Twitter Business Model Questioned

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In the Wall Street Journal this morning (subscription required), the explosive growth of Twitter (noun) and the rise of twittering (verb) has stressed the founders and operations staff of the VC-backed California company. With recent rounds of financing valuing the company at $255 million, there doesn't seem to be any downside for the 45-person operation.
I've been twittering too, but rather rarely - like when I remember to do so. Even still, I've managed to gather 47 followers in about as many days.

The problem that the Journal highlights is that the company has no monetary model, no method for monetization, no staff with the goal to develop the monetization model and no discussions about how and when to figure that question out... and according to the Journal, the founders Biz Stone and Evan Williams don't seem worried about that either.

It's a rarified throwback to the early days of Google and Yahoo! and Netscape before that when all you had to do was focus on executing and scaling the technology - the money will flow later - or so the VCs were told. And many bought into that approach, but sooner or later there was a piper to pay. In the case of Netscape it killed the company and in the case of Google and Yahoo! it worked quite smoothly, because the revenue model was a tangential component of exposing search users to ads along the same lines as their search requests.

How micro-blogging can be monetized is another question. Our recent report on business usage of Twitter, gives a few insights into how business people are using the service, but the revenue-generating applications are a little sparce right now.

Maybe, there are intranet applications of Twitter for help desk support among colleagues or for senior executives. The company however would need to restrict access to the tweets to only employees...

• Imagine a Twitter dialog - 'how do I reset my voicemail password?' 'http://www.resetyourpasswordhere.com' 'thanks'. Sort of a chat-blog hybrid.
• Imagine a Twitter notice from your boss - 'just finished the latest ppt. Pls review.' 'ok.' Sort of a real-time email reinforcer.

Sadly, in both these examples, I can do the same with IM.

There are no links between what I'm tweeting about and advertising (and even then they'd be really, really hard for an algorithm to figure out in 140 characters). A subscription service will kill participation - $5/month for 10 followers/followees, $500/month for unlimited followers/followees? Yuk.

What if Twitter is a fad like PointCast? Then the valuation and business model won't matter because it'll eventually be replaced as features of other services. I bet a subscription service will kill participation - $5/month for 10 followers/followees, $500/month for unlimited followers/followees?