
Twitter VC Laughs at the Idea that Twitter Has No Business Model - mcxx
http://www.readwriteweb.com/archives/twitter_vc_laughs_at_the_idea.php
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patio11
Were you expecting him to say:

"Actually, Twitter has no business model, and their mindshare will evaporate
as soon as they start charging. We're truly boned, and our only hope of
profitably exiting this deal is to unload it on a bigger sucker. Sadly the big
suckers are hurting for money at the moment, and unlikely to try running
another major site as a public utility, which is annoying because despite the
fact that the web part is nearly free those SMS charges for 180 character
messages are nearly killing us. So basically we have to keep up a facade to
justify our valuation per user of about $75, which is about equivalent to the
present value of, say, a WoW player, despite the fact that they have proven
their willingness to pay money every month, are intensely engaged with the
service, and have low churn rates -- absolutely none of which we can boast of.
Oh, God, somebody please hand me a martini."

?

~~~
ivankirigin
They don't have to charge per user to make money. The customer support aspect
is already huge, and each brand would pay to get better tools to reach their
customers. That's just one obvious application.

~~~
patio11
_They don't have to charge per user to make money._

They really do, actually. The only thing your proposal changes from my
analysis is what pocket the money comes out of.

A Twitter account simply doesn't have $75 of economic value, to anybody -- and
they need that to be true of every man, woman, child, and bot on the service.
You can dice that $75 into $5 from Tropicana and $10 from BoA and $10 from
Slicehost and... if you want. Is keeping a single marginally more happy worth
$10 to BoA, when a phone call would only cost them $8, a chat on their website
costs them about $1.50, and the average value of the free checking account
that the disproportionately young and poor Twitter audience carries is only
about $100 a year (mostly in overdraft fees which, haha, guess what they're
probably complaining on Twitter about)? [Edit to add: $8 and $1.50 are numbers
from a non-bank company who I was a CSR for, circa 2000, for response from a
human in North America.]

I actually wrote that jab about the overdraft fees before realizing, hey, why
not check to see if my assumptions are accurate.

<http://search.twitter.com/search?q=bank+of+america>

[Closing my Bank of America BOA account tomorrow due to being hounded to sign
up for a credit card I don't want/need & because of their fees.]

[Watching "Bank of America: Bad for America" VERY compelling
<http://tinyurl.com/bujr38>]

[really hates Bank of America. Probably the sorriest excuse for a banking
institution. Ever.]

Can you see the director of marketing just salivating over the opportunity to
pay $10 to tweet these people? "I suppose I could be buying a click from
AdWords on the keyword [i am a rich man looking for a credit card], but why
use a scalable way to reach great customers when I could use a labor-intensive
way to reach poor ones!" I'm not seeing it.

I'm also not seeing Twitter users putting up with automated and outsourced
tweets, which are an _absolute requirement_ if it is going to be used as
anything but a toy for customer service.

@boacustomer: You just mentioned BoA in a tweet. Can we help you with
anything?

@boacustomer: Thank you sirs i am truly regretful that you had a disfortunate
experience with the bank. Can I be helping you today?

~~~
callmeed
I'm going to argue your point that Twitter users are poor or an undesirable
demographic.

According to Aug '08 Hitwise data: \- 63% male \- 57% from California \- 25.9%
35-44 year olds \- 14.7% "stable career" type (young, metro areas) \- 12.3%
"young cosmopolitan" (40-somethings, income > $250k)

I'm not an advertising expert, but some of those seem to be desirable
demographics.

You're example of searching for BofA also doesn't make sense to me. If I
worked for BofA, I wouldn't buy AdWords on my own name–if someone is already
searching for me, they know who I am.

For every BofA complaint, you can probably also find someone looking for a new
bank (or complaining about WaMu, Citi, Wells Fargo):

<http://twitter.com/AliciaSkimbit/statuses/1265772120>

<http://twitter.com/JoDuxbury/statuses/1252926236>

The business model may not look just like AdWords, but I definitely think it's
there.

------
markessien
Twitter can monetize anytime. They have a huge number of options, because the
size of the userbase makes it possible. Even silly things will work.

For example, let's say it costs $1 to write a twit that snoop dogg will
actually see. A percentage of his fans will do so. Spread that across the
thousands of people who have a huge number of fans, and you already have a
revenue stream. Combine with a number of other things, and it here will all
become quite profitable.

~~~
TomOfTTB
This is the same faulty logic that's killed hundreds of web startups during
both the web booms.

Massive user base does not autotmatically translate into profit. In fact, what
a massive user base does do is to create so much cost in running the service
that it's hard to find a way to make a profit.

Twitter's already $55 million dollars down which shows just how much it costs
to run the service. So even if every one of Snoop Dogg's 25,000 followers were
willing to pay a dollar (unlikely) and Twitter got all the profit from it the
money wouldn't make a dent in the cost of running such a massive operation.

~~~
siong1987
Do you have any example that web startups which had massive user base died
during the web boom?

But, I don't think that I have to show any startup example which had a lot of
money but died during the web boom, right?

~~~
whacked_new
Lycos maybe? Excite? Go.com? (hit or miss)

------
vaksel
So why haven't they implemented it already? If its something so genius, what
are they waiting for?

~~~
markessien
For such widespread adoption, that people have to continue to use it, no
matter what the option is. Pay sites grow slower than free sites. Twitter has
money in the bank, so it can afford to stay free for a while, thus growing. So
when it's big already, it starts monetizing. If it starts monetizing too
early, growth will slow.

~~~
pjhyett
That's a ridiculous notion, though. If not paying for the service still allows
you to do everything twitter provides save for a small subset of features, it
doesn't prevent folks from joining and seeing the value of it.

Being afraid to generate revenue before hitting critical mass sets this silly
precedent that you can't flip the switch until you reach a mythical number of
users.

I'm not saying Twitter couldn't make a bunch of money, but for every YouTube
and Twitter waiting to hit it big, there are 1000's of companies thinking this
is a viable solution to their problems and failing because of it.

~~~
tonystubblebine
So the negative effect of Twitter not having a publicly announced business is
felt primarily by other companies, companies that aren't able to think for
themselves?

I'm not sure I buy that. There are plenty of companies, like your own, that
understand what their business needs. And there are always going to be plenty
of other companies that behave like sheep. If it wasn't Twitter, they'd find
some other trend to misapply.

------
smidwap
The web these days is full of applications that do cool things but don't
provide a hint of value to end-users that makes it worthwhile to pay. One
suggested option for Twitter to monetize on was charging for premium
membership ([http://calacanis.com/2008/01/02/the-three-business-models-
th...](http://calacanis.com/2008/01/02/the-three-business-models-that-make-
twitter-a-billion-dollar-bus)), the one option so far that seems to be in line
with traditional business models: provide a service that people are willing to
pay for. The blog post suggests 1-5% of users might subscribe to some kind of
premium membership...I think more along the lines of 1-5% of active users,
which drastically cuts the number of potential subscribers down. Bottom line:
advertising might be Twitter's only hope, but I predict limited success (in
the long-run) unless Twitter finds a way to produce a service they can put a
price tag on.

