Monday, 13 October 2008

Good digital idea - show me the money: Twitter.

Just in case you don't know, here's the simple answer to what is Twitter:

What are you doing?

It's none of your fucking business is not the reaction of two million users worldwide. However, they aren't yet making any money....which is the business of the people who stumped up $15million to get it flying. And in the current climate, pressure must be on for a return.
Here's Slate on it all.

Tweeter Pan
By chadwick.matlin
Created 10/08/2008 - 1:14pm
For months, tech writers have marveled at
Twitter [1]'s quirky success. One-hundred and forty characters at a time, the company has brought in more than 2 million users [2], 2 million monthly page views [3], and $15 million in venture capital [4]. Especially in the last few months, the microblogging, instant-messaging, social-networking platform has gone mainstream.
As Twitter has made the leap to the masses, a fundamental, quantitative question has
started [5] to [6] percolate [2] among technoscribes: How the hell is Twitter going to make money? Behind that query, though, is another that often goes unasked in today's Silicon Valley: Does Twitter even want to make money in the first place? Or is it all peer pressure?
Plenty of people have played armchair CFO and tried to graft a business model onto the service. The advice: Twitter should
start using banner ads [7] (as they already do in Japan [8]), charge for pro accounts [7] that guarantee uninterrupted service, insert text ads midfeed [9] a la Facebook, and/or sell data to advertisers so they can narrowcast ads based on what you and friends are Tweeting about (a tactic that social networks employ [10]). That's not all-the Twitterverse, blogosphere, and mainstream media have plenty of other pearls of wisdom to share.
Through all the noise, Twitter has made it clear that it's in no rush to start making money. Co-founder
Evan Williams told TechCrunch [11] last month that Twitter has "thought about" its revenue model, but that "it's not actively in development right now." Williams floats a few ideas about how to monetize, but they're sketchy. He suggested similarly murky ideas in 2007 [5], but the company hasn't moved forward with its revenue model since then.
Twitter gets the revenue question so often, it devotes part of its
press room FAQ [12] to the monetization question:
Twitter has many appealing opportunities for generating revenue but we are holding off on implementation for now because we don't want to distract ourselves from the more important work at hand which is to create a compelling service and great user experience for millions of people around the world.
The Big Money interviewed
Biz Stone [13], another Twitter co-founder, who recently told Portfolio [14] that focusing on a revenue stream would be "a distraction." We wanted to know whether this was all an act, whether Twitter was really just keeping plans close to the vest. So: How often do folks sit down to talk about a revenue model. Once a week? Once a month? It's never discussed, Stone said.
Why not? Because Twitter, according to Stone, still isn't "sustainable." Stone used the S-word as an excuse repeatedly during our chat, as if it were a safety blanket made out of chainmail. Twitter wants to have both a sustainable product and business plan before it starts to capitalize on its community. The product bit makes some sense-for months Twitter's service had been plagued with glitches. But
Twitter's servers have been performing relatively well [15] for the last few months, so maybe sustainability has been achieved.
Stone's other comment—that Twitter needed a sustainable business model—was more troublesome. Here, sustainability entails finding revenue without alienating current or future users, a common refrain among Web 2.0 folk. Facebook's ill-fated Beacon advertising platform
failed while trying to find that balance [16]. Williams told Download Squad [5], "Our top concern when it comes to monetization will be to do so in a way that does not negatively impact users." So instead of experimenting with a business model that might accomplish that goal, Twitter's founders continue to lounge within the comfortable status quo.
There may be a deeper, psychological reason that Twitter can't follow the dollar. It may have a Peter Pan complex-it just doesn't want to grow up. Pan ultimately chooses Never Never Land because he is worried about the pains adulthood will invite into his life. For now, Twitter is choosing to do the same.
Because Twitter is so resolute in its nonmonetization, it has earned a certain amount of respect among tech entrepreneurs. They're the champions of an improbable and absurd scenario: Imagine, a company restricts its users' self-expression, builds a global community, and raises millions of dollars. It's impressive enough that somebody actually pulled it off. Even more impressive, though, would be if the geniuses who gamed the system then chose not to reap the monetary benefits. It's a brand of asceticism one can find only in Silicon Valley, and even there only in selected pockets.
It wouldn't be the end of the Internet economy if Twitter chose to go Craigslist's route and
operated as a nonprofit disguised as a for-profit [17]. But it can't. In order to get to where it is today, the site had to raise money from venture capitalists—$15.1 million [18] worth. In exchange for the booster shot, the investors demand a considerable return on investment. That means Twitter is going to actually have to try to make some money at some point. Also of note: To get the venture capitalists onboard, Twitter's leaders presumably had to show some type of business plan, so we assume somebody, somewhere, is doing some (private) thinking about monetization.
So, Twitter's dilemma has taken the shape of an
Ouroboros [19]. The soul of the site is still rooted in the community ethos of the idyllic Web. Trying to make money off the service, they fear, will alienate the community and rob the service of its plucky aura. But in order to build the best product possible, it needs investment capital. And with investors comes a responsibility to turn a profit (whether by revenue or a buyout). But turning a profit means monetizing the community. And monetizing the community means stripping the aura. Around and around we go.
I asked Stone whether the two forces-idealism and capitalism-are mutually exclusive. He assured me they were not and that there's a way to live within both worlds. Google, of course, is the shining example of a tech company that has figured out how to straddle the boundary. For now, though, Stone and Twitter are firmly rooted in only one, too comfortable to try and find that happy medium. Some friendly, parental advice: It's tough to grow up without taking a few leaps of faith.

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