Blogging Tips

I have been using Twitter for a few weeks now, ever since I gave up Facebook for Agnostic Lent. I’ve also done a fair bit of reading and research into how it is being used by companies and individuals to improve their personal and business lives. It is fun and fiddly, addictive and annoying, complex and simple… in short, it is an emerging social network.

As a blogger, it’s important to understand any new tech tool for communication with readers as a possible way of building and servicing an audience, and I have a lot of respect for the way Twitter has grown its service, and changed the way people communicate. But despite the fact that it has recently raised $35 million (after previous multi-million VC investments), and is “valued” at hundreds of millions of dollars, I believe it will be effectively dead by the end of 2011. (I would say 2010, but they have enough cash in the bank to sit and twitter their thumbs until then.)

Here’s why I think Twitter’s days are numbered:

Twitter is Easy To Copy

My senior high school programming class could build Twitter. This is not to say the idea isn’t great, it’s just mind-numbingly simple. It’s really just the Facebook status update on steroids.

The challenging thing is how Twitter has scaled to support the millions of users they have. But any company with some cash, and/or experience in scale (Facebook… cough.. cough) can duplicate their service in a very short amount of time.

If Twitter’s only offering is easily reproducible, the only way to survive that competition is to have a loyal user base.

Twitter Users Are Not Loyal

Twitterers talk about how much they love the service, but if tomorrow it was purchased by another company (Facebook… cough… cough), how many people would stop using it? (Hint: it rhymes with meero.) Extending that a bit, if Twitterers found that an identical service was available from another social network they were already using (Facebook… cough… cough), and they could easily make the move to the other service, including migration of their tweets, follows and followers, how many would consolidate under that existing social network?

In fact, a popular social network just finished a redesign to address this exact point, and make it much more Twitterish (Facebook… cough… co– well, you get the idea). I haven’t seen it yet, because I’m on a fast, but I just saw a tweet from a friend asking why she would use both services when she can get the same functionality (plus WAY more) from just one.

You get loyal users by constantly adding value, responding to users, and basically being better than the competition. Since 2006, Twitter has had several well-publicized service outages, and hardly changed its user-facing product. Their focus on API has only cost them hundreds of thousands of dollars in bandwidth and enabled others to profit from their service (more on this in a moment). This is not a formula for building loyalty.

Twitter Has No Business Model

I have read dozens of articles about how Twitter will “monetize” its service. All of the negative articles I found were by bloggers and media outlets. All of the positive ones I found were written by Twitter co-founders or investors. Hmm.

The main business model seems to be that once Twitter has enough users, any monetization scheme will work. This seems incredibly naive to me, but hey, I’m just a user.

Let’s look at some of the possible revenue streams:

Ads

(First of all, I hereby copyright the terms “tweetvertisement” and “advertweet.”)

Twitter could easily inject ads into their timeline, even ads that are relevant to the topics. This would essentially be Google Adwords, version 2. Considering the inane stuff that clogs up the typical timelines, this will undoubtedly lead to hilarity, but not profitability.

Another ad channel could be their search results; there is a lot of speculation that targetted search, where users would be looking for up-to-the-second tweets on a topic, could be a good space for relevant ads.

I am skeptical about the ad model, because Twitter is about fast access to concise information, breaking news, and tips from people you trust. Trying to break the flow by dangling ads in front of me is unlikely to get my interest. I’ve seen relevant, inline ads in Facebook– where I’m more open to longer visits, surfing around, etc.– and they don’t work either, at least not for me.

Text Fees From Telecoms

In an old post by Markus Frind, CEO of Plentyoffish.com, a commenter points to a podcast explaining that Twitter can make money from Telcos by getting a chunk of the money users pay for text messages.

This makes absolutely no sense to me. Most SMS users have a package that includes “unlimited” text messaging, which means that the effective value of each SMS goes down as the number of texts goes up. So it will be hard for Twitter to convince AT&T that it will drive AT&T’s revenue based on extra SMS charges.

In fact, SMS is likely a cost center; Twitter is probably burning through tens of thousands of dollars a month paying for its out-going SMS service.

Paid Corporate/Identity Accounts

Some companies are using Twitter to drive business. Dell estimates it made over $500K last year through this channel. Still, when asked if Dell would pay “per follower” for a Twitter account, the answer was “probably not.”

The scariest thing to me is that Twitter and it’s backers seem to think it’s obvious that charging for “verified” accounts will make money. This goes against everything we know about the internet, and social networks. Users figure out who is who pretty fast based on the quality of the interactions they have with that user. Barack Obama didn’t need a verified account. Shaq registered as “TheRealShaq” and users figured it out.

API useage

It looks like most of Twitter’s traffic is through it’s API services, which means that most users aren’t visiting the Twitter web site. Other products are piggy-backing on the Twitter service, improving it, and making money doing so. In fact, if Twitter introduces timeline ads, expect all the Twitter aggregators to introduce ad filtering.

API bandwidth is probably Twitter’s biggest cost. This means they must monetize it. Ultimately this means either charging API users (unlikely), or coming to an arrangement whereby API users allow Twitter to control what appears in the stream without any interference (no filtering of ads, for example).

Conclusion

Just today, the Washington Post reported that Twitter is testing out home page advertising. It will be interesting to see the results.

Despite my prognosis, I hope that Twitter proves me wrong, as I prefer having competitive products on the net. However, if I was a betting man, here’s the outcome I would put my money on: Facebook will super-charge their status update service into a viable Twitter competitor, and kill the fledgeling company within 2 years. Twitter will admit defeat by mid-2010, and spend 2011 negotiating their sale to Facebook, which will facilitate the eas
y migration of their users to the Facebook platform.