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Twitter and its business model

It was busy last month in the Twitter offices. Dick Costolo stepped out as CEO under heavy pressure from shareholders. The results are disappointing and so a new CEO must be found. Chairmanship was taken over by Jack Dorsey, one of the founders of Twitter and currently CEO of  the payment company Square. Dorsey was previously  CEO of Twitter from May 2007 until October 2008.

The results are disappointing and that has everything to do with the fact that Twitter can not find a good concept to convince the 300 million users to spend money on Twitter and click on ads. Facebook and Google succeed much better at it. Twitter has only a market share of approximately 3% in the online advertising business while Facebook has more than 18% and Google even exceeds 36%.

It is logical that Twitter books little ad volume. People Tweeting regularly understand that it is almost impossible to place ads between messages. This distractstoo much from the conversation and the risk exists that users drop out. I do not understand, therefore,  that Twitter is not able to conceive no other business model than ads. If Twitter goes down that road it becomes difficult to achieve a higher valuation for the company. Twitter will thus need to find other ways to earn money and it does not seem very difficult.

Twitter monetizeTwitter is a great concept to make money but not through showing ads to users. The user of Twitter has a very different perspective than that of Facebook or Google. Google is used for search and if ads appear as a result it seems almost natural. If you’re using the convenient free Gmail then you are, in exchange for the application, ready to accept advertisements. If you have a look at Facebook messages and photos of your friends then it doesn’t disturb you to much that you see an occasional ad in the timeline.

Twitter, however, is used to communicate with others. Direct communication, fast and uncluttered. Ads disrupt the communications. It’s like you’re talking to someone and suddenly Amazon starts to roar its offers in your ear. The conversation is then disturbed. That is also on Twitter. Through Twitter you have direct interaction with other users and interaction should not be disturbed.

Therein lies the power of Twitter and thus the opportunity to monetize the platform. Many people have already discovered that you are helped quickly via Twitter by large companies or government institution. Twitter response is faster than trying to contact by phone. For the same governments and companies, it is also more efficient to answer questions via Twitter. Many have experienced that already. In that area are therefore opportunities for Twitter to make money, for example to  charge companies / government institutions for the use of the platform.

Another concept Twitter could make money with,  is to offer a search platform. Not such thing as Google but a platform where people who look for something specific are brought into contact with real persons with whom they can interact directly.

Yet another concept is a marketplace. A place where goods, services, stocks, businesses etc. can be traded. Actually Twitter would be the largest open outcry market in the world.
These concepts and more (think of movies, music, etc.) must be developed. Providing a platform and not get beyond thinking about how you are going to enter commerce is not enough. Normally I know Americans as people who do “out of the box” thinking. With Twitter, I see little progress in creative thinking about monetizing their product. I have developed a platform Tweetstart. A sort of Google but than for Twitter. Personally, I think this could be a top application for the use of Twitter. To further develop the platform Tweetstart I need capital and programming talent, so if you know someone, please contact me.
So, I think Twitter eminently a place where you can get answers.  Answers to questions that you do not find on Google. Google finds sites with information but on Twitter you can find people with knowledge and/or experience. Sometimes you just need that extra source of experience.
A match between Google and Twitter seems like a logical match. I would not be surprised once Google bid on Twitter. But, if it is not Google then it could be a different company. Twitter has a unique concept, making it a great proposition.
Thanks to Randall Liss who helped me editing this article. Randall is an options expert who writes a daily column called The Liss Report