Two weeks ago, when discussing all of the hype about a few IPO’s, three companies were mentioned. We discussed Facebook last week. Many are looking forward to Twitter’s IPO the most, especially thanks to its 44.5 million users (as of June). It has been confirmed that many companies including Google have looked into possibly purchasing the social network that is increasingly becoming a part of our culture all around the world. What is less clear is how they will be able to profit from all of these users.

How can Twitter make money???

To most, the fact that Google makes billions of dollars is difficult to figure out because they do not know how Google charges for ads placed on top of search pages or how lucrative those ads can be, especially when you are serving billions of them every day. But with Twitter, it is even less clear. Even the brightest guys in the industry have trouble figuring out a clear way to make money. There have been many ideas and Twitter’s heads continue to say that they are still on pace to start rolling out those solutions soon.

Last week, there was a plausible rumor that Twitter was going to start charging to receive certain Tweets on its Japanese website. The idea was denied by Twitter after all but I personally think this could be a good way to go. For example, I think few would pay to read how their best friend is doing. But what if you had to pay 1$ per month (or less) to get access to Ashton Kutcher’s tweets. And of course this would mean that Twitter would split the money with those “special users”.

If they will not charge for certain Tweets, then what?

Other options that have been discussed are advertising (of course), partnerships with other websites, profiling a few corporate accounts, etc. But honestly, nothing has been convincing yet and it will be very interesting to see how the user base will react when such solutions are rolled out. That is always the danger with social networks. If you annoy the users, they WILL leave, and it can happen very fast. Just take a look at how MySpace went from domination to a dinosaur in just a few months as it lost its “it” factor.

Twitter has said that 2010 would be the revenue year although he does not know if they will be profitable. Current private investments have valued the company at close to $1 billion but I’d be very surprised to see an IPO before Twitter clearly demonstrates how it plans to eventually become profitable.

Twitter vs Google????

I think search can be a big part of it. It does have one advantage on Google. It has a tremendous database of live data, what people are saying and thinking about. While they might not always be searching on Google, they are almost always giving out their thoughts to their friends/family on Twitter. That knowledge could become a game changer to be certain although taking on Google in anything is quite a challenge.

Twitter is fun to use… but does that make it a good investment?

There are a few examples of business models that seem to be perfect to build an empire and in my opinion, that is exactly what Apple has. They have built a line of products that were created initially to watch music (Ipod) but have grown to become so much more.

Video was added as was the ability to view photos, listen to podcasts and more. Then, it became possible to capture photos and now even videos. It basically became the ONLY gadget you need in your pockets, except for your wallet. And even that may eventually be replaced by the Iphone. But the real game changer happened when Apple opened its store to applications.

Why do I believe that? Because that’s when Apple created a business with major revenues and no costs. How often does a company have that opportunity? Here is one example sent by a loyal reader, but there could be hundred of other cases. Take a look at this article published in the UK media about research that is being done on an application to detect respiratory problems (potentially could help detect viruses such as the H1N1. The great thing about this is not the application itself. But just imagine how much money is being spent to develop such applications. Apple has NO RISK here. If the application does not turn out to work, it will have cost nothing.

And if it does work and become a hit, Apple will split revenues with the app creator. Isnt’ that the perfect business model? And there are no signs of this trend slowing down because Apple continues to gain market share thanks to its Iphone. And as long as it can break even on the Iphone sales (it does come out with a profit though), the business will continue to be a great one.

Apple shipped 7.4 million Iphones in the last quarter, that is 7.4 million users that will be buying all types of products through the Itunes store. The biggest danger right now for Apple would be to have a major rival come out with a superior product but there are no signs of that happening. The truth is that I think most competitors have almost given up on catching up with Ipod for the time being, it is too expensive and has shown little to no results. Both Sony and Microsoft gave it a shot but without any luck.

The next battle for Apple will be for the much anticipated Tablet, which could become as important of a product as the Iphone/Ipod. However for that medium, Apple will come out late with competitors such as Amazon’s Kindle already working well. So it will be a different challenge.

Does this mean that I am automatically a buyer of Apple? No of course not. Although I do currently have a live trade on Apple. Its valuation reflects most of these facts already. But it does give us ideas of what to look for in the “next Apple”.