Comments on: Saving Social Media with a Business Model?

By: Business Models « Internet Marketing

Business Models « Internet Marketing — Sat, 06 Feb 2010 02:18:03 +0000

[...] In the early days of the Internet, everybody was experimenting with business models. You might recall when Priceline tried to go into the grocery business and option pricing was brought to the Internet for buying consumer durables. On Tuesday we’ll talk about the various business models, which turns out to be (regardless of what the media and pundits try to tell you) basically a relatively finite number of possibilities. Also, if you want my take on what Twitter’s business model might be (and this has been a constant source of speculation), you can read it here. [...]

By: SEO India

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By: topspeeds

topspeeds — Mon, 21 Sep 2009 20:35:29 +0000

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By: California Animation College

California Animation College — Thu, 25 Jun 2009 11:10:49 +0000

Nobody really knows how successful an advertising model is in the context of social media. I’m betting on the fact that most big brands would try it, and then see that it doesn’t really pay …. the reason is simply because people aren’t using Twitter expecting to see ads interfere in their personal relationships and communications.

By: Ananda Chakravarty

Ananda Chakravarty — Mon, 08 Jun 2009 03:20:48 +0000

Spot on. Twitter can only sell behavioral targeting through ads or customer data research. These markets are already saturated from intense niche-based research firms to broad-based survey collectors and every significant high traffic site is already engaged in behavioral targeting – limiting any differentiation in the market. Only a subscription model might work, but that carries an inherent risk of ‘free’ services coming into the arena and usurping any gains. Almost all other biz models have limited ROI based on either costs or volume limitations. The transition to social media acceptance will take time, and Twitter will not have that time to build a solid exit strategy. As the technology gets cheaper and easier to implement, the advantages of Twitter vanish.
Quick SWOT:
Strengths -
Momentum – Social Media
Membership/Users (Tweeters)
Cost Structure – Scalable to Hardware
Uniqueness in mkt play (mobile)
Weaknesses -
No revenue model
Limited/unknown business/professional interest/focus
Oppty -
Buyout/Audience
Mobile computing play – SMS
Threats -
Fragmentation of Social Media
Limited/No barrier to entry
Sustaining user base
I’m sure you can find a few more to add to this – but unless Twitter finds something innovative and substantial quickly, they will be just a blip on the novelty radar.

By: Sean Hecking

Sean Hecking — Tue, 14 Apr 2009 19:05:54 +0000

Allen,
I think the only two lucrative business model options for social networks is: Brokerage or Advertising. In the brokerage model the site could display a personal recommendation for things like jobs, products, etc. and charge a fee paid by the participating company. If a company were to have an expanded profile (they pay for of course) it would act like a micro site to generate revenues off the recommendations. There has to be value on both sides (win-win) or the model will fail and people will jump to another social network.

By: Zetcepaspitte

Zetcepaspitte — Thu, 12 Mar 2009 23:33:40 +0000

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By: Allen Weiss

Allen Weiss — Sat, 14 Feb 2009 02:54:44 +0000

Hi All
Thanks for continuing the discussion. The free and then paid model could work (we’ve done that at MarketingProfs, for example), but as I’ve been saying, this probably wouldn’t get Twitter enough income to warrant the sky high valuations.
Let’s say there are 7M users of Twitter (which Pogue used as a figure in his NYTimes piece yesterday) and about 10% of the people said they would pay $5/month. Ok, that would mean income of about $42M/year. But would you pay, say $1.5B for that? Also, I would expect tons of competitors to fly in doing the same service for free. That would put pricing pressure on that $5/month charge.
Ok..let’s try the ad model. Today, Twitter reported biggest traffic coming from their api, not their website. That doesn’t bode well for an ad model since this means most people are using Twitter on clients (like Tweetdeck and Twirl), rather than the web site.
So, the idea that somebody will pay a bunch of money for Twitter seems most likely to me. Only that means the purchasing company will be in the same spot – meaning a very difficult way to make any money and their investment back. Ah..looks like the good old days of the Internet bubble

By: Meryl Steinberg (meryl333)

Meryl Steinberg (meryl333) — Fri, 13 Feb 2009 23:40:12 +0000

Good to ponder this issue. Frankly, I find the something-for- nothing model unrealistic for the long haul. If they don’t get greedy, I wouldn’t be mind being asked for payment of small fee for access to Twitter I get so much out of it.

By: BJ

BJ — Mon, 09 Feb 2009 16:44:14 +0000

Services such as MySpace, Facebook and Twitter have chosen the adverts-only model, and missed the “mixed-income model” that I’ve seen in LiveJournal — which is better tailored to the individual or corporate user’s needs.
Users of Free Accounts see adverts.
Paid or Permanent accounts don’t.
Yes, the code’s been utilized for other journaling networks, but despite that, I’m not seeing a significant amount of leakage of users from the LJ network to the free services (IJ, JF, etc), even considering the recent changes and shakeups.
I surmise that’s because the users have invested in their networks and those relationships. Tossing adverts on top of the pages, as recommended by Ray above, is going to drive some people away, and I certainly wouldn’t recommend it as a long-term viable option. It’s far too likely to create resentment, and resentment leads to network/site abandonment in favour of other sevices.
However, starting off with adverts, and offering an “opt out via paid membership” programme or “via additional account types/levels” is a more stable model, with multiple revenue streams.

By: Chris

Chris — Mon, 09 Feb 2009 16:37:38 +0000

The “somebody else will come and do it for free” argument is interesting. This suggests perpetual irrational behavior will occur – that company after company will jump head-first into providing this capability for free, only to discover that a sustainable business model must be devised. This will cause them to make the same decisions as Twitter, opening the door for another wide-eyed company to follow the same doomed path to failure.
This scenario is not impossible to imagine. Everyone is aware of the bar or restaurant in your area that keeps opening and closing as it changes owners. Despite the fact that everyone fails to make it profitable, the next person always thinks s/he can do better. Could happen.

By: Joe Pulizzi

Joe Pulizzi — Mon, 09 Feb 2009 15:51:03 +0000

Allen…loved the article and the ongoing discussion as well.
Twitter is the most important online business tool I use…but I don’t actually use Twitter, I use Tweetdeck. I never go to Twitter itself.
My relationships are with Twitterfeed and Tweetdeck (and sometimes Tweet Later), but not Twitter.
Your article has me thinking – how can a company like Twitter ultimately make money when no one goes to their website and all the data is free for the world to use? (of course, that’s your point, but it’s hard to believe there isn’t a model there…I can’t think of one either).
How would a VC company value the company? It seems more obvious for Facebook and MySpace, which use various advertising-based models…but what of Twitter?
Ultimately, I think a good bet would be a non-media company to gobble it up to leverage the user-base in some way…but even then, that company could scrape the data themselves, right?, but just wouldn’t have the opt-in permission a Twitter would have.
Thanks for this article Allen…it was needed.
Joe

By: Carl

Carl — Mon, 09 Feb 2009 00:49:24 +0000

Allen,
According to you, which business model does Second Life use? I say, none of the above.

By: Jeff

Jeff — Sat, 07 Feb 2009 00:30:00 +0000

Selling advertising is clearly the easiest and most straight-forward approach. But it would have to be pretty non-invasive to get people to accept it.
I think the only way, really, for Twitter to make its millions would be in the selling of data.
But Twitter is a unique case; most other social networking apps have fairly obvious ways they can make money.
Personally, I think Twitter’s best option is what Chris said– leverage their obvious talent and skills and create applications for other companies.

By: Allen Weiss

Allen Weiss — Fri, 06 Feb 2009 23:35:43 +0000

Thanks Ray and Chris
As for disabling 3rd party url shorteners, I doubt this could be done. If anybody knows how to do this and make it so it can’t be easily enabled by 3rd readers (like Twirl and Tweekdeck), I’d be interested in knowing this.
Actually, the idea of putting this into companies is intriguing (as I posted earlier), but I doubt companies would pay that much for it. Again, the technology isn’t proprietary so if a company really wanted this, they could probably create it themselves or buy a low cost solution somewhere.
Ok, you can see I’m a hard core skeptic here, but don’t take me too seriously

By: Chris Sonjeow

Chris Sonjeow — Fri, 06 Feb 2009 17:39:36 +0000

The problem with monetizing a program like twitter is that it’s too easy to develop these types of softwares. Yes, they are good ideas but the second you start to place a $$$ to it, people will just flock to the next free thing. You have to look at the face value of what is being done here.
The creators of twitter have shown that they understand how to create something that people want, right? That’s their leverage. I would say, they can now develop something specific for corporations to better their internal communications and then sell that. Kinda like how the guys who created Counter Strike (a Half-Life mod) leveraged their skills in gaming to get them jobs at Valve and beyond.
So, IMHO, I think they need to stop trying to make Twitter their win-fall and use it as their proving point to make large sums of cash on individual corporations.

By: Ray H

Ray H — Fri, 06 Feb 2009 17:18:12 +0000

Piggybacking on the tinyurl discussion, I think twitter should create their own version of a tinyurl-like function (call it a twink – twitter link, get it?). Upon clicking a link, the twink shows the page with an advertising overlay that the user can move out of the way of text. Any subsequent link clicked on that twink page would automatically modify the link into a twink page.
I’m not sure of the technology required behind it, but I don’t imagine it being too big of a problem for good developers.
And then they can disable the use of 3rd-party url-shorteners, and just have any url be automatically shortened into a twink.

By: LEADSExplorer

LEADSExplorer — Thu, 05 Feb 2009 12:57:11 +0000

Twitter is platform where other applications build upon. Thus they need to sell the use of this platform.
Similar to Amazon selling the use of its’ computers under S3 or EC2.
Thus every TW**** application should pay Twitter for the use.
Problem: now these useful applications need to find a business model.

By: dominic

dominic — Thu, 05 Feb 2009 03:28:26 +0000

@ Allen, maybe making it easier to build the tinyurl within twitter, with twitter look and feel instead of going to an external site could be enough to turn down competitors. (it’s only a 3 click differentiator and marginal user-friendliness, I know, but it would still be free, and financed by laser sharp targeted ads).
Btw, tinyurl already makes close to 3M visitor per month, more than half of twitter: http://siteanalytics.compete.com/tinyurl.com+twitter.com/?metric=uv), so it could be a good start . plus the zillion competitors wold have a hard time making a better service or making more revenues from ads.
Adwords is not that rocket science either and it’s only by having Google data that this becomes a killer app.

By: Allen Weiss

Allen Weiss — Thu, 05 Feb 2009 02:13:07 +0000

Hi Dominic
Sounds like a plan…but since there zillions of other services like tinyurl (I could even program such a service in a few hours), why wouldn’t people just use these other free services?
You’re right that they could own more of the info chain, but they gave that up essentially by having an open API..if they were to close off the API, well, you could be there would be a run for the exits.

By: dominic

dominic — Thu, 05 Feb 2009 01:42:38 +0000

Just an idea,
I feel like there are more and more tinyurls in the tweets I receive. Without twitter the tinyurl service has very little value.
Maybe an embedded version of tinyurl with highly targeted advertising would be a profitable option. (you know who is building the url, its network and the content of the destination site). I can do much better than adwords ( current ads on tinyurl) on this
So here is my game plan for Twitter:
- buy tinyurl and
- personalize ads
- sell for a premium.
There is probably also other similar opportunities by owning more of the info chain.
The net to me is that twitter has to acquire some services along the value chain and monetize on these.
Hey twitter guys, if you end up doing such a thing, we’ve some patent-pending stuff to contribute
There is still huge opportunities in relevant targeting without going into the (Facebook like) behavioral trap.

By: Allen Weiss

Allen Weiss — Wed, 04 Feb 2009 18:00:31 +0000

Hi Don and Sonny
Thanks for the posts. I do agree that corporations might want to pay for this, but only in the limited way you suggest (and again, I’m not sure this would validate the high valuation of Twitter since companies won’t pay that much for something that is essentially a commodity). If they are going to open it up to the larger Twitter community, then I guess they will quickly throttle the types of posts that will enter the company channel. Will they really want their employees spending the day devoted to following random twitter postings? I’m not sure.

By: Don Roedner

Don Roedner — Wed, 04 Feb 2009 17:24:03 +0000

Allen – Great post, thank you. A growing number of organizations seem to value Twitter as a channel for PR and promotion i.e., advertising in the native Twitter context. Assuming the Twitter community continues to grow, I could see a day when overt corporate participation in Twitter might carry a price tag. Corporations could always opt to participate in Twitter through selected employees or friends, but they’d lose the direct visibility and strength of their brand. I’m guessing many or even most would opt to pay to play. Corporations making good use of the Twitter channel would find justification for their investment in the volume of their followers. Unimaginative corporate tweeters would get ignored as they do now, and would either exit the channel or figure out how to add value.

By: Sonny Gill

Sonny Gill — Wed, 04 Feb 2009 16:51:08 +0000

Great thoughts that we all as marketers should be thinking about with our businesses.
With Twitter, specifically, I would think a ‘Freemium’ (subscription) model would work best. Yes, there would be some casual users who wouldn’t pay for Twitter but for a lot of the more prominent brands/individuals who use Twitter, we would be more than willing to do so if that equates to guaranteed uptime, premium API usage on Tweetdeck/Twhirl, additional features, etc.
Competitors pop up a lot within the ‘microblogging’ niche but with an established community, I don’t see enough people willing to port their followers to a free (and even equally as good) service to make a big enough impact on Twitter’s bottomline.

By: Allen Weiss

Allen Weiss — Wed, 04 Feb 2009 16:00:15 +0000

Hi Cam
I don’t know about patent law either, but if Twitter owns a patent, it sure isn’t a strong patent since Yammer and others are doing precisely the same thing. There isn’t much in the way of black box technologies here (the coding, while difficult, is easy to duplicate).
Ok…so before I forget, people on Twitter today (like they have in the past) are saying the business model should be like Yammer (private label twittering). This makes sense to me, but once again, given that competition will be able to duplicate it easily (wiggio.com, for example), this will push the prices down dramatically. Again, all I’m arguing here is that while a business model might exist, it doesn’t approach the valuations given this company)

By: Cam Beck

Cam Beck — Wed, 04 Feb 2009 15:33:15 +0000

There may be another model — let me know if you think this fits in with one of the others:
Speculation.
This is the model where someone invents something and either patents it (hoping for royalties) or invests the resources to build a community and make it very compelling for a complementary business to buy it.
I don’t know much about patent law as it relates to anything — but especially the Internet, code, and processes — but over the years a lot of companies made a ton of money in patent royalties, so why couldn’t a company like Twitter? Do they hold any patents now?

By: Allen Weiss

Allen Weiss — Wed, 04 Feb 2009 15:03:21 +0000

Thanks Paul and Gareth..yes, a licensing deal of the api might work for Twitter (but not bring in the boatloads of money that people value the company at), but this still raises the problems – at least from my perspective – that it pushes the monetization problem onto those who use the API – thus making them figure out how to charge for services. Again, this will raise the question of how many people will pay for anything here and what are the increased benefits that a Premium paid member might get (to me, it seems what everybody raves about is the simplicity of Twitter, not all the bells and whistles).
Yes, I agree this isn’t the same for all other companies, but my bet is that they all face the same problem…start charging and people will leave in mass to a huge number of companies who have no technology barrier and will provide the same service for free.

By: Paul Chaney

Paul Chaney — Wed, 04 Feb 2009 14:49:50 +0000

Regarding Twitter in particular, I proposed a model at the recent OMMA Social conference based on licensing part of Twitter’s API to third-party service providers (Tweetdeck and Twhirl for example) who, in turn, charges users for premium services similar in type to that provided by Yammer.
As to a business model for social media in general, I think there are a number of options, advertising being the least favorable.
But, keep in mind, when I refer to social media I’m not necessarily thinking of the large networks like MySpace, Facebook or Twitter.

By: Gareth Cutter

Gareth Cutter — Wed, 04 Feb 2009 14:48:45 +0000

Good article, Allen. As I was reading it through a thought crossed my mind that maybe advertisers, retailers etc. could be charged to have advertising accounts – but I can already see the loophole: anyone on the marketing team could become a ‘cheerleader’ for the brand with a personal account to help deal with PR disasters and other promotional work as ‘regular joes’. Plus, I think some of the existing Twitter users would rebel and, as you say, defect to a free equivalent.
I suppose one option would be to have paid premium accounts – although I’m not on Twitter yet so couldn’t hazard a guess at how the service could be commoditised…

By: Allen Weiss

Allen Weiss — Wed, 04 Feb 2009 14:20:20 +0000

Hi Paul
Thanks, however, I’m not sure how they will do behavioral targeting…say, I’m using TweetDeck, so they’d have to push the ads through xml, but TweetDeck can write code (if they want) to suppress those ads. So, Twitter is left with targeting ads only when people go to the twitter site – will users accept having their nice twitter pages turning into messy MySpace-like pages with ads cluttering it up? I don’t think so, but maybe.
Allen