Twitter's Ad-Free Future: Paid Tools and Services Instead

Twitter's management cleared up some of the mystery surrounding how the life-casting social networking site will make money. And it's a novel idea: instead of chasing down advertising revenues, Twitter will sell itself through tools and services for pro-users.

TwitterThat's in line with some hints Twitter made a month ago, but it's at odds with recent speculation, and it bucks the trend that nearly every single start-up website follows. Biz Stone, Twitter's co-founder, told Reuters, "There are a few reasons why we're not pursuing advertising--one is it's just not quite as interesting to us." Ads could annoy Twitterers, he says, highlighting that the company has no staff "who know anything about advertising or work in advertising."

The idea is that professional users may be interested in buying services similar to what Stone dubbed "lightweight analytics" and possibly paying for membership of a verified commercial account directory--a way of avoiding fake company spam. Twitter is also working with cellphone carriers to make sure the service is 100% compatible, and it's possible that some revenue sharing agreements with the networks may be in the pipeline.

The boldness of Stone's words suggest he's rather confident that the company can monetize its operations via the tools and services route. But does it make sense? The company is sitting on a substantial cash pile from its venture capital backers, and likely has the luxury to carefully choose how it proceeds. Given that the online advertising industry has been in serious trouble during the economic slowdown, choosing advertising as a main revenue earning strand may not be such a sensible idea.

For sure, operation costs for Twitter must be pretty minimal, mainly covering servers, net fees, hardware and software, and staff. But to make significant profits, it's going to have to sell a heck of a lot of tools and services to its pro-users. And those tools had better deliver real value for money to professional Twitter users, to make them attractive.

[via Reuters

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6 Comments

  • Felix Desroches

    I wonder if the business model makes more sense when viewed within the context of a longer time horizon. Sure, Twitter will never make ends meet in the next few years with this plan, but if it hangs around for close to a decade (or more), there's no telling how much money could be generated...

  • Emeri Gent [Em]

    All this tells me is that Fred Wilson was right all along with his belief "freemium". From the view of the man on the street (purely thinking out aloud) why would I personally care how big all these digital dinosaurs get?

    It is a bit like Victorian era people wondering how good a new Queen Victoria would be for colonialism. I don't have anything against these new emerging digital empires because it gives me a toy to play with, but a concept such as "freemium" isn't simply about the rich getting richer, but it forces power users to go lateral, which means flow their attention into areas of the web where dams of attention hold back streams of consciousness .

    I think your twitter was instructive to me where you used the phrase "reader". I totally agree with you that readers should not be insulting but personally, if you referred to me as a "reader", IMHO it is a term that comes from a master-server relationship, if I am truly interactive, then we are both thinkers.

    In anycase I have decided today that this is my last online comment here, these comments have become a pointless exercise personally for me and IMHO being nomadic is going to serve as a better use of my time/resource. I am retiring into my little world where I don't want people reading me - and I will remain their until of course the rent of "freemium" becomes the new reality. I think you are a very good writer but write with the paranoid not the paranoia :-)

    e.g., Power Users
    [Em]

  • Heather Gardner

    I use twitter as an everyday business tool... with all the new Twit's signing up daily, Twitter will be able to charge for premium user services to Twit-addicts like me ;-)

    --
    Heather Gardner
    Blogger * Social Media Maven * Recruiter
    www.heathergardner.com

  • Kit Eaton

    @Josh. There's a whole cottage industry growing up around Twitter. I particularly like the way my desktop Twitter client is free, but has embedded ads. Someone's making money, at least.
    @Akky. Interesting--I didn't know that.

  • Akky AKIMOTO

    Twitter introduced on-page advertisement for a year in Japan and it was bought by decent companies including Toyota.

  • Josh Jeffryes

    Twitter users depend on 3rd parties to get the most out of Twitter. All Twitter has to do is add better versions of those tools directly to Twitter.

    And they always have the option of cutting off all of those 3rd party tools, making their paid tools the only option.