BusinessWeek has a great article that is bound to be very popular – The Trouble With Twitter.
The article points out real issues with the service which doesn’t seem to have a business model (GigaOm posited that maybe they bought one in With Summize, Twitter To Buy A Clue). Everyone has an idea about a business model for Twitter and the article regurgitates the same old ones – advertising.
It also makes some rough calculations like a true dot-com financial projection sheet in an executive summary – except that there was a glaring mistake.
In calculating the potential revenue from advertising on Twitter, the article based ad impressions on Twitter’s users seeing 10 ads per day. The problem is that so many people are using Twitter without going to Twitter – they can send and receive messages via SMS on their phone, or even use other services to send tweets.
How do you generate revenue from advertising if the people using your service don’t need to come there and see the advertising?
Easy – sell something direct to users (I know, web startups don’t seem to like this proven business model).
Twitter has the following options:
(1) Offer Users Value-added Services – Worpress already does this and the model is easy to adapt. Their blog software is free but you can purchase add-ons. I am sure that Twitter can come up with value-added services users will want.
(2) Charge marketers/brands/advertisers to use Twitter – I pay a monthly fee to manage my email list through a provider (most programs charge per user or by the quantity of messages). Zappos uses Twitter, see Inc. magazine’s Zappos Finds a Use for Twitter. Really!, and many other companies use Twitter to quickly communicate with their biggest fans. I even use Twitter for Realvibez, tweeting about new videos uploaded to the site, news and blog posts. I would gladly pay a fee to be able to get valuable insight information on my tweets – how many read and so forth – plus be able to use such a great communications channel.
(3) Focus groups – I have seen Twitter used for focus group research and would gladly pay
Twitter to manage such a focus group for me. I will provide the
question and the account to tweet a reply to, Twitter can choose who to
send it to based on profile information.
Out of those 3 options, I believe that Twitter has the most opportunity with the second and third ones – corporate users. Companies like Apple and Nike, record labels and bands, MTV and media outlets, all of these could derive tremendous benefits from using Twitter to connect and interact with their evangelists.
Marketing people are supposed to be creative and these are just some of the ways we are already using Twitter.
Now it is up to Twitter to turn that into money and offer us some additional tools in order to generate some real revenue.
The problem with Twitter is that it has so much unrealized potential and many in the marketing world are dismissing it as a fad.
** update **
Look at how CNN Breaking News is using Twitter – twitter.com/cnnbrk – brilliant!