By, Krunal Barabde
“Joy of giving” a humanitarian and selfless philanthropist concept of giving things to others, it sounds antonym for doing profitable business. Same can be observed in case of Twitter a word almost synonymous with Facebook and the heartbeat of social media, which is no longer paring with later on the financial front at least.
The idea of Twitter took birth by brainstorming session of podcasting company Odeo. The idea was to create a platform, which is similar to SMS, but is free for communication and has character length of “10958” and later changed to “404404”. After its prototype release in July 2006, Twitter spun off in 2007 from Odeo. Twitter’s founders Evan Williams, Biz Stone, Dorsey and other members from Odeo regarded Twitter as information network than social network[i]. The tipping point for Twitter was in South by Southwest interactive conference. Twitter users where multiplying faster and so were the tweets. I remember more than the newspaper or tech news it was word of mouth that was pushing people on Twitter. The notion of getting connected to people who you can just imagine of speaking directly was important for many.
Twitter is open source software, 85% of revenues are generated from advertisement and 15% from data licensing. As we progress through stages of development, stagnancy has stopped the growth, since in business terms, market has matured. However, Twitter has other problems in its bag, Twitter’s open source software allowed third party app developers to develop applications. This resulted in the birth of tweetbot and twitterific. In 2010 Twitter acquired award winning Twitter client tweetie. However, if you observe the revenue growth for Twitter, it is not as impressive as number of users, because open source access to the Twitter stream (in common man language access to all tweets and stats related to it) led to the crunch in advertisement revenues. Anybody could develop an app using Twitter’s stream and even garnish advertisement, as this sounds similar to Joy of Giving on Twitter’s behalf, it was helping Twitter to multiply users but proved fatal on financial statements.
Twitter’s revenue is not increasing impressively as its hunger to maintain its servers. Therefore, in 2011 Twitter made a business decision of releasing version 1.1. It tightened the screws on free app developers and drove them away from Twitter. However, this did translate into a revenue multiplication but has never delivered the required profit margins for Twitter. Lately Twitter has taken some steps to win back the app developers by using the algorithmic method to see what users see[ii].
Twitter may not grow like before, but definitely with this strategy they might take a short term hit but long term they can leverage the access to huge and precious data. With its recent partnership with IBM, Twitter has put the foot in right direction to utilize its intangible asset to earn profit in the business. Many FMCG companies across the globe will be hopping to get access to Twitter data to analyze the trend and forecast production in future. Imagine the words “ low level of inventory and just in time supply chain” coming to reality and delivering profit to manufacturing sector with the help more accurate prediction than before.
Many pundits may differ on the current strategy of Twitter due to their stagnancy in growth of number of users but these pundits can’t deny that access to all data stream was never going to be sustainable business model for Twitter.