism about its revenue potential despite its impact on social interaction and millions of users.
Of all the social interaction tools, probably Twitter is the most impactful in terms of behavior. It made people able to definitely stay connected to each other all the time (whether this is a good thing is another problem...). However, unlike other social initiatives that have exploded fantastically, Twitter still has a doubt about it from Wall Street (which is, in fact, who runs the world): how can it turn into a money-making machine like Google and Facebook? Last week, an important attempt came to light, albeit belatedly.
The feature launched by Twitter last week basically allows advertisers (not all, only a group of advertisers chosen at this initial stage), who can buy ads via browser with a credit card, as reported by Peter Kafka from AllThingsD. It is unlikely that Twitter would disappear if this did not happen, but the irrational dynamics of the business world could condemn the microblog to deflate like a cake without yeast in some time. Translation: it doesn't matter if it caused the Arab Spring, if it helped promote the riots in London and if it greatly increases the surveillance on what politicians do. If it doesn't make money, it disappears.
And can Twitter make money? Probably. It's hard to imagine that with 380 million users, the tool could fail to be profitable, but WS demands exponential and growing profits. If a few million dollars make up a sum that the vast majority of people will never have, it's little for the appetite of investors waiting for the IPO of companies like Twitter. Valued at US$8 billion, Biz Stone's company needs to prove itself profitable equivalent to the 380 million users it has.
The answer is "it is not known". Do a search for "Twitter Business Model" and find out that the market and the digital world in general have no idea. Even when Jack Dorsey talks about "happy chance" for Twitter's business model, it's a poetic license imbued with wishful thinking. Twitter delivers 250 billion interactions ("tweets") per day, because the tool is simple and versatile, and therefore, it makes it difficult to create platforms that can be sold.
Nova Spivack wrote some time ago that Twitter should charge heavy users for its API. He even made some revenue projections for the solution. I don't have the arrogance to face a mythical opinion maker like Spivack, but the impression I have is that if the solution was this, it would have been taken, because it is quite obvious. Twitter needs to find a way to embed in its tool a platform that can be easily sold, deliverable and, more relevant than anything, does not annoy the user. The challenge is around programming, but also has to do with how Twitter behaves as a media company. Among the many companies whose IPO gains great attention, Twitter's is the one that most deserves general attention because of its public utility. Let's wait and see.