Monday, January 07, 2008

Twitter will figure it out

Fred Wilson a venture capitalist from New York, is an early stage investor in a an upstart social media company called Twitter.

For the blissfully unaware Twitter has been the subject of much debate in the tech community as of late because no one can really figure out how they will make money long term. They are a company that launched without a business model and are hoping that somewhere along the way they will figure out how to make money. I think they will.

Twitter is a service that allows users to deliver quick messages (tweets) to the community of people who follow that particular user. The tweets can be delivered in various ways. It is catchy because in addition to it being incredibly easy to use it is kind of fun. It is stream of consciousness micro blogging. It is also a lot more.

How do you monetize it?

Well the first thing they can do is make it a "freemium" service like Yahoo or countless others. It is free for the basic service, but if you want more complicated features, it costs X dollars a month/year.

Advertising. Web ad spending is expected to double between now and 2011. If this is true it means a LOT of new potential revenue for a company like Twitter to capture and they have interesting ways they can do it. Basic text ads attached to tweets and contextual advertising (Google-ish) based on tweet content are two very simple and possible ways that Twitter could start generating some significant advertising revenue.

Here is something I consider more interesting. They could partner with communities that already exist and brand their service to those communities. ESPN tweeting customized score updates through the twitter engine with the ESPN branding and Twitter collecting revenue from ESPN each time. ESPN pays the freight, they give an interesting service to their fans, and the brands expand. I know there are similar sports services out there already, but you can apply to any business, especially some that DON'T already have services like that. I know there is interest, because at my company we have already talked about trying to do something with Twitter. I also made a suggestion to a friend who works for a daytime talk show and he was intrigued about some possible ways to put Twitter to use.

None of these ideas even touch on the potential monetization of Twitter's open API which allow other applications to be developed on the Twitter engine. Twitter is a relatively young company and look at all these different applications that have been built!! Pretty impressive stuff.

Good social media tools become good marketing tools and end up being profitable marketing tools as long as they have good management, technology and support backing them up. I believe there are some smart people working on the monetization of Twitter and they will figure it out. I spent 20 minutes working on it and look what I came up with.

No 1 of Consequence

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