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?