Background: I downloaded Seesmic Desktop tonight. I like it a lot, but that’s not the subject of this post. This post is about the importance of Twitter’s business model to nurture a vibrant ecosystem.
2009 is shaping up to be the year Twitter’s white-hotness explodes into the mainstream. To me, nothing made this more clear than the New York Times’ real-time mapping of tweets during the Super Bowl.
Leading up to and following the Super Bowl, the media coverage and hype on Twitter has been, in a word, superlative. Literally, stuff of Silicon Valley legend. Facebook and Google are rumored acquirers. Inaugurations and political conversations are changed. Terrorist attacks are reported first through twitter. Sully’s downed plane was twittered. Etc.
And all this is fantastic. Twitter’s a very useful service, and there’s not a shred of doubt in my mind that it will continue to have an ever increasing impact, its management team will find a substantial, sustaining business model for itself, and its founders, investors, and employees will make a well-deserved, honestly gained fortune.
In the technosphere, not everyone is so sanguine. It is a common question to ponder how Twitter might make money. I was pondering this myself tonight as I tried out Seesmic Desktop. I realized the question of Twitter making revenue is a silly question; entirely the wrong question. Playing with Seesmic more, though I realized that there is a better question on the topic of Twitter and business model.
The right question is this: how will Twitter enable a broad and sustainably profitable partner ecosystem?
Twitter is clearly the PLATFORM, rubbing in Barry Bonds’ “Clear,” and eating the Michael Phelps 20,000 calorie diet (no bong hits thank you!) to bulk up into the 800# gorilla it will be. It’ll make revenue in the same way that Bonds, Phelps, Microsoft, and Google do—they have natural monopolies, in the form of hand-eye coordination to hit 800 HRs, win 8 Olympic medals or own 98% share of PC OSs or 75% of web search. Twitter’s got the traffic, the network effect is strong and increasing.
Everyone else though — the Tweetdeck or Seesmic Desktop or Bit.ly guys are the “Applications,” and they don’t ride with the Platform guys (yet). The Application guys, at least for now, appear to be catching the crumbs from Twitter’s table. This is a challenge for Twitter, potentially a tough one for them longer term. To use the most powerful recent example of platform healthiness—the Iphone–the great thing about the Iphone platform is that it’s crystal clear that app vendors can make money on it. App writer builds app; app writer gets royalty. Very clean. very simple.
With Twitter, less so. While I think its silly to ask whether Twitter will make money, I do think its a fair and important question to ask whether the Twitter App guys will and how they’ll do it sustainably. And answering this question is important, not just to the App guys, but in fact to Twitter as well.
Here’s why. First, it is going to be hard work for app vendors to get and sustain a lead, as Seesmic and Tweetdeck among others will likely show us in the next several months. The arms race will continue, etc., but it’ll be difficult to see who will ‘win’ the market share. Beyond that then, there’s the question of how would either monetize? Will they have an ad platform from Twitter they can tap, similar to Facebook? Not clear yet. Are customers going to want to send virtual beers or pokes thru Twitter in the same way they do in Facebook? Not sure. So my view is that the application guys have a tough slog in front of them. They could end up winning some market share war, without any revenue legs to stand on.
And this is something Twitter needs to help the Seesmics and others get clear around. How all this tweeting will turn into sustainable revenue for them. Twitter can’t entirely punt this to the app guy, nor can Twitter solve it entirely for them. In my experiences with platforms, and I spent a decade on them, this ain’t easy.
It’ll be exciting to watch Twitter continue to grow and the innovation in the ecosystem around it. I’ll be keen to see how Twitter’s business model comes forth, and I’ll pay attention to how that model helps app vendors make money.