Saturday, November 8, 2008

How Do We Profit From Twitter?

Twitter doesn’t make any sense on the surface:

“Some startup is paying squillions of dollars so that you can broadcast free SMS messages to your friends worldwide?

And people actually sign up to have their mobiles clogged with annoying and mundane text messages of no-more-than 140 characters?

And some venture capitalist actually paid for this to get off the ground?”

It reeks of a type of here-we-go-again - dot-com-boom - this-time-in-Web-2.0-form hysteria - and sounds (on the surface) like some venture capitalist was so eager to jump onto the Web 2.0 phenomenon that he bought the first thing that came through his door.

Or at least this is what I thought when I first heard about Twitter.

“Where’s the value in this?” I asked myself.

But the more I scratch the surface (of the Twitter riddle, not my head), the more potential value I see in it.

Twitter is Growing at an Exponential Rate

Twitter’s membership base was said to be 100,000 strong as of late March, and was doubling every three weeks, according to Technology Review

And if the Unique ID’s of the RSS feeds are anything to go by, then as of earlier tonight (when I checked it out) there were at least 4,177,800 users!

And thousands more sign up every hour!!

This is a growth rate which new Web 2.0 services dream of - They type of massive growth experienced by MySpace and YouTube.

And already fan sites are popping up – like Twitterverse – a mashup which looks at the most commonly used words on Twitter.

As Steve Rubel points out, with these sorts of vital statistics it’s only a matter of time until Twitter gets snapped up.
Twitter’s Value is in its ability to Communicate

From a user’s perspective, the real value of Twitter is in its ability to help you communicate with people.

In that way, it’s just like a blog.

If you’re running an internet business, you probably already know the value of a blog: The more you communicate with people, the more likely it is that they will think of you and want to buy from you.

Twitter is just the same – although it has its own strengths and weaknesses.

On the downside, you can only send messages of up to 140 characters.

On the upside, people can receive your messages straight to their mobile phone – meaning you can access them in their daily lives in places where blogs, e-mail and other web technologies can’t reach.

And Twitter foots the bill for you!

What’s more, people WANT to hear about the mundane stuff that happens in your life.

Check out the Twitter account of 2008 U.S. Presidential hopeful, John Edwards - he already has over 2,000 people signed up to find out what he’s doing on a particular day.

Check it out:

(from staff): 1st quarter fundraising deadline is tomorrow…Sen. Edwards will be in KY, IN, OH, and FL today for the final push.

Riveting! :P

So what’s in it for Twitter? How does Twitter benefit from all of this?
Twitter’s Value is also in Its Huge Database

But from a business perspective (ie - from Twitter’s point of view) the real value in Twitter is in the size of its database.

SMS marketing companies pay millions to build their databases.

Twitter already has a database of millions of users.

If I had this sort of database, I know what I’d do.

* I’d start collecting demographic data from people (as they signed up, or next time they accessed their account). Age, gender, location – and perhaps some interests;

* I’d then start profiling the database, looking for what people are interested in / what they do. For example, a quick scan of the Twitterverse shows coffee is used often;

* Then, I’d look for companies who wanted to market to these people, by targeting their demographics or certain keywords.

Imagine it - Starbucks sends a broadcast out via Twitter to all users who had ever mentioned the word “coffee”, who lived in an area close to a Starbucks coffee house advertising their latest frappe – and offering people a free upsize if they show this SMS when they order!

Something like:

Try Starbucks new Lychee Frappe: Get yours upsized for free if you show this message when ordering. Today Only At Starbucks.

And you still have characters to spare! ;)

This is all well and good - but it doesn’t answer the question:
How Can You Profit From Twitter?

Ever since Ed Dale posed the question on his blog, making money out of Twitter is something I’ve spent a lot of time thinking about and researching.

I plan on talking about more in a few days time (so if you’re not subscribed to my RSS feed, then I recommend you hook yourself up right away).

Here’s just one idea – Woot (the site that sells one thing every day) is using Twitter to let people know about their daily specials – and already they have 2054 people signed up!

(Sorry John Edwards - more people are interested in hearing about cheap LCD TV’s than your 2008 Presidential Campaign. ;))

So how do you plan on cashing in from Twitter? What are your ideas and strategies?

Let’s get the conversation started


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