Monday, October 4, 2010

Twitter gets serious in making money

Twitter is now four years old and in terms of Internet age almost an adult but does still work like a child which does not care about money.
However it is changing, Twitter co-founder Evan Williams is giving his CEO position to Dick Costolo the COO who did architect and lead the new advertising efforts.

Williams will focus completely on product strategy, effective immediately, he wrote in a post on the Internet company's official blog on Monday.
The move, Twitter's second CEO switch in its four-year history, underscores Twitter's increasing efforts to evolve from a popular, free-to-use Web phenomenon into a revenue-generating business that can justify the trust investors have bestowed upon it.
So far all attempts failed to generate enough money to get Twitter into the black numbers.

Twitter did start this year with some advertising and it seems they have high click through rates, however it is doubtful if they are to count like display ads.

The rates at which web surfers "click-through" on the ads, a measure that marketers use to track an ad's success, were "through the roof," Costolo said in an interview with Reuters on Monday. And he said that Twitter was on track to finish the year with a roster of advertisers in the "low hundreds," compared with the 40 or 50 companies that currently advertise on Twitter.

Interesting is that Costolo comes from which has to do with RSS feeds. Twitter was and is for me the next generation of RSS feeds. Costolo is a perfect fit.

The beauty of Twitter is that companies can have in their tweets tiny url links to brand pages, and we click on it because we think the target page has something interesting. This is nasally free advertisement, for now.

Twitter has over 165 million users which makes it the third biggest social network after facebook and zynga games.
But Twitter has not yet a good revenue model. Zynga makes a lot of money by charging their gamers to get special virtual goods or by sponsored virtual items in their games.
Facebook has a very active website (just short behind google). Each page has at least three ad placements and users spend many gorse a week to go through Facebook pages or to find new and old friends.
Even if Twitter is number 7 in reach, the page views per visitor and time spent is much lower than Facebook and google it is around the same and even lower than Walmart (which is ranked 51 in the US and 246 worldwide).

Let us assume the numbers above are correct and Facebook does make $900 million, then Twitter could be able to make $400 million.
And Twitter got recently redesigned (not yet to all users), but i still don't know where the ads will be and if i would click on an ad. I understand Twitter is selling keywords for their search results, but any attempt i tried, I did not find an ad, or maybe the tweet was not marked as advertisement and therefore i would not know, but i doubt it is legal not to mark advertisement.

Maybe, if companies have to pay $1 dollar for each follower, they could generate a few hundred millions extra. The top 23 tweeter have together 90 million followers.
The biggest company (besides celebrities) is CNN breaking news with 3.5 million followers.

But it would hard to change a free model suddenly in a paid model.
Twitter might think about closing their APi that no 3rd party can access Twitter without paying. Example: A brand page wants to show live tweets on their page or a developer can only offer a Twitter app if he pays for each tweet through his app.
Twitter did start already to buy 3rd party applications, but on the other side they helped Twitter to get big. It would be a not a good idea to cut all of them off.

Costolo has hard times coming up, to build a revenue stream which can bring Twitter into positive numbers but at the same time not losing too many users.

Advertising spending on social networking sites like Facebook will surge roughly 31 percent in 2010 to $3.3 billion, according to Internet marketing research firm eMarketer. Twitter must find a way to get a big piece of the cake to survive.

Trades of Twitter's private shares by investors on Sharespost, a secondary market for shares of private companies, in October imply a valuation of $2.5 billion.

- Posted using My iPad

Location:Spinning Wheel Ln,Spring Hill,United States

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