Twitter’s (almost) Business Model

There has been much debate about Twitter revolving around opinions that it lacks a reason for being, revenue, business model, and ultimate fiscal viability. And yet some really really smart, really really rich VC investors not only dumped an additional $35 million into it, but then proceeded to laugh at the lack of a business model. But things are about to change, there’s a whole new PPC marketplace coming down the road, and there’s a long long tail of Twitter revenue out there for the taking.

Now, I’m not going to say that the naysayers are short-sighted dinosaurs who think flying is for insects and will therefore go extinct while their forward thinking friends sprout feathers. And I’m not going to say that this is the same type of clinging to old paradigms that has landed traditional marketing agencies and departments in hot water with budgets getting slashed because they are losing audiences, losing engagement levels, and can barely find ways to measure their reach and effectiveness.

Twitter is having its hockey stick moment:


Actually, it has been having it for a while. Now it’s going totally mainstream:

picture-2Pop culture celebrities and news anchors are jumping on board. Marketing agencies are espousing the benefits of Tweeting a brand to their clients and getting paid to design Tweet campaigns on behalf of their clients. Granted, it was on JetBlue, and it was on a flight heading to the opening of SxSW, but think about it: A flight attendant told the passengers to update Twitter upon their arrival.

But going mainstream doesn’t just mean more people using Twitter. It means more people in the community to be reached by people who can leverage it correctly. Since the very beginning of social living in animals, individuals who were able to leverage their social interactions have been able to use that to their advantage.

The same was true for the very first marketers at the dawn of commerce, for managers of general stores in the last century, and it’s true today for brand managers of hyper-huge multinational conglomerates.

Here’s my point – “It’s Insane!”

As reported by TechCrunch (@techcrunch) Jason Calacanis (@jasoncalacanis) made a legitimate offer of $250,000 for 2 years placement in a slot on the ‘Suggested’ list to follow that Twitter provides. And you know why he’s offerring so much money? Because he thinks it’s an absolute steal at that price. And he’s right.

huge_saleTo quote TechCrunch:

“Simply being on that list can boost your followers well above 100,000. … Many of the most popular Twitter users are on the list, including TechCrunch (we have 214,465 followers). It is insane.”

To quote Calacanis from that article:

“I believe that in five years the top 20 recommend slots will be worth $1m a year each–super bowl commercial level in fact.”

But What About The Ethics?

People may argue ethical concerns about paying for a placement that is suggested to the users. This is a non-issue in my mind. Google allows people to pay to insert advertisements alongside organic results. Why not allow people to pay to insert their accounts into organic recommendations from Twitter? And just like in a crocodile, the meat is in the tail.

The Long Long Tail of Twitter Revenue and the New Paid Insertion:

This central page of recommended people to follow is blunt and powerful, and easy to understand. But Twitter is going to have the capability to create infinite recommended lists. For any search a user enters in http://search.twitter.com, Twitter will be able to compile a list of users to follow if you are interested in tracking information about that topic over time. This list could be based on statistical analysis of users’ posts and their relevance to the search query. (Who knows if they’ll actually do it this way exactly, but the concept is valid.) So sure, they could rake in Superbowl-like money from that front page of recommendations, but the long tail of micro-revenue based on all the other queries within Twitter will support an Adsense type market where users can bid to place their accounts with prices based on relevance and demand – thus completing the prognosticated ‘Twitter is a Search Engine” theory by showing it can function not only as a search engine, but also as an advertising marketplace.

It may only be a matter of time before you can bid to place your Twitter profile next to organic results for #catswearingtuxedos and then use the Twitter attention you get to direct traffic back to your very prestigious blog all about cats wearing tuxedos. It’s a whole new world of paid search that may be opening up soon.

So buy your Twitter clicks early; maybe even try to get a steal like Jason Calacanis. Because when your #catswearingtuxedos Twitter query starts to trend upwards, this is all going to start getting more expensive. And weird.

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