There was an interesting article in the Wall Street Journal yesterday about Twitter, the darling of the social media world, and the future of the site. Here's a link to the full article, "Twitter Trips on Its Rapid Growth" - I recommend you read it.
No, the article was not a doomsayer, predicting a failing. But it did raise the question of what lies ahead in Twitter's future in terms of their ability to mange growth and their business model.
Twitter is a business. And like any company it has a business model...well, sort of. Like so many start-ups it may be more concept and visionary that a real model The problem for Twitter, and one which the owners/founders must wrestle with in the near term, is financial. Like many start-ups, especially on-line, Twitter has had amazing growth in its first years of existence. I don't know how it compares to some of the other on-line businesses that has sprouted up, but with about 32 million unique users now (per the article), and only 3 years old, the growth rate has been phenomenal. Perhaps that exceeds the growth rate of the Googles of the world.
The problem for Twitter is revenue stream. There is none. Hmmm, reminds me of AR in its earlier days. As we all know that has changed, in ways that I think many feel are positive.
Oh, Twitter has money, having found financing from venture capitalists, a common strategy with start-ups. And the article goes on to say how they are exploring alliances with other companies. But Twitter is not generating income from the site as it currently exists since they don't sell advertising. The investors will, certainly, be looking for some return on their investment
The other growth-related issue is infrastructure. Twitter has employees, but not many considering how rapidly it is growing, and the growing pains - server issues, product development - will likely continue without bringing on more employees to deal with the running of the business itself. And further development, I suspect, will be hindered. According to the article plans are in the works to bring on more staff. The challenge, as I know well from being in an Internet start-up, is finding the folks with the business acumen but who also fit the corporate culture and the vision. That can be a significant challenge for some founders.
Will Twitter continue to exist in its current form?
Unlikely. A revenue stream must happen at some point for Twitter to remain viable, as has happened with other Internet companies, unless they can secure more VC funding. And certainly the question of being sold has arisen - no doubt of interest to the VCs. Time will tell on that issue.
Will Twitter continue to attract users?
Undoubtedly. But how many of its users are, and will continue to be, active? (We know from recent reports that about 8% of AR members are active). And won't new product offerings be necessary to meet the changing needs of devotees? And provide income, in addition to the potential of advertising becoming a part of the Twitter landscape.
The popularity does not seem to be waning, but 2009 should be an interesting year. Would you pay to belong to Twitter? Would you advertise? And are there other product offerings that could provide Twitter with a revenue stream. We'll see.
First, Edmund Andrews, an economics reporter for the New York Times (who makes $120,000 a year), falls in love, and then he buys a $460,000 house in Silver Spring, Maryland, and then he takes out two mortgages (a primary mortgage of $333,700 and a "piggyback" loan for $80,300). Here's how his broker convinces him not to worry about the loans: "'Don't worry," Bob reassured me, saying what almost everybody else in real estate was saying at that moment. "The value of your house will be higher in five years. You'll be able to refinance.'" And then the credit card debt starts piling up, and then his wife gets laid off, and then they default on their mortgage, but JPMorgan Chase is so busy dealing with the mess of the housing market that the bank is too busy to foreclose on his home. Wondering how he, an economics writer, failed to understand what he was doing (well, he knew he was gambling), Andrews ends his essay this way: "Eight months after my last payment to the bank, I am still waiting for the ax to fall." [NY Times magazine]
