What Is Twitter's Problem? No, It's Not the Product

47 thoughts on “What Is Twitter's Problem? No, It's Not the Product”

  1. Twitter’s main revenue stream should be data sales. Honestly, they have a real time hose for millions of peoples’ activities. That HAS to be worth something.

  2. Great post. One thing I’d note with Google is that at first they did only focus ont he product, without consideration for a business model. They were one of the lucky ones, one in a zillion, that later stumbled upon an incredible business model.

    I think Twitter hoped they could do that too – focus on the product and getting a lot of users and then stumble upon a business model. They’re still stumbling. 🙂

    1. Totally agree. It’s easy to say in retrospect that Google made it due to a good business model while forgetting that several of their business decisions/acquisitions lost money while on the way to being segment leaders.

  3. Nice analysis, it seems Twitter seems to bumble along without any clear strategy.

    Another thing that bothers me about Twitter is their claim to focus on social responsibility yet they have held San Francisco hostage in that they threatened to leave SF unless they got big tax concessions. How do they square their “social responsibility” when they are working hard to remove resources from the community where they live and work? It adds up to bullshit PR. They shoud just f*ck the shut up about social responsibility – better be honest than hypocrites.

    1. Social responsibility has very little to do with taxation, particularly when California’s tax rates in metropolitan areas are among the most onerous in the country. I’d rather Twitter felt responsible to its employees and investors, and there’s nothing socially irresponsible with trying to maximize after-tax profit. That’s more people who you can hire…or don’t have to fire.

  4. Entrepreneurs with a technical background get a lot of satisfaction in adding newer features .. and because of that business model / finances ends up taking a backseat ..
    “Dont let your creative satisfcation turn your startup into a science project” …

  5. Twitter is more private than facebook, but has no personality. people on twitter don’t communicate like on facebook. twitter can boost their signature by going “wall street” , on line duel player arcade, and monopolize on line “price is right”. Possibly an e-bay type auctioning. What I like about twitter is you don’t have a million people popping up on your page every day.

  6. The dickbar was fine in how it stat at the top. But the way it popped up over your tweets broke the UX. It was a big force to do that little step. I actually love the dickbar the the top when I want to look at it.

  7. That’s great analysis. It touches about one of the open questions of the mobile platform wars. While Apple has won the most developer mindshare to date, it remains very possible, as your post suggests, that another platform play will crack the code for making developers more money than via the Apple approach (or Android for that matter).

    That’s would be some interesting business model innovation, right?

  8. Great thoughts, I had been trying to put words around this same concept for some time now.

    The biggest issue, in my opinion, is the fact that advertising is thought of just as something slapped on at the end. If you make it a core part of your product in a creative way, it’s simply a way of a seller conveying information to a buyer – and you can still do that in a sexy way.

    I’ve blogged about how these “media models” can be very effective, if anyone is interested: http://bit.ly/eNSrKv.

  9. Nice post, Om. It’s right on. Two quick thoughts:

    First, on the question of Twitter itself – yes, the tweet stream outside Twitter.com accounts for 75% of total tweet volume, but even using last January’s numbers, that still leaves 300 million tweets a month coming through the Twitter.com UI, which is the company’s canvas to paint. They have really valuable data on my interests that are real-time, which makes them extremely valuable from an advertisers perspective. Also, there is a definite tiering of Twitter users in terms of service usage, which, like flickr might be used to build a “professional” account. Some thinking on this tiering, and the overall Twitter service here:
    http://www.alchemyofchange.net/twitter-is-not-a-social-network/

    Second, and this is the more controversial thing to say on post about business models, but sometimes I wonder if we as a society need a better way of thinking about how we fund socially valuable services like Twitter. There is no question that it, like Wikipedia, is a critical information infrastructure. It’s helped topple tyrants and helps me track the Charlie Sheen spiral. Users complain about this and that, but my guess is that there is a great deal of love for this company out there and that in the back of people’s minds, we’re all concerned about its ongoing financial health and the long-term viability of the service. It would be an amazing thing to see the company open up a discussion with this huge community on the best way to ensure its continued sustainability. Whatever path to remuneration Twitter pursues, it will no doubt have impact on this community. Better to engage them directly in it to hep ensure their buy-in in advance. The Japanese call this Nema-washi, or root-binding (i.e. what you do to a tree’s root system before you move the tree). Having that kind of discussion would be a radical departure from the norm, but Twitter is itself a different creature.

    1. The thing with Wikipedia is that the company DNA is completely different. From day one, Wikipedia was about providing a free and open service to provide information to anyone.

      Twitter is a more for-profit model. If they weren’t, then they could be accomplishing the same things with 1/10th the staff (but at a much slower rate). They also wouldn’t have garnished the valuations and as much VC money as they did.

      I don’t see a problem here. Someone can build an open-source Twitter (in fact, I’m sure there are many out there). Twitter’s value isn’t so much about technology as it is market penetration.

  10. One small comment – the business model innovation for Google was created at Overture (aka Goto). And while Google did take it to the next level, they did have to license the patents – thus showing that the innovation came from outside the company.

  11. Beyond the phenomenon that is Twitter, the world’s ultimate social communication utility… watching Twitter’s business model ideas unfold is one of the most exciting business stories happening today. It must be equaling maddening and exciting to be in their situation.

    Perhaps, Twitter’s hire of Adam Bain, president of monetization will bring out the creative thinking necessary to make a real business out of the giant micro messaging service.

    What do think is the worst that could ever happen to Twitter, by the way? Other than being bought by Yahoo.

    1. I think they need to finally get to the bottom of the business model problem. If they don’t, they will keep alienating their ecosystem which in turn would cause more long term problems for them.

      I have to say, the developer attention is the crucial difference between the success and failure of platforms.

  12. I think the main thing Twitter is lacking is the realisation that users might actually *want to pay* for the service. It’s like a brain virus these companies have, thinking that trading money for service is some kind of taboo, so therefore we all have to put up with a compromised experience.

    Twitter doesn’t even charge for its clients, or offer a premium version. That’s just an inexcusable lack of trying in my book. This page talks about “business model innovation”, but here the innovation would actually just attempting to sell something in the first place.

    1. Why are new, young tech companies seemingly so averse to the generation of rigorous strategic planning (short and long-term) and development of comprehensive business plans? In most cases, without a solid strategy (which can always be adjusted), tactics that result in revenue are often a proposition in time-limited luck. I posted the following comment yesterday in response to an article about Twitter’s recent push of trending topics (http://brandsavant.com/why-twitter-is-pushing-trending-topics/) which also seems to have some relevancy here:

      Twitter has evolved to be like a free shuttle to take people to shopping destinations for discounts and deals, to news/political links for real-time and reference information, and to socially relevant content. With all due respect to the people who work at Twitter and likely do lots of hard work there, it seems Twitter has become a pro bono middleman to: 1) help channel its users toward fulfillment of some knowledge and/or engagement goal and 2) provide a lucrative platform for businesses to engage with customers, make money, and foster goodwill for themselves. Realizing that Twitter has hired a “President of Revenue” and is beefing up a sales force (???), until the company comes up with a viable revenue model (which, to be fair, they’re likely working on), that organizational title simply comes off as sounding grandiose and like they’ve hired and upgraded a “Mayor of Something” on Foursquare. I’m certainly not trying to bash Twitter, as it has turned out to be a vitally important service for those who use it. It’s just that approximately 20 million people (according to the data presented in this article) are currently drinking free milk because they don’t have to buy the cow. Ironically, I just read a WSJ article this morning about how advertisers are paying big bucks through Ad.ly for celebrity product endorsements on Twitter. Is Twitter even getting paid for providing the advertising vehicle? Twitter has a tough task when it comes to monetization since people and many businesses are already used to a free service and also because consumers simply don’t like the annoyance and interference of having products and ads pushed at them via an internet platform.

      1. I love the free shuttle analogy there. I’ve often wondered if Twitter will be Java was for Sun – namely that everyone BUT Sun was able to make money off of Java.

  13. I think their business strategy, at the end of the day, is for Google to buy them to make up for their lack of social, and compete against Facebook.

  14. I would be surprised if the app store adds much to Apple’s bottom line. The expenses are not trivial. Every release of every app needs to be manually reviewed (including releases that fail). Most apps are quite cheap.

    Now apportion some percentage of the iOS marketing budget to the app store and I bet your net margins are near 0%

  15. Interesting angle, and quite correct. However I wish people would think of the alternative once in a while, which is not monetising the product at all.

    Why do we always assume that “popular-product=megabucks”? What’s wrong with Twitter just being a service that is paid for by the sales of the clients (entirely possible economically speaking), and that’s it? There is tons of money being made in the Twitter client field, but instead of capturing that, they give away the client for free and then are forced to find ways to milk the clientele for cash.

    The unspoken and mostly unexamined assumption that they have to “find a way to make money,” seems faulty to me. Providing the world with a service and merely breaking even is also an option.

    1. Yes, that is an option, if you don’t take millions in VC money. At that point, that really isn’t an option. And without the VC money, Twitter would have been unlikely, in my opinion, to have been able to scale.

  16. I’m a big fan of Osterwalder’s Business Model Generation. Every entrepreneur should read this book.

    I think it’s a little hasty to say that Twitter didn’t think about how they would generate revenue. It’s probably fair to say they were more concentrated on product and scaling but could you blame them given the tear they’ve been on?

    In general, I do think that some of today’s highly-covered startups needs to put revenue into the DNA/model of their business. It doesn’t bode well that Twitter shut this off right away. Perhaps this is one of those situations where they shouldn’t have listened to the greater audience, bit the bullet and see if the criticism dies down.

    Lastly, one probably didn’t need to read Osterwalder’s book or even go through a complex analysis to see the problem here. It’s a simple question: How do they make money? If it’s not ads, then their options, at least for a tremendous return, are much fewer.

  17. Twitter turned a profit in 2009. The Data pipeline not free, Google and the growing number of Social Media Monitoring tools are paying to access this data. They get paid by brands, brands get paid by consumers. Oh Capitalism we love you… indirect costs. As with any variable cost structure growth will push a company into a new cost zone. Twitter has been forced to find additional Monetization lines (rather successfully), the product will be fine… people will get over their complaints. Twitter is not going to get “myspaced” because there is too much invested into this network counting both innovation and followers.

    1. Subscription models are great. Is it too late for Twitter to implement one? If they do, how will it provide value? I know there’s a good sub model out there for them, however it’ll come by the way of a third party. I don’t think Twitter is capable of doing it themselves unless they carve out a serious group within the company to focus on it. Do you think that’s likely?

  18. I’m sure they’ll be ok. Twitter will figure it out and they’ll make tons of money doing so.

    Now for startups who think they’ll be as lucky as Twitter, good luck.

  19. Social plus business is kind of more worth to business opportunities s for businessman and small online business on internet. So Twitter should discouraged this. Twitter is one of the most important facility on internet for micro blogging so i think they should not change their mindset towards business.

  20. You’re not giving ARM due credit there. You say “Around 2005 to 2006, it was clear that…”, but ARM’s business model saw that coming many years before that. By 1999/2000, they were already giving post-mortems about it!

  21. Although I agree with most of what you say… you are so utterly wrong about the iPhone. Much like the iTunes Store, I would be extremely surprised if Apple pulls any kind of significant revenue from it (sure they’re making hundreds of millions of dollars on it, but what’s cooler than hundreds of millions? Billions). Apple makes an absolute killing on HARDWARE sales, and every investment, every software project, every service is geared towards making hardware sales. The App Store is a way to sell iPhones. Just look at Steve’s numbers. In the 3 years the App Store has been around, they’ve paid out $2 billion to developers. That means that they’ve made about 30% of that… in 3 years… that’s peanuts. But the iPad netted them $9.5 billion in revenue.

  22. Great post with bigger implications for the tech sector, which has always been product-led. Agree with evster88 that packaging of data and analytics tools around it would have immense value for any Brand trying to shorten cycles, improve service, monitor competitors, etc. Not everything has to be destined as an advertising space.

  23. Surely Twitter missed a trick with providing paid for data analytics. They could maintain the integrity of the twitter experience for the user and sell the data to whoever wants the information.

    Already you’re seeing the likes of Klout and Peerindex creating viable business models out of ranking people’s influence and reach online using Twitter’s data. Ultimately there’s value to be had in providing relevancy and coherence to the shear volume of data available from tweets.

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