Pic from Comicbase @ Flickr. Some rights reserved.
The past week has offered some, but not much, insight as to what Twitter‘s revenue model will be like, with CNET and the New York Times reporting on the failed Facebook/Twitter deal and a morsel of information from CEO Evan Williams.
When reports of the failed Twitter acquisition by Facebook first emerged, my initial reaction was a slap on forehead. If, as Kara Swisher says, there was a $500 million deal in FB stock tabled, it looked to be a great deal missed, especially considering the collapsing Web 2.0 scene because of the financial turmoil, the tumbling prices of startups (MySpace’s Chris DeWolfe saying some are willing to sell at just 10% of their $200-300m valuations 6 months ago.), and the fact that Twitter still has yet to come up with any sort of revenue-generating model.
But not so, says CNET’s Rafe Needleman, who says that it’s a good thing that Twitter wasn’t bought by Facebook. The acquisition, if it were to happen, would represent “a double mismatch” for Facebook.
First, Facebook is not pitched as corporate or business communications service. It could become that, I would argue, and could compete with LinkedIn, or even acquire it. That’s a bigger opportunity, revenue-wise, than a Twitter acquisition, and would take up resources that might otherwise be used to incorporate Twitter into the fold.
Second, Facebook knows how to experiment with revenue models. Twitter does not. Facebook sells electronic micro-gifts and has tried different forms of advertising. Twitter: Nothing, not even an online store for plush toy Fail Whales. Facebook should demand more from a company it plans to sink $100 million of cash in to than a clever product that’s never been put to the test of generating a dime. Twitter may be hot, but it is, so far, not a business. Facebook is a business.
So as alluring as Twitter’s numbers are, it’s a let off for Facebook. So where does that leave the Twitter bird? According to the NYT, the recession has caused Twitter to change its priorities, saying that “revenue is now a priority for the first quarter of next year,” a turnaround from his initial statement that it would only focus on revenue in 2010.
Mr. Williams said that Twitter gets daily calls from companies who want to pay for sponsorships, but it plans to avoid making money from ads. Instead, it will figure out a way to charge businesses who use Twitter to talk with customers or sell products. Companies like JetBlue Airways, Dell and Whole Foods Market have used Twitter in these ways.
So far, though, “we haven’t studied the business cases much,” he said. “We literally have no business people in the company, so this isn’t an area we’re really focused on.”
There’s still not much to go on at this point, with Ev going on to say on CNET here that “We will make money, and I can’t say exactly how because…we can’t predict how the businesses we’re in will work.”
As the conversation went on, one got the impression that Williams actually has a plan. He revealed that the company is in talks with large consumer packaged good companies, and whether that’s to sell the company internal services or to help the company monetize its own Twitter feeds, it’s promising.
The revenue plans aren’t just ads or sponsorships. “We want revenues to be product-based. Google built something that can really scale, and that’s our intention as well.”
Google’s a big model for a small company (Twitter has 25 people), and Williams’ laid-back affect belies his ambition. He says, “I worked on Blogger for six years, and I don’t think that’s as big as Twitter. Twitter will dwarf that.”
Those comments may sound all good and well, says writer Rafe Needleman, but he’s “still not convinced that Twitter can be as big as Williams says it will become” because Twitter may not necessarily be king in the microblogging space just because it was first, pointing out that Google and MySpace dominated their respective fields after the pioneers. “The microblogging corner of the technology economy is extremely young, just as Twitter is.”