Capping IT Off
As Tim Sears nicely points out on his blog: Twitter has no business model and has survived on venture capital funding only since their inception in 2006. According to this recent news item, Twitter has yet again managed to secure another S20 million.
Many of us are probably wondering how much longer the inevitable can be postponed: Twitter will charge their users for rendered services. They will have to come up with a clever plan.
On the lastest episode (151) of the Cranky Geeks podcast, John C. Dvorak also remarks on this and says that he thinks that at some point Twitter will probably charge you for using the API, which would mean that users would have to pay for every tweet they send through Twitter desktop clients (like Twhirl and TweetDeck) and mobile clients (like TwitterBerry and PocketTweets). Sounds like a plausible option, but the viability of that plan will depend on how much users value their ability to tweet whenever and where ever they like.
That’s the main question here isn’t it? What is Twitter worth to its users? Where, in terms of cost per tweet lies the pain threshold? We do accept that text messages sent from our cell phones cost up to 20 $cents per message in the US and up to 50 Euro cents in Europe, and yet we text our brains out.
It’s just a hunch, but I suspect that applying the texting/SMS model to Twitter will make Twitter a lot less lively. People will be far less forthcoming with their thoughts, ideas and hints than they are now. To me, that would make Twitter a lot less attractive.
On the other hand, the overall quality of the tweets will probably increase. So we are looking for the exact balance. Have people pay too much and Twitter will effectively suffocate and extinguish or have people pay too little and Twitter will effectively have no stable source of revenue and eventually extinguish.
Another option is applying the Ad model. But what would that look like? Will Twitter then polute your tweet box with targetted ads based on the content of your tweets and the content of the tweets of people you follow? As with the texting/SMS model, there is a balance between what is acceptable and unacceptable for the Twitter user. In this respect, Twitter should have a good look at popular Twitter accounts that have +10.000 followers, because these are obvious targets for Ads. They could perhaps apply Google’s AdSense model and have the owners of these acounts earn some money from advertizing as well.
For performance reasons, Twitter has already put a cap on the amount of people you can follow. There might be money in that area too. Twitter could create levels of subscriptions, where they start charging subscription fees above the level of basic subscription where you can only follow, say, 500 people max.
I believe that it is inevitable that Twitter will need to come up with some sort of business model to sustain itself. It’ll probably be a mixture of the above options.
What do you think?
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totally agree mark and i am willing to pay for it. you could also have a model of 5 dollar per month for unlimited tweets, or 2 dollar extra if you want to connect with an external client
as i said many times before on twitter, perhaps it’s not such a stupid idea that one day tweets might replace sms and become a first class citizen on cellphones
Thanks Lee. I am not too sure if I would be willing to pay for Twitter, but then again, I am Dutch.
I would accept a certain level of advertising though, as long as the ads are not intrusive. I wouldn’t mind receiving sponsored tweets, as long as they are relevant. Google manages to do that on their search page. I don’t see why Twitter couldn’t do something similar. What I would NOT like is something like this: “this tweet was made possible by [logo of company]“
Most of tweets that I do, I do through SMS, so I already pay for using twitter. I guess many would not mind paying and many many more would want it for free and would not mind getting ads in return. Twitter’s usage spectrum ranging from banal to useful and so it perhaps would have a hybrid business model.
Thanks Guarav. Good point. Didn’t think of that myself. So its the telcos that are making money off Twitter. Conclusion: Twitter should strike deals with mobile telcos.
as i said, make tweets a first class citizen on mobile phones :-)
Nice post, I think you raise an interesting point about charging for lifting the follow cap. That would be helpful without penalizing casual users.
To all twitter users who retweeted my initial tweet about this post: thank you!
While I agree that Twitter needs to come up with some sort of business model that provides it with a revenue stream, I think it will prove a shortlived venture if it tries to charge for its services.
I would be amazed if the vast majority of twitter users were prepared to stump up money for the privilege. Corporations and marketeers might pay to use, but then they’d find their target audience dwindling away.
Sell the API? Perhaps too late for that – and the bad press surrounding the implementation of such a beast when so much free Twitter software exists, would not reflect well on the brand.
It’s a bad time to even contemplate it – and it’s soooo dull and predictable – but advertising is the obvious route out of the revenue dilemma. Maybe coupled with an option to buy an ad-free user license.
Remove free tweets and you could be left with a handful of 2.0 consultants sending gibberish URLs to one another – and otherwise just virtual tumbleweed blowing through a once-thriving social network.
Thanks Tim. Yes, advertising indeed seems to be the only plausible route for Twitter. What could work is applying the AdSense model.