Curious Case Of Twitter Revenue Generation

The way twitter has evolved is fabulous and worth a praise. They became mainstream in a year or two. The aspect we are going to explore in this article is much talked “Twitter Revenue Model”. When everyone in internet business considers advertising as the biggest source of revenue, twitter chose it’s own path. Twitter grew exponentially because of the ease of use and innovative idea of social communication. Twitter recently raised funds at $1 Billion valuation. Web evangelist Robert Scoble went ahead saying Twitter is underhyped and is probably worth five to 10 billion dollars. Let’s dive deeper in to the cash piles and find pearls of wisdom.

Little Bit “About Twitter”

Twitter is a free microblogging service that enables its users to send and read messages in less then 140 characters per message. It founded in 2006 by Jack Dorsey with two other colleagues Evan Williams and Biz Stone. Headquartered in San Fransisco, Twitter actually came out of Obvious Corp’s venture Odeo where Jack worked. Eventually Twitter was formed as an independent entity Twitter, Inc. That’s enough for history lessons. Let’s move to economy class.

Twitter’s Growth And Lack Of Revenue Plans!!!

Twitter has 18 million users as of 2009, reported by eMarketer. And that’s a 200% increase over 2008 numbers. Unique visitors to twitter.com is around 21 million as reported by Nielsen. Enough numbers for revenue generation!! Probably it is for any hot new startup. And same was the case with twitter, but the road block was to What Should Be The Revenue Model? Twitter founders are not a big fan of banner or contextual advertising in particular. Though they don’t hate advertising as cited by co-founder Biz Stone in the blog post. But to continue operations, any business needs cash and twitter was no exception. Most obvious option was to serve advertising in user’s Twitter feed stream. To that Stone replied “Are we going to end up pissing them off?” Other options were to show ads in search results as well as “freemium” model where paid users won’t see any advertisement.

So Where’s The Twitter’s Cash Pot Exactly?

Ultimately twitter founders found two ways (at least) to monetize the service. The first was the deals between Twitter-Google and Twitter-Microsoft(Bing). The deals were to allow the use of tweet streams to show up on Google and Bing search results – The holy grail of Real-time search!! Real time search is quite a buzz word and it means enable searching of real time events and information available on the internet. What’s a better mean other than to tap twitter’s tweet stream for real time search on both the leading search engines. And it’s been said that twitter made lot of money by making those deals, though exact numbers are still a mystery.
The other way of revenue generation is also quite unique. Corporations paying money to use specialized premium services of twitter to stay in touch with their customers and increase their sales. Much talked case of Dell making $6.5 million in sales through twitter. Look at this Dell on Twitter page. Dell makes exclusive discounts for their followers of @DellOutlet on twitter. Ok, that’s another story. But the purport is twitter now has one proven business model to generate revenue without annoying end users with clutter of contextual or banner ads. How this premium model for businesses work? Read the excerpt below from the twitter blog post,

The feature we are beta testing is called ‘Contributors‘ – it enables users to engage in more authentic conversations with businesses by allowing those organizations to manage multiple contributors to their account. The feature appends the contributor’s username to the tweet byline, making the business to consumer communication more personal; e.g. if @Twitter invites @Biz to tweet on its behalf, then a tweet from @Twitter would include @Biz in the byline so that users know more about the real people behind organizations.

What’s The Conclusion Then?

Looking at the growth of twitter and how they devised revenue generation models without compromising user experience, one thing I can note is, they always thought of users and not the money. They made excellent yet simple service and parted themselves from greed of easy money – which they could have earned with in-content advertising. They showed patients for growth and love for the users. Any hot yet new startup should consider following twitter path. Case ends!!

Image Credit: TheNextWeb

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