Tag Archives: profitability

Can Twitter’s business model be monetized?

twitter users.001

Twitter’s online growth has exploded last year. It is becoming more popularized with news organizations, celebrities, businesses and users. With the increase of users can Twitter’s existing business model be sustainable? Can it be monetized? This article from Wharton explained how the Twitter website increased its user base from 475,000 in February 2008 to over 7 million in February 2009.

Has this venture been monetizable?  It has not been so far.  Some of Wharton’s professors have argued that the service can be replicated by rivals such as Facebook, and question whether it is simply a fad (e.g. ICQ, Friendster and MySpace).

Part of its draw for marketers and celebrities is the ability to tap into conversations real-time, providing instant online commentary for an offline event and to join in conversations with consumers.  From a user standpoint, it is easy to track like-minded people, friends and celebrities.  Can data mining be used as a revenue model?  The social networks on twitter tend to be less meaningful than on Facebook or even MySpace, and thus, the information would be less value to marketers.  Facebook is a platform that contains more personal information about the user such as the conversations that surround the user’s offline and online activities (e.g. photo albums, interactive quizzes, etc.).

With the large increase in users, could Twitter charge for premium services such as being able to input more than 140 characters or even charging for advanced search options for twitter search?  There needs to be a balance between growth and earning profits.  Currently, the demographics for twitter are mostly with Generation X (people born between 1964 and 1979).  Compare that to Facebook, where much of the growth was with Generation Y (people born between 1980 to 1995), and it expanded to other age groups.  This clearly illustrates that Twitter’s growth maybe stunted.

I think there is money to be made with the development of the APIs.  As Twitter’s base expands, more developers will want to develop more applications for it.  As this occurs, the additional features will attract more users.  Once a critical mass is reached, Twitter can start to charge developers for making APIs on their platform.

What do you think?  Can you think of possible areas that Twitter can be monetizable?  Or do you think it is simply a fad?

Are companies built to “flip” versus built to last?

 

 

The above link is a concept that defies regular managment practices.

 

The article discusses how companies are increasingly built to sell based on potential to generate instant returns instead of the traditional practice of building sustainable businesses.  The “traditional” business mantra extends to a reason/purpose for the business to exist beyond profit motives.  These core values are embedded as an organizational culture.  According to the author, the traditional business model generates higher long-term returns.   

 

The main catalyst for this new model of businesses being built to “flip” instead of being built to “last” was from Venture Capitalists and from Wall Street.  In fact, the number of VC-backed start-ups more than doubled in the late 90s versus in the 80s.  The author included multiple examples of businesses that were being “flipped” and turned out that these businesses were not sustainable and did not generate the expected returns.  Some examples were during the late 1990’s technology bubble, when technology firms announced their IPOs, valuation of these firms generated unprecendented values.

 

The author mentioned that there were two cases that this model is viable:

 

1)   Leverage creative insight of one individual – e.g. Thomas Edison.  After this person/people created their invention(s), the company’s raison-d’etre waned. If the inventor/inventor(s) decides to leave the firm, their company’s raison-d’etre is history.

 

2) Sell technology to a larger company.  This small company does not need to have either the economy of scope or scale to develop a niche product.  They focus only on their core competency – their product/service.  Other business functions that are essential to the sale of the product/service such as distribution can be adopted by the larger company.

 

The author states that this “Built to flip” model is not sustainable. It devalues the tenet of a business’s raison-d’etre which is to contribute in a sustainable method to the economy. To simply dump a company based only on potential rather than sound financials cannot be sustainable. Markets are self-adjusting and would recognize the lack of substance.

 

Does the selected company built to work? Does it contribute? Is it meaningful – the sense of purpose beyond money?