The value of Twitter
Everybody has an opinion about Twitter. Robert Scoble thinks it’s great, but those smarties over at the Economist’s Free Exchange blog think it’s going nowhere.
For the longest time nobody thought Facebook was going to make any money, but now they’re cash flow positive. It’s also important to remember that Google was not profitable for some time after it’s launch as well.
I’m in the “Twitter is going to be a success” camp. I think the risks they face are organizational more than anything else. Their product is great if they can just do the right things to keep it growing and make money off of it. I’ll try and convince you that it’s a viable business in the rest of this post.
Real time search - I think this has been a bit over-hyped but it bears repeating. Twitter lowers the bar for content creation and as such, get access to a wealth of information that Google, as yet, cannot see. Blogs will report things, but tweets will come faster. Moreover, tweets will tell you more quickly what things are useful as people tweet links to articles faster than bloggers will post links to other blog posts.
The impact of this is that two types of content: information too geographically isolated to be caught by blogs and information too fresh for blogs won’t make it into Google’s results, but will into Twitter’s search results.
It’s unclear whether Twitter has the tech to do the real time search ranking in-house or whether they’ll just license the firehose API that exposes all tweets in real time to Google/Bing, but it’s certainly a valuable resource.
CRM - People tweet about their experiences with businesses, good and bad. Tweets feel very personal and immediate, so there’s an opportunity for businesses to respond to concerns raised on Twitter and earn customers’ incredibly valuable good will. In practice, this means that businesses need tools to track tweets and reply easily.
As with search, it’s unclear whether Twitter will build their own tools in-house or just license to third parties. Either way, it’s clear there is value to be given there. Personal responses from companies are valuable and hard to come by. Verified accounts are the beginning of Twitter’s interactions with businesses and if you believe Scoble’s account, there is a lot more to come on that front.
Ads - This is the basic webby thing to do, but you can’t just put ads on a page an expect to get rich. The reason Google is so successful is that doing a search for “30 GB Hard drive” is a really good indication that I’m interested in buying a hard drive, so seeing a link then is valuable.
Some tweets are similar. Once I tweeted about how the battery on my Dell laptop had died. In reply, one battery company tweeted at me suggesting that I check out their website for a replacement. Twitter could be slightly smarter about this; an ad could appear just above my tweet automatically based on key words or phrases — searches are less than 140 characters and Google seems to do a good job figuring it out.
It’s true that the vast majority of tweets aren’t monetizable — bits of celebrities’ lives aren’t incredibly interesting — but many searches aren’t monetizable either. The key thing is scale. If Twitter manages to continue expanding at an extremely rapid pace, they have a real shot at becoming a brilliantly successful business.
It’s not obvious that they’ll make the most of what they have, but what Twitter has is incredibly valuable to a lot of people. I believe the doubters will be proven wrong.
