“A lot of people think Twitter is just about tweeting. In fact, a lot of people are using it as an information appliance,” notes Wharton marketing professor Peter Fader. “Twitter has valuable information and perspective.” In contrast, Fader suggests that Facebook has become a “wasteland of meaningless crap” due to its users oversharing every minor detail of their lives.
Despite the recent increase in Facebook-like features, Twitter has historically been positioned as the “anti-Facebook,” with a simpler design, fewer features, a clear privacy statement and a mobile-friendly interface. “Twitter was always the elegant, Zen-like Facebook alternative. Where Facebook kept adding features, often to the dismay of its user base, Twitter remained simple,” says Whitehouse. “Facebook’s philosophy has been to do more and more. Twitter has avoided much of that fray.” Whitehouse worries, however, that Twitter’s recent addition of banner images, embedded media and other features reminiscent of Facebook profile pages may slowly undermine the service’s unique position in the social media landscape.
An evolving business model
In many respects, Twitter’s current business model, which revolves around minimal, relatively unobtrusive advertising via promoted tweets, remains a bit of a mystery. But experts say the site could take one of several approaches in pursuing a long-term revenue stream.
For example, Fader considers Twitter to be an important resource for people who are passively watching trends and comments about breaking news. “Microblogging is a valuable tool, and Twitter is a really valuable channel.”
He doubts that much of that value can be unlocked through the current model of sponsored tweets. Instead, Fader suggests that Twitter could deploy a tiered subscription model, similar to that currently used by LinkedIn, which gives users with paid accounts access to a greater number of messaging and search tools. “Twitter needs a ‘freemium’ twist so there is broader access to information and analytics” for those willing to pay for it, Fader notes. “If Twitter can come up with just enough stuff to justify a premium service, I’d pay for it. I’ll never pay for anything on Facebook.”
Chaudhuri agrees that Twitter’s advertising potential has limitations. “Twitter has enough data to be useful for advertising, but not direct marketing,” he says. “The future for Twitter probably resides in charging for interesting ways [of using the site to better] distinguish corporations and products.”
Hill, who also uses Twitter as a research tool, notes that she, too, would also pay for a Twitter premium service, but adds that the company has to be careful about limiting the free flow of comments. Should Twitter offer too many tiers of premium services, and severely limit what people using the free service can see, it could turn off users, who generally now share equal access to the platform.
Twitter’s trove of data may be the best road to revenue: The firm could structure a subscription system around historical data, or analytics packages based on what users are talking about and who they are following. “I think that data is the secret sauce,” says Whitehouse. “While a number of companies, such as TweetReach, provide services that track the impact of tweets, Twitter is the primary holder of the entire history of its data. And that gives it a huge competitive advantage.”
In addition, Whitehouse says, Twitter has been clever in adding features that both enhance the user experience and allow it to collect more meaningful data. For instance, Twitter now links together the individual tweets that make up a conversation between users. This helps users follow the thread of the conversation, but also allows Twitter to see connections between people and gauge the impact of tweets. “Twitter’s changes have been conservative, but many of them have been geared so data on trends would be easier to follow,” Whitehouse states. “There’s an immediate user benefit, but there’s also a data element.”
While Twitter lacks Facebook’s depth of individual user data, Wharton legal studies and business ethics professor Andrea Matwyshyn suggests that the company may not need that level of specificity to succeed. “Twitter has set itself up as a contrast to Facebook in terms of monetization, data and privacy,” she points out. “Twitter’s privacy policy is clear: Tweets are public or private. Facebook has repeatedly changed its privacy policy.” As a result, Matwyshyn argues that Twitter has more built-up goodwill with users than Facebook. Now, however, the company must figure out how to monetize without damaging that relationship.
Open and shut (a bit)
When Twitter first launched in July 2006, it gained a cult following because the company provided an open interface that attracted third party developers. These developers created software, such as HootSuite and Seesmic, which allowed users to access and update their Twitter accounts and aggregate tweets based on certain topics or trending hashtags. Using that model, Twitter became a big data feed, and a valuable utility to many web developers.
However, Twitter recently changed its developer policies to limit applications that rely on data from Twitter. Previously, third parties could write software that replaced Twitter’s own products for reading and sending tweets. Any new application that plans to serve more than 100,000 users must now seek the company’s permission. Applications that already serve that many users will only be allowed to expand to a certain point before needing Twitter’s sign-off to grow further. Developers creating products that complement Twitter will have greater access to the company’s application programming interface (API), which allows different parts of a program to communicate, as well as facilitating one application sharing content with another.
