The Twitter Value Paradox

By George Reese
January 18, 2009 | Comments: 3

Twitter is the only social media tool that has proven itself in the business arena. While some tools have serviced niche uses for specific industries, Twitter's global appeal to business and the amount of value it adds are unmatched. The irony of this situation is that any attempt to recapture that value necessarily destroys it.

Let's do a little thought experiment. Let's say you run a company that makes broiled widgets. How much would you pay to know whenever a potential buyer anywhere in the world is in the decision-making process to buy a broiled widget? I'd be willing to bet you'd trade your CRM system and pay quite a bit for that qualified lead.

That's real value; and any company who delivers it deserves compensation for that value. Twitter delivers that value. Using any number of tools out there, you can mine the Twitter stream for people tweeting about broiled widgets. If a Twitter user is thinking about broiled widget purchases, chances are they are tweeting about it. In doing so, they are inviting you in to talk about your product.

Twitter derives this tremendous value from three factors:

  1. Twitter is a disinterested party
  2. The Twitter population lacks meaningful (in this context) sampling bias
  3. The Twitter population is large and growing rapidly

Unfortunately, any attempt to recapture Twitter's value destroys these factors that create that value.



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The minute Twitter charges anything for Twitter—either directly through subscription fees or indirectly through API access fees—they do three things:

  1. You reduce the number of people willing to try the service
  2. You reduce the number of people willing to continue using the service
  3. You skew the population towards people who find more value in the service

The last impact is one that I think is the least talked about, but the most problematic. Currently, Twitter welcomes everyone—whether you find almost no value in the service or whether you derive great value from the service. The people who find great value in the service derive that great value from the presence of people who find little value in the service. Any kind of charges born by Twitter users will cut out a certain level of people who find limited value in the service. Without the Twitter users who find limited value to tweet their mundane thoughts, the service ceases to provide the same value to those who formerly saw great value in the service.

A lot of smart people—presumably including the investors in Twitter—have been thinking long and hard about this problem. I have seen a number of different business models evolve, including:

  • Charging users to use the system
  • Charging tools vendors for API access
  • Charging for advertising

In the end, the only business model I see being workable is something similar to Google Analytics. Google Analytics is a free service that Google can use to recapture value because it helps its users see the value they are receiving from the Google services like Google AdWords they pay for. I just don't see what that scenario is for Twitter. I hope they find one though; they deserve to realize value from the service and it would be a shame to see it disappear because they someday find they cannot afford to continue paying for operating such a valuable business.


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3 Comments

How about a Google AdWords-style model, where Twitter users get personalised ads based on what they twitter about? Then I can set up an ad so that all broiled-widget-twitterers see my message. Highly targeted and presumably well-aimed at those who are in an active broiled-widget mindset, which is one reason Google ads work so well.

I suppose the simplest version of this model only works for those who twitter on the Web (which includes me, and probably lots of other people in the UK where SMSs cost money) - what proportion of overall usage does that represent?

To extend it to mobile users might mean sending them extra tweets with the adverts in, which is potentially off-putting. In any case, I assume this model has been proposed in the conversations you refer to - what other objections are there to it?

You make some pretty unsubstantiated claims about the value of Twitter to businesses in the set-up, IMO.

"If a Twitter user is thinking about broiled widget purchases, chances are they are tweeting about it."

I use Gmail every day, and I am thinking about purchasing all kinds of stuff every day. Does it stand to reason that if I am thinking about buying something I am going to send an email about it to a friend or colleague via Gmail? Of course not - just like it doesn't stand to reason that if I am a Twitter user and I plan to purchase something that I'm going to tweet about it. That's only one of thousands of possible ways (online and offline) that a potential buyer might talk about something.

"Twitter is the only social media tool that has proven itself in the business arena."

Ok - to me the word 'proven' implies a sure thing. Salesforce.com has 'proven' to be a good way to organize and manage sales leads and statuses. RSS has 'proven' to be a great way to pull content dynamically into a portal. Windows Vista has 'proven' to be a major embarrassment to MSFT. Twitter has only vaguely demonstrated its place in the business arena, IMO. And the folks that are cheerleading the hardest about its impact on marketing are marketers who have a personal interest in establishing their Twitter expertise.

I think there is something irresponsible about this type of "Twitter for business" cheerleading hyperbole, and it's happening all over the place. It misleads busy marketing people into believing that it is something more than it really is ... or that it is an absolutely rock-solid vehicle to attaining certain marketing goals.

You know what I see most when i search Tweets on topics of business interest (like "virtualization")? I see a lot of tiny URLs to white papers (from marketing people). I see a lot of links to content about virtualization (by bloggers / analysts). I see a lot of insipid / promotional comments from PR folks inserting their client into the discussion. I.e., a lot of bread crumbs to sales and marketing collateral. You know what I *don't* see very much of? Actual enterprise IT buyers sharing their interest in buying virtualization solutions.

Maybe someday Twitter will be this amazing goldmine of qualified leads that can be tapped into. I don't think we're even remotely there today to the extent that this Twitter advertorial suggests.

I completely agree regarding the analytics value of Twitter. Tremendous potential there already being tapped by some industrious agents. I also wonder which additional API's Twitter has access to that aren't shared with public.

I still maintain that secured enterprise deploys are also highly valuable. Pair that with internal analytics for business intel...

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