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We've been talking a lot about Twitter lately. Everybody has. The popular microblogging service continues to grow rapidly in popularity and seems to be making the transition from a first-adopter favorite to a bona fide mainstream property.
But as it does so, the one topic that can't be avoided: Twitter's lack of a business model. Despite the fact that it has raised a lot of money from venture capitalists, at some point the legions of loyal Twitter users will want to see their favorite service fly under its own power. That means that a scalable and sustainable business model must be developed.
As I recently discussed, companies are increasingly looking to bridge the gap between Twitter as a marketing experiment and Twitter as a 'real' marketing platform that drives business. Yet as they do so, Twitter isn't making any money from the trend.
According to the UK's Marketing magazine, Twitter may be changing that soon. According to Marketing's Fiona Ramsay, Twitter co-founder Biz Stone stated:
"We are noticing more companies using Twitter and individuals following them. We can identify ways to make this experience even more valuable and charge for commercial accounts."
This is one of the most obvious business models and Twitter really has two options:
- It can create new commercial functionality that companies will voluntarily pay for.
- It can charge for all commercial accounts.
The former approach is problematic because, as I had previously mentioned, there's already so much that companies can do with Twitter at no cost. Twitter would need to create commercial functionality that is really compelling and valuable and alas, Stone didn't spill the beans on how the companies believes it can do this.
In the absence of a really compelling commercial offering that companies will have a strong reason to upgrade to, the latter approach is problematic because it's difficult to charge for something that was previously free. So difficult in fact that I'd suggest that there are relatively few companies online that can successfully pull this off.
Another problem Twitter must deal with is that commercial activity is hard to define. There are lots of sole proprietors and people who run small businesses using the service and their use is sometimes 'commercial' but not always. At the same time, there are also employees of large corporations who aren't tweeting in an official capacity but who have come to be recognized as Twitter representatives for their employers. And what about the increasing number of celebrities who are using Twitter?
Bottom line: what is commercial and what isn't commercial is often hard to define on Twitter.
Obviously, Twitter needs to make money and charging for overt commercial use is an obvious way to do this. But Twitter must be very careful in how it goes about rolling out commercial accounts. It may have a single opportunity and it has to execute flawlessly.
Bob Pearson, Dell's VP of Communities and Conversations, made it clear that Twitter doesn't have the type of leverage and flexibility some might think it has. He told Marketing magazine that "if [Twitter] becomes complicated and costly, our instinct would be to move elsewhere."
Despite Twitter's popularity, I think he's not the only one thinking along these lines. Which means that Twitter has its work cut out for it. In the meantime, companies will continue tweeting while Twitter tries to figure out the exact approach to capitalize. Hurry Twitter, but take your time.