The Times runs a piece today citing a media analyst at Sanford Bernstein claiming:
…monetizing Twitter “would be difficult at best and likely unsuccessful.” People who sign up for free services tend to resent a company for trying to wring revenue from the business later. Subscription fees are out of the question, they said, and advertising-based revenues don’t seem to have yielded enough cash flow to make a Web 2.0 property viable.
I agree about one thing – building ad platforms like Tweetsense will be difficult. But nothing valuable is ever easy. Adwords was not easy. Overture was not easy. What Facebook is building is not easy. And TweetSense won’t be easy.
But that’s the point, isn’t it? If it was easy, everyone would do it.
To be entirely clear, Twitter has at least three major potential revenue streams.
1. Tweetsense – AdWords and AdSense like platform for Twitter. This has major scale potential.
2. Branded licensing. This is stuff like Stocktwits, where Twitter could promote and perhaps gets licensing fees.
3. SMS/carriers – deals with carriers to split revenue driven by mobile tweeting.
And there are plenty more.
Analysts who write stuff like this are clearly not thinking very hard about the potential of services like Twitter, nor do they understand the appetite for risk the venture capitalists backing such ideas have. Check this quote:
“Whoever buys Twitter, they wrote, “will likely have to operate it at a loss in perpetuity, or until the next cool Web 2.0 social networking concept comes along and Twitter tweets no more.”
Utterly ridiculous on so many fronts it’s hard for me to summon the energy to refute it. The idea of the tweet as the query, the idea of brands wanting to have a commercial “response” to searches (and tweets) on Twitter, these are not small ideas. The idea of real time search, conversational and social search, real time “AdWords” – these are not minor new wrinkles. They are here to stay. Twitter is a very promising service directly in the center of these trends, trends the “analysts” at Sanford Bernstein clearly do not grasp.
That’s why people like that, the so-called “Analyst” will never understand the true power of twitter
Am=n analyst handed me an article on Twitter yesterday. It was almost a year old! No clue.
I call them chicken-little pundits. It’s easy to say that someone will fail. It’s hard to innovate, sustain, and win.
Twitter has TOO MANY options. See http:/twitter.tearn.com They are HOT. Same with Facebook. What path they choose dictates their future success.
That said, it’s true for any web venture – whether started with $50 million funding or the sweat equity of a savvy entrepreneur.
Stay the course and ignore these analysts/pundits.
“and there are plenty more”
Building value that Twitter may not have to monitize directly. Though this can be a blind hope for too many companies (we’re building value that we have to be acquired to unlock), that’s almost certainly not the case for Twitter.
An example that I’ve heard Tim Draper use is HotMail. HotMail couldn’t directly monitize its users to the extent that another company could unlock their value. Some people said Microsoft paid too much for them, but it was really a bargain. MicroSoft got more value from advertising against all those captive users (and what buying that advertising would have cost) than it paid to buy the company.
There are many different kinds of value that Twitter is building, and it’s doing it at a very low cost. Brilliant.
John,
I agree! Most analysts (I’d say @jowyang is the rare exception) watch from the sidelines. Otherwise, they’d be entrepreneurs/marketers/content creators.
With Twitter, people are voluntarily broadcasting what they’re thinking and what they want. If that’s not valuable, I don’t know what is.
Yes, it’s exciting, it’s important, and all those eyeballs have tremendous potential (and I use it regularly too – it’s how I found this post). But switching costs are so low (hmmm, how long did it take to switch my primary professional contacts from LinkedIn to Facebook? a few minutes?), until Twitter _proves_ it has a viable business model, I think it makes complete sense to question its future.
Sure, because it has traffic, the _potential_ is there for a viable business model. But, as you state in your post, “Tweetsense” is going to be difficult to pull off, and everything else I’ve heard discussed (Stocktwits, etc) isn’t “Twitter” but rather things that are somewhat (or a lot) different than the incredibly clean and simple user experience that defines Twitter today.
In comparing the Twitter situation to the Google situation, I think you’ve made the case that Twitter is like the web, not like Google itself. Has anyone made money *being* “the web”? We’re all making money *using* the web, or *transporting* the web, or *hosting* web sites. But the web itself is some kind of “Open Source for Hosting” phenom.
Glad you’ve articulated what I was waving my hands about when I read that article. Yes, utterly ridiculous, and transparent too. I see these silly predictions clothed in ‘net jargon as lame attempts to be able to say “I said it first,” at some future point when things unfold in a way that can be spun back to this “prediction.” So, they have a plan, it’s just not a very good one. What I wonder is, how do they fail to become deeply interested in this complex cultural transition we’re steering?
Personally, I have moved on to amplifying instead of merely twittering. I think twitter has been too slow to respond to spam issues, and it’s now beginning to look like they’ve missed the boat.
Note that you cannot simply delete accounts by hand (which was their rather lame attempt at controlling the issue) — that sill not scale well. You need to be little smarter than that.
I don’t know if amplify ( http://amplify.com ) will be able to scale better than twitter – but I now find twitter is overrun with bots and apps that make the stream look more and more like a Google SERP day by day….
:S nmw
You’re missing the point. The analyst is talking about Google or Yahoo buying Twitter. They aren’t predicting failure but assessing the likelihood of a company like Google or Yahoo making a good investment out of a purchase of Twitter:
“nor do they understand the appetite for risk the venture capitalists backing such ideas have”
Are they venture capitalists? Do shareholders want to see them spend $1B on Twitter in the hopes that they can monetize it? I hope not. Leave it to the venture capitalists.
@DJChan: “They are HOT”… right. buy whats hot – that’s proven to be a great strategy. That’s a recipe for making shareholder value disappear.
i am glad he thinks that john because i so badly want to show him and others that it can be done and it will be done.
Fred,
How do you think it is going to be done. I think what the analyst is saying is that sure you will have your exit but turning a communications service into a profitable sustainable business isn’t that easy. I actually would like you, spark or one of the Twitter backers to write about their business model and not just theorize about it in interviews.
don’t get me wrong, i love twitter and would want nothing more than @ev and @biz to be super successful. But lets get some details now. Fair enough?
Cheer Cheer on this post. Right on the money John. Best line of the post..
“Utterly ridiculous on so many fronts it’s hard for me to summon the energy to refute it.”
Twitter has a big opportunity in front of them and it’s the real deal. I’ll be posting something on SiliconAngle.com shortly but their message on their web page echos my thoughts months ago when the notion that no business model existed. They have one for sure and it’s looking good.
Spectator vs.”The Man in the Arena.”
I’ve written about start-ups, started my own, and working for a start-up.
It’s ORDERS of magnitude easier to write about a start-up than it is to start one and successfully or otherwise turn it into a true business.
“there ain’t no statues erected for a skeptic”
Om:
Here you go! Tony brought back the goods from Twitter this afternoon:
http://twitter.com/zappos/status/1351016995
This reflects a fundamental difficulty with Internet monetization in general… Twitter is a wonderful concept and like many similar attractive functions, it’s actually a fairly simple concept.
As such, it’s easily duplicated with some variation (e.g. amplify mentioned above).
This is to some extent counter-balanced by a natural tendency for a stable congregation to form around a particular (or simply first) iteration of such a concept.
Which, in turn is often pulled down when it tries to monetize by anything other than advertising… the value of which is directly tied to usage statistics…
It’s like trying to monetize snowballs in Switzerland…
As such, while advertising opportunities are great and should never be neglected…
Let’s all kneel down and praise the models that don’t completely depend on advertising in one form or another!
Speaking of which… that’s why my humble startup, while expecting great opportunity from advertising… won’t depend on it!
Of course, a profit making model ultimately owned by the User base is fairly atypical and results from its unique ability to straddle the profit and non-profit worlds.
By the way, would have been an interesting (and more useful to both the Donor and P&G) opportunity for that T-Shirt promotion mentioned a few posts ago which I’d be happy to lay out for any interested.
Chagora & Civilization Systems
John,
I think you are wrong on this one. Twitter is glorified text messaging and will go the way of roller-blades, breakdancing and parachute pants. There will be a following, but the public interest will wane in a few years.
Yes, I believe Twitter is a fad. That does not mean it is not neat-o, nor does that mean I am not a fan of social media. I’m a big believer in the space.
I would love to be proven wrong. I think those guys have a great gimmick and should sell as fast as humanly possible.
Best,
John
Peachtree Media Advisors, Inc.
With Twitter, people are voluntarily broadcasting what they’re thinking and what they want. If that’s not valuable, I don’t know what is.Yeah.
John — way to go, dead on right. Your theory often applies to corporate america too. With everyone so focused on getting through next week’s sales rewsults, there lacks a burning need to truly innovate. Ther is less need to think three steps ahead, but rather, make it through the quarter.
That is business for you, there are risks to be taken, they just don’t understand this concept.
Yes, there is gold in this database of intentions and desires.
Yes, there is capital in social capital.
Yes, there is a market for attention.
How will it be mined?
I suspect the miners know but are not yet ready to show you the road map to their goldmine.
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@om malik should follow up on the request he made of @fred wilson
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Twitter
and Facebook are being used increasingly today by internet marketers! And the
result of it has been of humongous importance to the marketing field. So this
completely negates these views of the analysts!