Beyond Yahoo and the “What is Yahoo?” question, the other “billion” dollar question frequently discussed in the business press is “What is Twitter’s business model?” To be honest, a simple answer to that question does not exist.
A new flurry of articles sprang up after Twitter announced in late June that Twitter will soon have “stricter guidelines” around how much latitude independent developers will have to build applications on top of Twitter (e.g., its API). At the same time, LinkedIn announced it no longer had permission to include Twitter streams inside of the social network (click here for more detail from Reuters).
In sum, it appears Twitter is on the move to towards an “advertising” dominant model as they clamp-down on how and where Twitter’s content – the stream of Tweets – is viewed by users (e.g., controlling the where the eyeballs see Tweets). Twitter’s 140 million monthly active users collectively publish 400 million Tweets daily and CEO Dick Costolo believes Twitter will have a $1 billon dollar ad business by 2014.
Recently, I listened to John Gruber’s “The Talk Show” podcast (from approximately the 28:00 to the 1:03:00 min mark – click here) with guest Dan Frommer and they dumped a healthy hump of skepticism on this strategy (click here for Dan Frommer’s detailed commentary on his blog SplatF).
While Twitter is just 6 years young, the pressure is on for Twitter to develop a sustainable business model. For the past 18 to 24 months, the leaders at Twitter still have not convinced any of their constituents (e.g., the business press, advertisers, geek professors like myself, etc) that they have a business model that is both scalable and sustainable. I expect to see more announcements/refinements from Twitter by year’s end.
Something to think about today…
Associate Professor of Marketing
Stillman School of Business
Seton Hall University