Twitter’s PR team must be working late each night because over the past several weeks dozens of articles have appeared in almost every media channel. Many of these articles examine the twitter business model and try to hypothesize a path to prosperity or failure.
One of the most interesting articles appeared in the NY times examining twitter through the perspective of is it better to build an audience and then figure out how to make money (Twitter.com) or build a business with a revenue stream and then scale (Yammer.com).
Yammer’s business model is compelling, Mr. Sacks said, because it spreads virally like a consumer service, but earns revenue like a business service. Anyone with a company e-mail address can use Yammer free. When that company officially joins — which gives the administrator more control over security and how employees use the service — it pays $1 a month for each user. In Yammer’s first six weeks, 10,000 companies with 60,000 users signed up, though only 200 companies with 4,000 users are paying so far.
The founders and backers of Twitter, which has reportedly raised $20 million from venture capitalists, are just as adamant about their decision to grow first and monetize second.
Like the value of the telephone network or the Internet itself, the value of Twitter increases with the number of users. So growth is its top priority, said Evan Williams, Twitter’s chief executive. “If we spent time monetizing early on, it would have meant we weren’t doing other things that made the product better for users,” he said. Registrations have grown 600 percent over the last year.
Several authors have already announced the decline of Twitter as inevitable with headlines like “Once again, Twitter’s death is laid out. Once again, users will fail to notice”
Caroline McCarthy at C-Net blogs a more thoughtful assessment of the Twitter situation.
With these growing pains behind it and some money in the bank, inching toward profitability is a natural next step for Twitter. The clock is ticking, and industry confidence may start to waver before Twitter puts a business model in place. Some critics have alleged that it’s getting late already, especially given an economic climate that has shortened the shelf life of companies running without revenues.
Twitter is far from dead and the company is beginning to recognize (1) the first mover advantage to raise (and burn through) capital only takes you so far. (2) Twitter is a tool (or service), but not a solution. People did not walk around before thinking “how can I alert fifty friends about what I am doing right now.” The question is can they develop and grow a revenue stream fast enough to keep them ahead in the microblogging race? The problem is companies like yammer.com have proven b2b models and there are a whole lot of new microblogging competitors popping up.
Conclusion: Twitter has a good chance of becoming another Netscape. Breakthrough technology but not a breakthrough in business strategy.— Chris Dornfeld, President & CEO, Dornfeld Management Group
Popularity or Income? Two Sites Fight It Out
New York Times (NYTimes.com)
Building a Better Twitter
Business Week (BusinessWeek.com)
Once again, Twitter’s death is laid out. Once again, users will fail to notice
Venture Beat (VentureBeat.com)
Twitter’s Evan Williams: Making money through corporate accounts?