There’s a new Viewpoint column about Twitter, over at BusinessWeek. Before I go on, it’s important to note that Viewpoint’s are guest columns, not written by normal BusinessWeek staffers.
Anyway, "The Trouble with Twitter" takes an in-depth look at the money woes at Twitter, in particular its lack of business model. Now, when I say "in-depth," I mean it. In fact, you can safely skip the entire first page–unless you enjoy a little fluff with your morning coffee.
The second page gets to the meat, and has a pretty good analysis of the different types of monetization models Twitter could consider. I’ll summarize the suggested business models:
- Twitter could ask users to pay
- Twitter could get messages to pay
- Twitter could extract money from user data
- Twitter could sell ads
From what I can tell, selling ads is the best lifeline that could be thrown to Twitter at this point. Certainly, it’s likely the option that Twitter users would be least resistant to. Unfortunately, number crunching reveals that Twitter might not be able to make enough money from ads alone:
Advertisers would find Twitter ads generate $28.2 million in profits. So the maximum they logically would spend on such ads is $28.2 million.
Thus Twitter has a real value of $12.26 per user. Compare that with Facebook, which has a perceived value of $300 a user—or at least it did last year, when Microsoft purchased its 1.6% stake for $240 million and the site had 50 million users.
And, that’s assuming some pretty generous CTR and conversion rates.
I’m a huge fan of Twitter–you can catch me discussing Twitter at SES San Jose this week–so I’m hoping it can figure this out before it runs out of money.
So, this is where you come in. What suggestions do you have for revenue model for Twitter? Leave a comment below and we’ll make sure we pass them on to the Twitter team.