Why Does Twitter's Business Model Matter to You?

That’s a real question, not a rhetorical one.

In a Radar post I wrote last week about whether Twitter’s user base was hitting a critical inflection point, the first comment was, “How does Twitter make money?” Although the post wasn’t about Twitter’s business model per se, a lot of the comments were. Which wasn’t too surprising, given that many people seem to care intensely about how Twitter will make money (it doesn’t do so yet).

Twitter could make money in a number of ways, from selling data to selling services (it recently posted an ad for a Business Product Manager, calling the role “Twitter’s first product manager focused on revenue generation” and then describing a product that sounds like competition for Yammer and Present.ly). Indeed, Blog posts and articles speculate constantly, and comments around the Web range from curious to seemingly angry that Twitter is not yet generating serious cash. Some of the discussion is constructive, but a lot of it is pretty hostile toward Twitter.

I can understand the argument that people who build services on the Twitter API want assurance that the company will be around for the long haul. But that point rarely comes up in stories or comments, and I suspect it’s not fueling the fire.

So, if you’re among those who care: why does Twitter’s business model matter to you?

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  • http://www.fiftybyfifty.com/lifeoffarhan/ Farhan Lalji

    My guess is the audience is filled with wannabe entrepreneurs and investors who are curious to see how the company will survive or how the investors will get a substantial return on their investment without a business model.

    Think its partially due to the first bubble as well, people are scared that some .com’s haven’t learnt that sales is vanity, profits are sanity and cash is reality.

    Not me though I love twitter!

  • http://basiscraft.com Thomas Lord

    Twitter’s business model matters to me because it reflects (and implements) how the investment class views and treats engineering. If they will invest in engineering skills only insofar as to implement abusive, or dangerous, or otherwise undesirable technologies then that is a problem.

    -t

  • http://www.5o9inc.com Peter Cranstone

    You wrote: Twitter could make money in a number of ways…

    Correct – all I ask is it pick one and start making money. The speculation is simply amazing. Everyone has an idea and yet there seems to no action taken on actually making money.

    Perhaps the better question is this “How can Twitter make measurable, sustainable, profitable revenue from volume?”.

    The answer should require no more than 140 characters.

    Cheers,

    Peter

  • rick

    Short answer? It doesn’t. As a user of the service I’d like it to survive, but if it doesn’t I’ll live just fine.

    More ambiguous answer? It’s curiosity. Once something gets this much traction it’s more than a prototype. They’ve obviously tapped into something that people like… but to survive they need, at some point, to generate revenue. Can that be done without detroying what people love about Twitter? (*cough* magpie). Is there even a business model? Not every activity has one, after all. And if there is a model that supports Twitter while retaining its nature, might that point out something that we’ve not thought of?

  • http://twitter.com/sarahm Sarah Milstein

    Peter, it sounds like it’s important to you that they start making money. I’m curious: why do you care? I mean, lots of people are talking about how Twitter can generate revenue from volume or otherwise (see some of the post’s links). But I’m interested in why people other than employees of and investors in the company are so concerned about the Twitter business model.

  • http://www.sanative.net TJ Downes

    Personally anytime i write an application dependent on another API I want to know how they are going to pay to keep their service running. Otherwise I am wasting someone’s money building something that in the end may be fail.

    Secondly, it’s interesting to me to see how many interesting companies can grow to the size they are without a business model. Is that the new business model? Create something, if it becomes wildly popular then figure out how to monetize it? Overall, for me, it’s a curiosity factor because it amazes me that so many companies are still stuck to the DotCom 1.0 mindset, which has already proven to be a failed methodology.

  • http://waxy.org/ Andy Baio

    A clear path to profit is an assurance that a service that we love won’t be forced to make concessions that hurt the community. They won’t be forced to be acquired, do desperate partnerships, or rebrand the site with McGriddles everywhere.

  • http://stubbleblog.com Tony Stubblebine

    Rick, when you say “all you ask,” do you mean that if you only had one request to make of Twitter, you’d ask them to pick a business model?

    I have a hard time understanding why that would be at the top of the list for any Twitter user. Looking at immediate wants, I want them to continue to be stable and I want them to continue to battle spammers.

    Long term, I want them to do what they’re already doing, but on a much larger scale. Everything that I value about Twitter, keeping up with buzz about my company and keeping connected with friends, gets better as they get bigger.

    There are a number of immediate business opportunities that undermine my longterm want for Twitter. The Facebook rumor today is a good example. So would taking the Yammer route. Pretty much the only thing I need to know about their business model is that one exists that they can tap before their sources of funding run out.

    Beyond survival, there’s nothing about their revenue that should matter to users. We’re all benefiting from their focus on growth. If the employees and investors get rich with that approach, great. And if they’re missing a massive opportunity, then too bad for them.

  • http://www.140char.com Dan Thornton

    From a personal point of view, I’d like Twitter to successfully monetise simply because I’ve built a lot of good relationships on the service, and don’t want to face losing any if I have to migrate elsewhere.

    But Twitter itself? I hope and suspect that microblogging has now reached the point where the value has been proven to a critical mass of people – and if Twitter fails to monetise, we’ll see a migration to identi.ca, Plurk, Jaiku etc – eventually one will find the right mechanism! Whether Twitter continues to lead or not is, for me, a similar conversation to whether Facebook will continue to lead – either way, microblogging and social networking are here to stay as just two elements of human interaction.

  • http://www.tonx.org t o n x

    I think for people who love the internet and still hold to some utopian-flavored idealism about the future of the web, twitter failing would feel like real blow.

    A service that is as successful and popular with its users as twitter should enjoy some path to survival… I think we hope for an ecosystem that supports conservation of novelty in the expanding electronic frontier.

  • http://www.jasoncrawford.org Jason Crawford

    To second Rick and Farhan, I’ll put in a vote for “curiosity”. I’m a business geek; I like to think about this stuff. Just as my tech-geek side looks at a program or service and says, “how do they implement that?” or “how would they make this scale 10x?”, my business-geek side looks at startups and asks, “do they have the right product concept?” or “what’s their best revenue model?”

    Also, to second Rick again, I’m a user of the service; I find it entertaining and informative. It would be nice if it survives.

  • bowerbird

    um… twitter is us sending messages to ourselves, right?

    and we presumably could continue sending messages to us
    even if twitter doesn’t eventually prove as profitable, right?

    or is there some special sauce in their servers or something?

    -bowerbird

    p.s. i once had an idea to monetize party conversations…
    i thought i was gonna get rich. ended up just too drunk to

  • http://basiscraft.com Thomas Lord

    Bowerbird:

    Perhaps between us and other readers here we can prove your point? Here’s a thought:

    Write and distribute a free software (GPL) twitter replacement that runs on, say, Amazons “cloud” services. The tricky bit is to arrange a kind of “group pay” for the cloud slices so that people can lay out a few bucks per annum or agree to receive ads or have a corporate sponsor or some mix….

    Extra points if the revised protocol doesn’t “privilege” any particular owned host — if it’s really very “P2P”.

    -t

  • http://www.groovie.org/ Ben Bangert

    I’m already finding twitter annoying. It’s missing features I’m starting to realize it doesn’t have (mainly from using Yammer).

    For example, I want twitter groups, cause there’s some things I only want my friends to see, and some things that I’m fine broadcasting to the general public. There’s things I want people in a specific group (say a company) to see as well, so I’d add a seperate group for them too.

    Flickr sort of has this, but isn’t smart enough to make it arbitrary groups, so you have just a ‘Friends’ and just a ‘Family’ group, which is weak. I’d really like to make both photos, and tweets available to specific groups of friends or family (my family, vs my wife’s family, vs the entire extended family, etc).

    Despite all this time twitter has been around, new features have been mostly non-existent as they struggle to get reliable. Meanwhile, at this rate, the twitter service is on its way to being a ‘my first app’ with web framework XXX.

    So in the end, twitters business model doesn’t matter to me. If they disappear, I have no doubt a replacement will pop-up. Hopefully one that adds some of these rather useful features.

  • John H

    Twitter has already backed off from services it wasn’t able to afford any more (for example, SMS alerts in Europe).

    My totally selfish hope is that they start earning money so that they can provide those services again.

    That said, I don’t see how. Who’s going to pay for those SMSs to me, if it’s not (indirectly) me.

  • http://www.thewavingcat.com Peter Bihr

    I’d go with Dan’s answer: It’s not necessarily important to me that Twitter makes money per se, but I’d like it to stay around for awhile because I’ve built a lot of relationships there that I’d hate to lose. If they can stay around with no money, I’d be fine with that, too ;)

    That said, if there is an easy way to move to an open service like identica/laconica and take my network there, I wouldn’t say no either…

  • Richard Peck

    Why does Twitter’s business model matter to me?

    1. Twitter is useful. It’s a continuously flowing stream of information about information (assuming you are following @timoreilly and others, not just “Had donuts this a.m.” posts). It is, in a phrase I first heard from Tim 15 years ago, “meta-information”: info about info.

    2. Twitter must ultimately make money to exist. If that’s user subscription fees, at the moment it’s one of a few sites I’d pay to use.

    3. The right business model will make Twitter a better Twitter. Instead of user fees, continue to build info volume by keeping use free, while mining the information stream they’ve generated (e.g., one of the directions in the posted Business Product Manager job description they’ve posted). More use = more info to mine = more useful info products available from Twitter.

    4. Multiple business models will make Twitter a stronger Twitter. Offer custom research, based on a more robust version of http://tinyurl.com/2eqxad or something like it. Info volume (many users) is a prerequisite. But searches like “wine & distributor” or “restaurant & economy” were interesting snapshots for me this a.m.

    Four reasons what Twitter’s business model matters.

  • Richard Peck

    Umm . . . “Four reasons _why_” in concluding line, previous post. Typing too fast.

  • http://www.sastwingees.org rajagopal sukumar

    As an avid twitterer i could say because i need it to survive. But that is not the reason.

    As an observer of business strategy/models, it is extremely interesting to see how twitter can convert itself into a money-making operation.

    I hope they figure it out quickly.

  • http://www.qubesystems.com Greg

    Since I originally posed the question “How does Twitter make money?” I feel some obligation in clarifying my motivation. My thinking went something along these lines.

    Many web companies (e.g. Myspace, Plaxo, Linkedin etc) originally started by providing a free service to their users and then bolting on a revenue model when they’d reached a certain critical mass. In nearly all these cases, this backfired spectacularly. It led to accusations of betrayal and even manipulation by a lot of of their users. Many of whom shared large quantities of personal data with these companies without really appreciating how this might be used. Many also wanted to believe that they were part of a community rather than customers and entrepreneurs seemed more than happy to foster this fantasy. Inevitably, disillusionment set in and companies that were once described as “trusted” were now openly vilified.

    Nearly all of this could have been avoided if the users had realised that they were dealing with commercial organisations whose employees had to be paid and whose investors were entitled to a return. Obviously, the sooner a company can publish its revenue model the less likely it is that disillusionment and a mass exodus of disgruntled customers will occur. Indeed, now that the “hype and hysteria” days of the web are over, companies will need to be far more open about how they intend to make money even to reach critical mass. I hope Twitter is a successful company but I have no vested interest in them and I do not use their services.

  • http://xmlhacker.com/ M. David Peterson

    Both Dan and Peter nailed it: For the same reason people freak[ed?] when Twitter went down: No one likes the temporary fail whale much less the idea of a permanent one. Twitter has become an important form of communication for a /ton/ of people. There are relationships, some fairly strong, that I have developed on Twitter in which I would have no clue how to reestablish if Twitter were to suddenly close up shop.

  • http://twitter.com/sarahm Sarah Milstein

    Great comments, everyone. Any thoughts on why a lot of the discussion about Twitter–particularly around their lack of a business model–can be hostile? Is envy of their popularity a factor? Nobody has mentioned that, and I wonder if the buzz generates a kind of automatic counter-buzz.

  • http://laughingmeme.org kellan

    Andy certainly hit on the crux of it. Understanding the long term viability of something we use is important in understanding how we can expect it to live, die, or evolve, how much we can trust it with long lived hopes, or private information.

    Additionally I think people are inerested in *Twitter’s* business model (more so then they are in any other service they use) for several reasons:

    1. It is non-obvious how they’ll make money.

    2. More importantly its very obvious that they’re spending quite a lot of it. Twitter has real costs that most websites don’t. SMS ain’t cheap for one.

    3. Twitter has a history that breeds a certain anxiety about its long term well being. (certainly no other company has built a brand around its downtime pages)

    People focus a lot on #1 and #3 but I think the reason the question comes up so much is really #2.

  • http://shelleysplace.com Shelley

    I agree with kellan.

    I want to see a great tool stay a great tool.

    It is never good to have company without a business plan/model that includes viable income stream to ensure they meet their very real non cloud computing obligations.

  • http://www.uol.com.br Marcos Lavieri

    Sarah, I think that people just want to know what will be the next good idea from the makers of Twitter. The service is proving to be very valuable, but nobody figure out a way to really cover its big expenses.

    For me, it is like a “Graal” effect. If they discover, in those harsh times, a good way to be profitable, maybe they will launch a new concept that everybody will follow.

    Besides that, nobody is really believing in start-ups anymore. So, there is natural curiosity on how those guys will keep up.

    Here in Brazil (I am that guy who talked to you during lunch on Web 2.0 Summit), lots of people and companies are using the service. We don’t have a fever like Obama’s twitter, but the buzz is high. We don’t have much of venture capital available here (not even during the bubble), so we need to figure out how to make money to keep alive…

  • David Berlind

    Hey Sarah:

    Lack of a business model isn’t directly hostile. However, when I hear about the idea of Facebook potentially acquiring Twitter for $500M, the first question that comes to mind is whether FB’s business model will be the proverbial kiss of death to Twitter because of how it might open the window of opportunity for a service like Jaiku.

    I suspect that Jaiku is of more value to Google than Twitter is to Twitter because of the network effect that can Jaiku can contribute to (or take from) which means that to the extent that Twitter might end up commercialized through a Facebook or some other purchase, Google can afford to retain Jaiku’s unadulterated mode somewhat indefinitely. Would people leave in a so-called flight to quality? I guess I doubt it.

    I’ve always felt that I’d be willing to pay about $10, maybe even $20, for some premium services from Twitter. For example, I’d love to be able to hyperlink text. I know this presents issues in certain mediums like SMS. But the amount of linking taking place on Twitter proves that value of being able to hyperlink.

    Also, I might pay for unlimited API executions (versus the curret 100 per 60 minute limit) or smart threading to make it easier to follow a conversation. For example, you can sort of follow a conversation off a root tweet in Twitter Search. But why can’t you do it outside of Twitter Search?

    Oh, here’s the real biggie: I’d pay to be able to claim a #hashtag so that when you went to that hashtag’s home page, I can modify that page the same way I can modify my profile page. For example, for Mashup Camp, we used the hashtag #mashupcamp. I would have paid twitter money to be able to customize the twitter search page of that hashtag.

    Twitter: here, take my money!

    David

  • http://www.csquaredtech.com Donna Snow

    I’m a nearly 45 year old single mom to six kids who runs an IT company in San Jose, CA. I use LinkedIn, Facebook and Twitter.

    I hadn’t planned on jumping on the “social network” bandwagon because I just felt it was silly for a professional woman to “twitter” or post on Facebook. I’ve changed my mind.

    Why? Reconnecting with people I’ve lost touch with and keeping connected with my adult children. The other day my 22 yo daughter who works in Vegas told me, “Mom, you haven’t posted any videos lately, I like to know how everyone is doing at home”. I’ve reconnected with people I lost touch with as I struggled through raising these kids on my own. I’ve learned more from Tim 0′ Reilly and Rick Scoble’s tweets than I think I’ve learned in the last 20 years!

    Do I care about Twitter’s business model? On a personal level, not really, I would hope that they’d find a way to keep this going. On a professional level, sure I’m curious. Would I be willing to pay for it? Possibly

    It’s obvious all sorts of people find this valuable. I only follow those who interest me. The other day I asked an Ubuntu question and wound up with 8 more followers, people I wouldn’t have met through facebook or linkedin alone.

    I’d live through the loss of Twitter but I would be less connected and not nearly as street-smart (some of the twitters that come through just blow me away!) The instantaneousness of Twitter feels like a humongous block party and I’m not ready to go inside yet.

  • http://twitter.com/snowwrite Donna Snow

    David,

    I just read your post, those are some great ideas! Hopefully we keep the “free version” for those of us who love Twitter for the constant brain feeds, things I wouldn’t consider are introduced and lead me to research and learn even more about my industry or society in general.

    As a business owner I’d love to be able to “upgrade”. For example, today I was looking at twitter backs to make my twitter page look more professional and I know there are third party “themes” and branding. But why not do like LiveJournal and charge for the ability to totally and completely customize every aspect of your twitter page?

    Anyway, great response David! Hope twitter is listening!

  • http://twitter.com/sarahm Sarah Milstein

    I agree, Donna, that we’ve got some great ideas and thoughtful comments here. I shot the Twitter guys a note to let them know.

  • http://wraptinweb.blogspot.com Alistair Nicholson

    Why does it matter to me?
    1. I want to know in case I can use the same ideas for social communities I create – the Consulting/Entrepreneurial reason. (First rule of consulting – plagiarise).

    2. I want to know so I feel the service will be around – so why does THAT matter? I can see that comments will appear while I’m writing this so please excuse duplication.

    • Accretion – several pundits have tried to move to other services, but can’t. I follow several ‘gurus’ on Twitter. If one moves to another service they lose many of their followers, because we stay where we are and lose only one of our inputs. Therefore, they come back (except for Dvorak who only talks about Wine on Twitter now(alcoholic not open source)).
    • Investment – there is manifest investment in terms of people that have developed API’s. There is less obvious investment in terms of blogs and articles talking about using social software in business. There is personal investment of time in learning the culture, the personalities, finding souls of like mind and developing relationships. It is really a for of ‘social capital’ that carries real value in our minds and real world effort to acquire. That is why the loss of Twitter would have some devastating effects on people somewhat analogous to the loss of a local school, shopping centre or Bank (but at least we don’t lose the house over Twitter).
    • Opportunity Cost – I see the responses along the lines of ‘we’ll just go somewhere else’. Ultimately that is true, but the build up of a community of choice where we can find every ‘guru’ and friend is not that quick. There will be sorting out, lost experiments (lost social capital), loss of some followers that have been burnt once too often, and contributors that find it all too hard to start again. This lost time as we ‘storm, form and norm’ around a new community is time and relationships lost.
    • Risk – is it worth worrying about? Absolutely as anyone that found their favourite sites disappear overnight in the 2000 crash can testify. Utilities we relied on vanished, so I’m really twitchy now when I can’t reach a site. In the back of my mind is always the question ‘has it gone under’?
    • What is different this time? – The nature of the sites. In 2000 we had more single purpose sites that dealt with data. I, and every prudent user, had our data redundantly backed up – we only lost functionality. Twitter is something else – it is not the software we lose – it is the community and the connections we have built up – social capital with effort and time. There is no glib alternative. We can go to another site with similar functionality – but that is not what Twitter provides – it isn’t the functionality – it is the community connection. That cannot be found on any of the other sites – although we can build it up. Yes, I have a friendfeed and a Jaiku account, and my guess is FF is where we would go today. But the rebuilding of community? Social capital takes time and effort.
  • http://www.brianmcnely.com Brian McNely

    I’ll simply respond by quoting Clay Shirky:

    “For any given piece of software, the question ‘Do the people who like it take care of each other?’ turns out to be a better predictor of success than ‘What’s the business model?’”

    Here Comes Everybody (p. 259)

  • http://techconfidential.com Mary Kathleen Flynn

    Hi Sarah,

    Great question.

    Twitter has become the poster child for what John Borthwick of Betaworks calls “The Now Web.” If Twitter can figure how to make money, it would help to legitimize the whole Now Web social networking/media phenomenon.

    Back in September, Union Square Ventures’ Fred Wilson did a Q&A with me about monetizing Twitter and the Now Web: http://bit.ly/Dqhc

    Here’s my favorite quote from Wilson on the topic:

    “People who can’t wrap their heads around trying to monetize these businesses aren’t trying that hard. It would be naive to assume that the management teams of Twitter or FriendFeed or Disqus don’t have four or five strategies for monetization in their business plans that they are evaluating. Just because people aren’t currently executing a business model doesn’t mean they don’t have two or three they are ready to turn on at the right moment.”

    (Both Union Square and Betaworks have invested in Twitter.)

    Cheers,
    Mary Kathleen Flynn (MKFlynn on Twitter)
    Senior Editor/Senior Video Producer
    The Deal & Tech Confidential
    http://www.thedeal.com/techconfidential/

  • bowerbird

    ben said:
    > For example, I want twitter groups,
    > cause there’s some things I only want my friends to see, and
    > some things that I’m fine broadcasting to the general public.
    > There’s things I want people in a specific group
    > (say a company) to see as well, so I’d add
    > a separate group for them too.

    yes. yes, yes, yes.

    i’m not “hostile” to twitter — they’re so cute and fuzzy and
    incompetent with their popularity, how can you hate them?
    – but i’ve been feeling disenchanted with the overall state
    of cybercommunications in general for a long time, and was
    finally able to articulate it to my fiancee the other evening…
    (thank goodness for that woman… she’s a saint, i tell you.)

    i’m mad at the geeks who let spam ruin e-mail for everyone.
    (spammers can use _your_ e-mail address to send out stuff,
    and if you talk to your provider, they say they cannot stop it.
    why not? why should it be so hard to verify sender status?)

    and now listserves have gone down the tubes the same way,
    abandoned for the big-fish-in-a-small-pond blog platform.
    (we prefer to speak _at_ each other, not _with_ each other…)

    but those aren’t the only reasons why i’m disenchanted…

    we naturally have a ton of different “communication spheres”.

    we communicate with our neighbors about the neighborhood,
    our families about our families, our soccer team about the team,
    our co-workers about the job, our mechanics about the car,
    our friends about where we’re going to tip over cows tonight,
    our book club about the reading we’ve done, and on and on…

    what we really need is a communication infrastructure that can
    figure out who we’re talking to, and direct our communications
    intelligently so that only the relevant parties receive our bursts,
    depending on their own immediate proclivity to _accept_ them.

    now, sure, you could form listserves that would encapsulate all
    of these various and sundry groups, but that’s too hard to do,
    given the lack-of-progress on listserve software over the years,
    especially since all your correspondents would have to do it too.

    besides, the computers should be able to figure this out for us,
    only asking us to _verify_and_confirm_ what it has figured out.

    somehow e-mail and listserves failed to keep up with our needs.
    twitter just exposed a small chink in the armor. we need more…

    -bowerbird

  • http://xmlhacker.com/ M. David Peterson

    You’re doing a good job of keeping the idea and conversation flow moving forward, Sarah. It’s keeping things interesting. Keep it up! :-)

  • http://twitter.com/sarahm Sarah Milstein

    Thanks, M. David! I’ve been so pleased to see this conversation generate such good points and ideas, we should all count ourselves lucky that I didn’t respond to each comment individually. :)

  • http://berkeleyblog.com Tim

    Sarah,

    Just check out the many comments on Rael’s blog https://www.blogger.com/comment.g?blogID=28231212&postID=9038050274843606704 by people who feel totally shafted by his closing down I Want Sandy. People invest a lot of their time, energy and in the case of twitter social cred in these services. As in investors, they want to make sure that their investment will succeed, not fail like I Want Sandy failed for the people who invested their time, energy, suggestions and heart into it.

  • http://twitter.com/mattesgoertz Matt

    Why does Twitter’s business model matter to me?

    -anxiety-

    a transparent (and existing) business model allows me to judge whether i want to use a certain service and thus support the business model or not. is the business model yet to be developed, i might fear that e.g. my data might be misused, tons of ads might turn up, etc.

  • Don Gillis

    Don’t people see twitter as a public good, like a parkland. But this parkland is privately owned.

    If the parkland owner is not able to pay his bills, then he will sell the land to be developed by someone else (read: patent lawyers, and cash cow milking maidens).

    Furthermore, if the parkland owners are too greedy, they would not be able to sell at a reasonable price to those who might operate it as and for the public good.

    Don

  • http://www.Leebow.com Ken Leebow

    Actually, the best question that I heard asked about Twitter: “Is Twitter a just a feature within Facebook?”

    The reality is: With a few changes to the “Ken is” feature of Facebook, you have a better Twitter product. Bye, Bye Twitter.

  • http://twitter.com/sarahm Sarah Milstein

    Don, that’s a really interesting point about the “public good.” A number of years ago, people we’re making a similar argument that Google was going to become akin to a utility. Fascinating that Google’s early approach to their business model–build something very useful and then find a way to profit from it–is the approach Twitter is now taking.

    Ken, while the Facebook status update feature has come to look more and more like Twitter, it’s different in two important regards. First, on Facebook, people have to give each other permission to share updates; on Twitter, the messages are public by default, and anyone can follow anyone else–making for much broader connections. Second, Twitter is set up to be a device-agnostic platform. Although Twitter has had to sideline IM, their model is not nearly as PC-tethered as Facebook’s.

  • Tom Reynolds

    We had discussions like this online in the early days of Q-Link, when it was still Quantum Computer Services. If Jim Kimsey, Marc Serif, Steve Case and company didn’t make Q-Link work as a business then our magic playground was gone.

    Looking back to those days in 1986 and 1987, it’s hard to imagine the giant AOL thing that would result, and all the things that happened as people sought another way other than AOL.

    People who knew that I made my living at Tymnet helping tend the modem pools used to ask when the busy signals would end. I told them it would happen when the online world was big enough to drive new modem installation, instead of living off of the unused night and weekend hours of modem pools installed for business. (Once online services did so, keeping up with the growth of online services was difficult and busy signals happened all over again, but that’s another story.)

    The access infrastructure growth at networking companies that was pushed by what started as Q-Link (all right, Control Video, but that was before my time) meant that when the US was ready to discover the net in large numbers the onramps were already in place. Keeping up was never easy, but it was an essential step in us getting right here, right now.

    Is Twitter going to be an essential stepping stone to the future? I don’t know. All I can say for certain is that if Twitter doesn’t make money, it won’t be part of the future.

  • Michael Sander

    FYI… an Inflection point is when there is stalled growth which shortly results in massive growth or decline.
    http://en.wikipedia.org/wiki/Inflection_point
    I’m not sure thats what you meant.

  • http://www.jonmountjoy.com Jon Mountjoy

    Sarah, I think that much more important than the twitter service, is the *idea* of a twitter service and how that idea has been validated by its uptake. Sure, I wish Twitter every success, but micro-messaging is much more important. That, and my social network – which is sadly still not portable.

    So it doesn’t matter to me that twitter doesn’t have a business model. If twitter fails or succeeds, the idea of twitter will live on (wow, that sounds melodramatic). FriendFeed is right there knocking on the door (though we can argue about complexity vs simplicity and client support), as well as folk like Yammer and others.

  • ReaderX

    I think it deserves to be pointed out that you’re very late to the party, here. People have been talking about Twitters critical inflection point for a year. As well as the business model. Your post is a jane-come-lately and not at all insightful. Please formulate original ideas instead of regurgitating the buzz you read elsewhere. Otherwise, it looks like you don’t know what you’re talking about and that devalues your publications.

    Constructive criticism.

  • http://www.bhmk.com/mariners/steve.htm Steven K. Mariner

    Sarah,

    Twitter’s business model matters to me because I like the service and the concept behind it.

    I won’t rattle off the laundry list of reasons why I like the service — and it IS a long list — but the running theme of many of those reasons is that it has managed to re-personalize the web.

    Forcing brevity means people have to get to the point quickly.

    SMS is going everywhere and more cellular providers are making it either a built-in or cheap add-on to basic service accounts.

    The Where-This-Could-Go factor is HUGE. A few creative ideas have already sprung up and I suspect we’ve just scraped the surface.

    All this goes down the toilet (or at least takes a huge hit below the belt) if Twitter collapses.

    Sure, other services could follow. But Twitter has done something rare, amazing, and wonderful: It tried out a new idea and exploded in popularity. That stuff doesn’t happen every day. Lots of good ideas hum along in our world every day, but truly excelent, game-changing ideas are a lot more rare than the marketing people try to make it sound.

    From about the second or third day actively using the service I wanted to find a way to pay for my account — the desire for durability was THAT strong.

    Mind you, I’m accustomed to singing that song alone. I pay for my shareware, I pay for service accounts like LiveJournal if they let me, etc., and I often find very few other people doing so, opting instead, as they do, to find the “free ride” approach.

    Twitter is different — I’ve seen others echo the sentiment that they’d like to pay for the service. (Wil Wheaton mentions it from time to time, amongst others). I think that’s very telling. People don’t want to lose this. And they’re willing to pay to not lose it.

    The bottom line is I’d miss Twitter if it were gone, and goodwill doesn’t pay the mortage for those who own or work for Twitter.

    Therefore, I have a vested interest in seeing Twitter make money — otherwise I risk losing something which has so amazingly rapidly become very dear to me.

    So I hope they start making money soon.

    - Steve M.

  • Jim

    Personally, how does twitter go about raising millions of investor dollars without a business model in place?

  • Jake

    Why does understanding Twitter’s business model matter?

    Let’s put it this way: NOT asking these questions about Internet start up business models was one of the big reasons for the tech bubble and collapse at the beginning of this decade. Maybe by better understanding how the new batch of companies can be sustained, the industry (of which I am a part) can avoid making the same mistakes this time.

  • MikeeB

    Why do I want to know – because its guys like us (me, if I want to be selfish about it -grin) that are out here struggling to pay developer’s their wages, cover business expenses and still try to push out products to customers – in other words, struggling to make a living, stressing the finances…..

    To see a software product floating around is just driving me nuts… I want to just know how they can afford to keep NOT making money. If I stopped making money, my company would shrivel up and whither away, customers lost, and hurt. I care about my customers so have a difficult time letting that happen – so I stress over it.

    And Twitter isn’t making any money…… sigh

  • Realist

    The reason people are interested in the business model is because without one the service only has a limited life before it goes bust.

    I think therefore real question here is “how can twitter make money and continue to provide a service that I enjoy that I don’t have to pay for”.

    In my opinion, twitter’s model, along with other social networks is ultimately flawed in that they want to provide a service which is free to users and hope that someone else will pay for it. It seems fairly obvious by the fact that messages fall short of SMS limitations by 20 character that one hope is that they can convince mobile operators to provide free SMS services which they can then monetise with tacked on ads.

    Additionally they can use these messages to become an SMS provider for businesses who currently pay mobile networks to deliver their messages. Whilst some networks may currently be dumb enough to provide free messaging in the hope that it gives them some good PR it wont be long before the smarter ones realise that it’s eating into their own business and that they’re effectively funding a competitor.

    There’s a perfectly good way for twitter to make money and that’s to charge users a perfectly acceptable rate to subscribe to the service or to receive SMS alerts. If enough people enjoy the service sufficiently then they’ll pay for it. If not and they don’t think it’s worth paying for then it wasn’t that good in the first place and it will run it’s course.

    Right now there’s a choice of social networking sites that people can flit to and from according to the latest fad and because it costs nothing. One day someone smart enough and brave enough will charge people to use their service. Once this happens there will be no value in it any more for the spammers and scammers who are currently getting a free ride and users will be more tied to it because they’ve not only invested time but also money in building up their social network and wont wish to lose it.

  • http://www.all-famous-quotes.com/ Rich

    AND THE SECRET IS…TWITTER IS MAKING MONEY.

    With an Alexa ranking of 38, i.e. the 38th biggest website world wide, they may (or may not) be making money right now, but the potential is absolutely massive.

    They could add a single google adsense ad per page and make good money. The ‘how can we make money outta-this’ question is however no doubt in discussion right now, and as a business and multiple website owner, I would LOVE to be in their position.

    Give me traffic and I will find out how to make money.

    The whole concept of their site is another discussion altogether. Aren’t we busy enough with life already to keep up with ‘Tweeting’ several times a day?

    It’s just a fad, i don’t think it will last.

    P.S. OK, apparently they are not making money, I wonder what they would sell it to me for!!!