I’ve been noticing lately that more of my friends and colleagues are using Twitter. Within the last month or so, at least 10 people I know have invited me to follow them on Twitter. Going on a hunch that Twitter is on an upsurge, I checked its traffic via Alexa, and sure enough Twitter has been going through a fairly consistent period of growth. Although the traffic tends to rise and fall, the last few weeks have seen an all-time high, at least in terms of visits.
So let’s go ahead and declare Twitter a successful Web endeavor. Successful, that is, in attracting attention and use. But what about that other success? You know, the kind that comes in the form of green slips of paper with portraits of past U.S. presidents? Of course, the answer is a resounding no. There is no model currently in place where Twitter makes money.
There have been no shortage of ideas as to how the service could make money. They all tend to focus on the opportunity to either tweet ads or create some kind of tiered system (where you would pay for better service). But here’s a new take on Twitter’s revenue model: fuhgedaboutit.
What Does Twitter Cost?
The primary reason a company has to generate revenue is to pay for itself. It costs money to make cars, bake cookies, and build houses. You have to make back at least the money you spent on creating the thing. You have to recoup your costs. What does Twitter cost?
I’m going to hazard a guess: not a whole lot.
The service is extremely simple. That’s not to say it would be easy to create. I’m sure there’s some very clever engineering going on. But, really, Twitter is a very simple thing. And there’s not a huge bandwidth or storage cost, because we’re only talking about text here, and not a lot of that either. There isn’t the kind of hit you get with video or audio with Twitter. The costs would even be somewhat fixed. That is, it takes a certain number of connected computers to operate Twitter. A new user would create the need for only a small amount more horsepower. The more people sign up for Twitter, the lower the per user costs get.
I’m not going to consider overhead costs here (most notably salaries), but those would probably be the biggest costs for the company. Usually, though, companies that have salaries as their biggest cost are professional services, like ad agencies or architects. But the big difference here is that new users don’t increase employees’ workload. Creating software to be used by 10 people costs the same as creating software to be used by 1,000 people (assuming you built the software to scale, which Twitter didn’t at first).
In Twitter, you know have a service that doesn’t really cost that much to operate. So, why do you care whether it makes any money?
Those Who Do Care
Of course, there are people who do care whether Twitter makes any money, and they tend to be the ones who invested the money in the first place to get Twitter (or any of these other Web 2.0 services) started. Clearly, they are interested in seeing some kind of return on that investment and want to see the sites capitalize on the interest they have generated.
But why do we always expect this value will come from ads or the creation of some exclusive content or features? Sure, that’s worked in the past; YouTube seems to have successfully implemented an ad model and Flickr has sold a lot of service upgrades. Yet there may be a new model, and it has more to do with the price of services.
That is, in addition to the actual value Twitter may have generated in terms of capturing users (which could then be marketed to), Twitter also generated a communal value for everyone who seeks to build on the Internet. Twitter introduced a new way of communicating, a method that was low cost not only in terms of money but also in terms of interest and attention. Just as it (probably) doesn’t cost all that much money to run Twitter, it doesn’t cost all that much attention to use Twitter.
I don’t mean that as a knock. In fact, Twitter streams can provide immense value. Consider the way the service was used during the recent incidents in Mumbai. It’s not that the service has no value; quite the opposite. It has value in an entirely new way.
From the marketer perspective, we tend to see all services from the pure traffic numbers first and foremost. It almost doesn’t matter what the content or functionality is, as long as we know that people are there and that we can send them something.
But a shift in the economics of construction for these types of sites should prompt a new round of innovation. I keep hearing about Weekend Rails projects. These are sites and services that are hacked together over the course of a weekend, using Ruby on Rails and posted up, just to see what happens.
We can only hope that there are lots and lots of these that sprout up in the coming months. We are in a business climate like nothing we’ve seen before. There is a throttle on big R&D, true, but innovation continues to grow. I hope that 2009 becomes the year that we see a ton of new sites and services, each one offering a new potential behavior, and each one not totally concerned about making money because they are fueled by innovation and supported by infrastructure.
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