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Wednesday, April 22, 2009

Twitter Will Make Money

Now that Oprah is on Twitter, millions of others will follow soon. Twitter is an open real time short message service with basic social networking features. Some people also call it micro-blogging. Since it is relatively new, there is no universal way to describe it. For generally accepted definition on Wikipedia, please click here.

I think twitter can be bigger than Facebook. Here is why:

1. Accessibility: You can twitter 24/7 since you always have your cell phone with you. To twitter, all you need is a cell phone which can send and receive text messages (sms).

2. 140 character Restriction: Your "tweets" (short messages you post for others to see) have to be limited to 140 characters. This works well with how people communicate these days and, in general, our attention span is declining so people like short messages. 1 Trillion SMS were sent just in the US in 2008.

3. Real time Nature of Tweets: You know what is going on in real time.

4. Transparency: Tweets are open. Anyone can see them- re-tweet, or respond to the tweets.

These are the advantages twitter has over Facebook. In addition, there are 4B+ phones which can potentially twitter and Facebook needs either a computer (1B) or a smart phone (~800M) However, Facebook recently launched status updates via sms in some countries and there are applications on Facebook which integrate tweets and Facebook status updates. In any case, twitter is not a replacement for Facebook. They serve two different purposes in two separate environments. It would be interesting to watch how things develop.

Now, the question is-can twitter make money? The answer is Yes! I think the company is right to focus on customer growth for now. Following are a few ways twitter is creating real value in the world:

1. Communication platform for Corporations: Twitter gives the corporations ability to directly communicate with customers in a transparent environment i.e. anyone can observe and join the communication. Corporations can "listen" to what customers are saying in real-time and take action to resolve problems before they become PR nightmares. Furthermore, customers can help each other in quick problem resolution.

2. Feeling of Personal Connection with Celebrities: Ashton Kutcher has 1.3M "followers" on twitter i.e. 1.3M people feel that they make a personal connection with Ashton Kutcher few times a day. Of course, there are smaller local celebrities who people want to feel like that they have a personal connection with.

3. Interactive TV: People can share thoughts about things as they happen on TV. For example, I was on twitter observing what the "marketing experts" were saying about the ads during Superbowl. On programs which benefit from interaction with the audience like American Idol, Q&A on CNBC, etc. can have a live twitter feed on TV. Smarter networks can develop programming which is shaped by audience feedback in real time. CNN Headline news has 1M+ followers.

4. Live Events: There are live events which you want to attend but can not. Now, twitter enables you can get real time updates from these events. For example, local community events, industry shows, conferences, etc.

5. Ad hoc Organization: Organizing people in different locations in a coordinated way requires many-to-many communication which is transparent. Twitter enables that. For example, coordination of activities of volunteers in a disaster recovery situation.

6. Resource Utilization: There are many businesses which can not forecast demand correctly. For example, bars, restaurants, salons, spas, theatres, etc. The incremental cost of providing prodcut/service to a customer is very low. If a bar is empty at 6:00PM then the bar manager can tweet a special happy hour for rest of the evening or a theater can announce availability of Rush Tickets, etc. etc.

7. Increased Transparency and Accountability: Public servants like congressmen (women), senators, mayors, etc. can update their constituents on what they do all day. Executives in big companies can do the same (only for the company employees). It would increase transparency and accountability for leaders.

8. Sharing your daily life as it happens: Most people spend a lot of time away from their loved ones. Now, you can tweet things as they happen, to keep in constant touch with people you care for. Everyone is busy. Phone call every hour would not be prudent and it would be cumbersome (and costly) to send ten sms to people you want share something with. Now you just send a tweet from your phone.

9. Better Use of Company Resources: In big companies, it is always a mystery to find out who is doing what. Usually, you would call 3-4 people before you reach the right person. It takes hours. Now, you can tweet the fellow employees and get answers in minutes. Imagine the productivity gains!

10. Real time help: People can ask for help in real time like the student who got arrested in Egypt (see story here) or in less threatening situations like feedback from friends before shopping.

11. The Secret: I am starting a business which may utilize twitter:-)

These are just a few examples how Twitter is and can create value. I am sure there will be many many more. Furthermore, I did not touch upon known but small revenue models for social networks- advertising and data mining. The point is that the value created by twitter is much bigger than social networking. I can think of various business models just with the examples I gave above. Hence, making money will not be a problem.

You can follow me on twitter at

Happy twittering!