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.
That'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.