Where Twitter Went Wrong

May 8th, 2009 § 8 Comments

Twitter is the third most popular social media network with something like 6 million unique visitors a month. It’s all over the media, used by celebrities and normal folk alike and really seems to be the next big thing. According to the Wikipedia article, Twitter has secured tens of millions of dollars in venture funding and the company could be worth up to $150 million.

So Twitter Makes Loads Of Money, Right?

Wrong. Twitter may have had over $50 million in venture capital sunk into it, but it does not make meaningful revenue. In fact, according to the previous link, Twitter has only just hired someone to think about what services Twitter could charge for.

Possible Revenue Streams

Twitter could sell advertising on user home pages or through Twitter search. They’re currently improving the search feature so this looks like a strong possibility. Putting adverts on the homepage when users aren’t used to them could create a backlash however, at least amongst those users who haven’t fully bought into the service.

The number of monetisation options is limited because people are used to Twitter being a free, slimmed down service. There aren’t exactly many features to upgrade and limiting usage now would seem unfair. Maybe the founders didn’t expect Twitter to take off in such a big way (and who could have foreseen 6 million users?) but I get the feeling they didn’t really think about monetising the service at all.

Where Twitter Went Wrong

People have come to expect social networks to be free, so Twitter had to offer a free service. They could however have stuck advertising on it from the start to bring in a trickle of revenue and acclimatise users to the ads. If the advertising increases it does so by degrees and doesn’t seem like such an intrusion. On the other hand, Twitter could have offered premium accounts for users who want an ad-free site. If the premium account fee were low enough a fair percentage of users would be willing to pay it.

They could also have limited the usage to, say, 50 friends, with an option to upgrade to an unlimited account for a yearly fee. This is the model that Flickr use and it works pretty well for them.

Twitter’s problem is, the boat has sailed and with it the opportunity to monetise every single user on the site. They may find themselves relying on secondary revenue from search ads – that is, potential secondary revenue – good luck getting that venture funding back….


§ 8 Responses to Where Twitter Went Wrong

  • Griff says:

    A great post. I suspect that Twitter is a fad that will fade away. It already filling up with SEO teams and other companies using it as a sales forum. At best it will become a kind of RSS feed for opt-in advertising and fact snippets. Joe Bloggs however will get bored and move on. I give it 12 months (assuming they don’t go bust and/or get bought by Google)

  • Good post Zoe and a point everyone seems to have missed in all the Twitter excitement. The big offers have come and gone, it may now be a case of those previous suitors turning into vultures circling the ever weakening body of Twitter until the last breath of life escapes it.

    Then they swoop in with a very small ‘rescue’ offer and get what they were after for less.

  • Matthew Oxley says:

    I suspect they were of the ‘Let’s build it first, and worry about monetization later’ school of thought.

    What about a share of revenue from those using devices?

  • EnglishFolkfan says:

    Where Twitter does work is for those of us who don’t do IM and find Facebook too cludgy & messy to use. OK I have a small follow/follower base but that’s through choice and it links me with those important contacts & information feeds.

    Twitter is a simple clean format which appeals to the ‘silver surfer’ not requiring umtee gongs & whistles!

  • admin says:

    @Griff it does seem to be full of SEOs and marketers, but then it’s a fantastic platform for companies to reach individuals on a more personal level. You could be right about Joe Bloggs getting bored though!

    @Matthew – do you mean mobile etc? That could be a revenue stream but I don’t know how many people use Twitter that way (probably quite a lot). The trouble is, people are used to using it for free so it’s another example of trying to claw back money from people who already expect it for free.

    @Stuart It’s incredible the amount of money that Twitter has secured – can you see them getting it all back? I struggle to…!

    @EnglishFolkfan I think you’re right – Twitter is so slimmed-down it appeals to a certain audience. Maybe that’s the sort of person who would have paid for a premium account if they had the chance?

  • Sean Fleming says:

    While it’s hard to disagree with the logic of what you say, I can think of worse problems to be faced with.

    It’s extremely likely that the plan all along has been to grow it fast and sell it to some big corporation or other, and let them figure out how to make Twitter pay its way.

    The number of “Twitter’s not for sale” stories and press speculation that the likes of Apple & Google may buy it are evidence of some very switched on thinking going on behind the scenes. Those stories don’t end up in the press by accident.

    It’s extremely unlikely, after all, that the VCs who’ve put $50M into Twitter would have done so without an exit strategy.

    I hope to one day go as spectacularly wrong as Twitter.

  • admin says:

    @Sean I see your point – fair play to them if they manage to exit with enough money to buy an island. I wonder, if that’s their strategy, why they’re waiting so long. The longer they wait, and the longer Twitter doesn’t make money, the more likely it is to become a toxic asset. Big companies like Yahoo and Google have already been burned by acquisitions that fail – it’s hard to see one of them risking a buy out without a firm plan for monetisation.

  • Sean Fleming says:

    I guess only time will tell! 🙂

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