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Twitter founder Biz Stone isn't all that concerned with making money.

Earlier this month, he told Portfolio.com's Sam Gustin that "at this point, given that we have plenty of money in the bank, it makes a lot more sense not to distract ourselves with trying to put the finishing touches on a revenue plan."

But while Stone may not be focused on making money, he certainly knows that he's spending it.

On August 13,he announced that Twitter would stop delivering outbound SMS messages in the UK.

He was quite clear about the reason why:

"Mobile operators in most of the world charge users to send updates. When you send one message to Twitter and we send it to ten followers, you aren't charged ten times—that's because we've been footing the bill. When we launched our free SMS service to the world, we set the clock ticking. As the service grew in popularity, so too would the price."

"It pains us to take this measure. However, we need to avoid placing undue burden on our company and our service. Even with a limit of 250 messages received per week, it could cost Twitter about $1,000 per user, per year to send SMS outside of Canada, India, or the US. It makes more sense for us to establish fair billing arrangements with mobile operators than it does to pass these high fees on to our users."

The decision is probably especially painful to Twitter becauseaccording to Hitwise, Twitter is more popular in the UK than it is in the United States.

As PaidContent.org's Robert Andrews details:

"A big part of the problem may be Twitter’s choice of UK SMS distributor."

Apparently, Twitter is using an offshore telco in the Isle of Man to handle its UK-bound messaging, which has increased its costs.

However, Andrews observes that other major companies are using the same Isle of Man telco so he wonders if "perhaps the problem lays more with the economics of Twitter itself."

Bingo!

Twitter's shuttering of outbound SMS messages in the UK is the direct result of two things:

  • Twitter's lack of a business model.
  • Poor management decisions.

The saying "Don't put off until tomorrow what you can do today" applies to business. Yet Twitter has done exactly the opposite by putting off the development of a business model.

When Stone writes "we need to avoid placing undue burden on our company and our service," does he not realize that the lack of a means to generate revenue is the greatest burden he can place on his company?

Apparently not.

Note to Stone: when you don't have a business model, all of your expenses will eventually become an "undue burden" on your company.

Furthermore, Twitter should be faulted for making bad decisions when it comes to its relationships with mobile operators.

Stone wrote:

"It makes more sense for us to establish fair billing arrangements with mobile operators than it does to pass these high fees on to our users."

"Twitter will continue to negotiate with mobile operators in Europe, Asia, China, Australia, The Americas, and other regions to forge relationships that benefit all our users. Our goal is to provide full, two-way service with Twitter via SMS to every nation in a way that is sustainable from a cost perspective."

I had to chuckle when I read this and I couldn't help but think that Stone was being a bit disingenuous.

Let's be clear - Twitter must have established "fair" billing arrangements with mobile operators. They just weren't, in hindsight, "fair" enough.

Essentially, Stone is admitting that the company made poor decisions vis-à-vis its mobile agreements and probably didn't negotiate the type of arrangements with mobile operators that it should have attempted to originally.

Given the fact that the company has cut UK outbound messaging, it appears that "talks with mobile companies around the world" may take some time. After all, if the type of "fair billing arrangements" Stone is seeking were easy to obtain, one would think that the company would be inclined to keep UK messaging intact.

There may be a silver lining in this situation, however.

The mere fact that Twitter management is starting to think about pesky little things like costs is a sign that Twitter is starting to be run like a real business.

Which just might mean that an attempt at a real business model is right around the corner

Given that some Twitter users state a willingness to pay for Twitter, my advice to Stone is simple - take them up on the offer.

In fact, even though I think Twitter is useless, if Stone has enough people willing to waste time on Twitter and pay for the privilege, he just might build a nice little subscription-based business that does quite well.

Drama 2.0

Published 28 August, 2008 by Drama 2.0

237 more posts from this author

Comments (2)

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Craig Mason

Twitter doesn't believe that people are willing to pay for receiving their SMS messages, whereas recent surveys have shown that many people are prepared to.

We've started http://www.tweetSMS.com and have had a great response, even before we launched. It will be very interesting to see how our user-base develops over the coming months.

over 8 years ago

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Jeff Bonnes

There was a big rush of providers to replace the SMS functionality that twitter dropped from it's International users. The first one was http://www.twitsms.co.uk which was up only 3 days after Twitter cut the service. There have been many others since. It seems strange that Twitter seemed to go out of it's way to avoid collecting money from it's users for a service they are willing to pay for!

over 8 years ago

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