This document analyzes Twitter's business model and challenges in monetizing its ecosystem. It finds that Twitter currently relies on promoted tweets, trends, and accounts, but these may not scale or fit the social nature of tweets. Most tweets are pointless blabber or conversations not easily tied to purchase intent. While the ecosystem is valuable for sharing information and trends, directly monetizing tweets, applications, trends or users faces challenges. The document argues that discovering a revenue model that fits Twitter's nature will be difficult and may remain an open challenge.

1. Twitter’s Business Model: 8th Wonder of the World Business Model 30, January 2011 pj | pj@beingpractical.com | www.beingpractical.com

2. the twitter ecosystem tweets applications users www.beingpractical.com pj@beingpractical.com beingpractical.com

3. what is twitter’s core product? tweets re-tweets (more tweets of tweet) 95 Mn tweets per day Source: Twitter - http://twitter.com/about - As of 14 Sept 2010 www.beingpractical.com pj@beingpractical.com beingpractical.com

4. who generates the tweets? 175 Mn registered users on twitter 75% applications thatare outside twitter.com 40% from users on mobile devices Source: Twitter - http://twitter.com/about - As of 14 Sept 2010 Business Week - http://www.businessinsider.com/twitter-stats-2010-4 Smart House - http://www.smarthouse.com.au/Content_And_Downloads/Applications/V5C7D9W9 www.beingpractical.com pj@beingpractical.com beingpractical.com

5. what are tweets all about? 4% 4% Spam 6% 40% News Self-Promotion Pointless Blabber 9% Pass-along value 38% Conversational Source: Pear Analytics - http://www.pearanalytics.com/blog/wp-content/uploads/2010/05/Twitter-Study-August-2009.pdf www.beingpractical.com pj@beingpractical.com beingpractical.com

6. do tweets get attention? 71% get no reaction 23% get replied 6% get re-tweeted Source: Sysomos- http://sysomos.com/insidetwitter/engagement/ www.beingpractical.com pj@beingpractical.com beingpractical.com

7. what is a life-span of a tweet Fractional! it depends on: 1. number of followers you have 2. % of your followers online at that time 3. rate of tweeting of people followed by your followers at that time Fractional tweets are seen. More fractional tweets are read. More fractional tweets are responded (replied or re-tweeted) www.beingpractical.com pj@beingpractical.com beingpractical.com

8. twitter’s current business model have 3 business offerings: - Promoted Tweets - Promoted Trends - Promoted Accounts All of these business offerings appear on Twitter.com, while - 71% tweets go without any reaction - 75% usage of twitter is outside of twitter.com - No context or relevance is applied based on user demographics (Sitting in India I see all US centric promoted tweets, trends & accounts) - Users who geo-tagged their tweets are minimal. www.beingpractical.com pj@beingpractical.com beingpractical.com

9. twitter’s revenue $140 Million According to internal documents leaked and published on TechCrunch, expected revenue for 2010 Twitter’s Business Model ? - Promoted Tweets - Promoted Trends - Promoted Accounts $140 Million = Source: TechCrunch- http://techcrunch.com/2009/07/15/twitters-financial-forecast-shows-first-revenue-in-q3-1-billion-users-in-2013/ www.beingpractical.com pj@beingpractical.com beingpractical.com

10. twitter’s revenue Twitter’s Business Model $46 Mn - Promoted Tweets - Promoted Trends - Promoted Accounts $140 Million = $46 Mn $46 Mn Assuming 33% revenue generation for each offering – they have to generate $46Mn per year $46Mn per year = $125,000 per day! That’s Expensive! But that may be true!Clickz – McDonald’s all day promoted trend costs around $80,000 Mashable– Mentioned reports from Wall Street Journal speculates promoted trends & tweets costing upwards of $100,000 TheNextWeb– Promoted tweets are sold for $100,000 or more ReadWriteWeb– Again quoting the Wall Street Journal report Source: Clickz- http://www.clickz.com/clickz/news/1869732/mcdonalds-mcrib-twitter-cooks-salty-comments Mashable- http://mashable.com/2010/09/27/promoted-tweet-pricing/ TheNextWeb- http://thenextweb.com/socialmedia/2010/09/27/twitters-promoted-tweets-already-a-failure/ ReadWriteWeb- http://www.readwriteweb.com/archives/twitters_promoted_tweets_sell_for_100k_and_up.php www.beingpractical.com pj@beingpractical.com beingpractical.com

11. twitter’s ecosystem is valuable, but cannot be monetized! tweets -> most tweets are blabbers, pointless -> user tweets are not intents like search keywords tweets are meant for others, not self -> user tweets with intent, the intent may not last for long the tweet itself is in social context, and may be intended for others -> twitter needs to discover the intent and push an advt to user as reply, but – that will lead to tweet spam, users will protest – its very difficult to decipher purchase intent from a tweet www.beingpractical.com pj@beingpractical.com beingpractical.com

12. twitter’s ecosystem is valuable, but cannot be monetized! applications -> twitter has indicated it will not allow applications to monetize tweets -> twitter cannot monetize applications by charging them 75% tweets are from apps, twitter is more dependant on it -> if twitter starts monetizing individual tweets, they will need to credit the applications that completed action. www.beingpractical.com pj@beingpractical.com beingpractical.com

13. twitter’s ecosystem is valuable, but cannot be monetized! trends -> most of the times natural trending topics are consequences of - offline news events - big announcements by brands/ companies / individuals -> a promoted trend may not cause same impact amongst users -> if twitter continues with promoted trends – this is model is not scalable. at $100,000 per day it will appeal only to a small segment of advertisers www.beingpractical.com pj@beingpractical.com beingpractical.com

14. twitter’s ecosystem is valuable, but cannot be monetized! users -> most followed twitter users are celebrities or big brands that have pulled more users to twitter. Twitter will not have been the same without such users. -> twitter will continue to offer ‘featured users’ and ‘verified accounts’ there may not be a business model here -> there may be little value to businesses for ‘promoted accounts’ to gather users to whom tweets may not relevant or received www.beingpractical.com pj@beingpractical.com beingpractical.com

15. twitter’s other business models! ecommerce -> product recommendations, purchases, reviews are already getting posted as tweets by users. Twitter may not be able to add more value in this! Twitter is not an affiliate or an ecommerce seller like Amazon analytics -> thanks to twitter API, there is not much analytics that twitter can provide which its API cannot. news -> twitter is anyway used by newspapers and users to break/share news key news become trends. there is no business model here. www.beingpractical.com pj@beingpractical.com beingpractical.com

16. twitter’s is trying to discover a new revenue model that fits is eco-system. although the ecosystem may be of value, the challenge to monetize it will be a remain for a long time. may be for always! twitter’s business model will surely be 8th wonder of this world www.beingpractical.com pj@beingpractical.com beingpractical.com

17. Fail Whale Wallpaper. Image credit – Cheth Studios #thank-you Note: All thoughts, concepts mentioned and views expressed are made in personal capacity. www.beingpractical.com pj@beingpractical.com