Tag Archives: wharton

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?

If you had $60M, what would you do?

News of the AIG bonuses and other financial institution bonuses and perks have received populist angst. While companies that received bailout money continue to pay out extravagant bonuses and parties, this one did the opposite of that, in this interview a man named Leonard Abess, sold his bank for $60 million dollars and rather than lining his own pockets, he shared it with his employees.  Why would he do that?

He believed that people are the center and the core of any business.  He felt his employees contribute to much of his banks’ success and felt that they acted and worked like owners, and he wanted to acknowledge that.  In his annual report, he acknowledged and thanked his employees first before talking about the various metrics as so many companies are apt to do.

With regards to laying people off:

“….I tell young CEOs, that before you cut anybody’s compensation, before you fire anybody for economic reasons, you deal with yourself. Your perks go, your bonus goes, your salary goes. I am very surprised when I see huge amounts of money that go to the people at the top [even] as there are massive layoffs, especially when they accept government money.

One of the greatest traits that any leader has, according to Mr. Abess, is the ability to listen.  Mr. Abess knows his employees names’, spouses names’ and even their parents and children.  He added that leaders lead by example such as: motivate people, being human and being real and talking to people.  They should also have a clear moral compass and clear ethics and be examples in their communities.

It is too bad in the news, we hear too much about the greedy and morally corrupt leaders and not the ones that influence and inspire positive change like Mr. Abess.  He truly exemplifies a positive force in leadership.

Global Businesses

In the 1980s there was a shift to globalization, in which a Western or Japanese firm would go to a low cost center (e.g. China, Malaysia, Brazil, etc.) that had inexpensive labor rates, set-up operations, and have these businesses export goods to their home countries.  This was the modus operandi that was pervasive throughout the late 1980s and 1990s.  However, there is a shift from globalization to globality, which firms from developing countries compete with the Western and Japanese firms in the global markets, according to an interview conducted by Knowledge at Wharton of Hal Sirkin, senior partner and Managing Director at the Boston Consulting Group.

For every threat, there is an opportunity.  These firms will challenge everyone from everywhere for everything.  Everything refers to not just products/services but also raw materials, intellectual captal and human talent.  The Western firms need to adapt and compete by the different rules.  This rise in globality is attributable to different regions of the world having different capabilities and costs. An example of globality was when Lenovo, a Chinese multinational bought IBM in order to compete more effectively in the developed world, and to acquire new capabilities including intellectual capital and human talent.  

For companies that operate in low costs centers such as China and India, these firms need to observe and learn how the world’s best function.  These multinational firms from the West and Japan may eventually compete in their local markets. This is also a reality in Western countries and Japan, companies that compete locally need to be cognizant of the emerging multinational as discussed in the previous example of Lenovo.  A realization is needed  that the old business model of one-way street competition (globalization) has transformed to the two-way street competition (globality) model.  

Between China and India, there are already 2.5 billion people.  In addition to the sheer size of the market, the economies of both countries are expanding at a rapid pace.  People that were in abject poverty are moving into the consumer market.  As a result, in the next 20 years, there will be a billion new people that will enter into the consumer market.  

Of course to understand the behaviors and the motivations of the consumer, it is a necessity to set up operations in those locations. This extends to both the Western and Emerging multinationals.  Each one now has similar challenges in understanding their local markets respectively.  Rather than using a U.S. or China centric approach, blend both approaches together and take the best from each.

Here is a quote from the interview regarding the blending of both approaches:

They’re blending the best of the East and the West and saying, “I’m okay being a high-cost competitor in some places because it’s worth it. I can charge the right price and learn the right skills. I don’t have to be just a low-cost competitor.” And they’ve done an excellent job of blending who they are.

I think that it was only a matter of time that firms that were principally based in emerging low cost centers would eventually expand their capabilities to compete internationally.  When globalization occurred, as Western multinationals set-up businesses in these locales, some of their capabilities were being mimicked by local businesses.  Once perfected, they competed internationally.  First it was the Japanese, then it was the Koreans and now it is the Chinese.  In the future, it would be the Indians, Brazilians and others.  In my opinion, there won’t be any borders that separate businesses, as both Western and Emerging firms purchase other firms in various places around the world, it has changed the environment of business in both developed and developing countries.

Why do companies rest on their laurels and not embrace change?

It is well-known that in order for companies to innovate and build sustainable businesses, they must adapt both their business model and products/services to match the marketplace and the consumer’s needs and wants.  But many businesses seem resistant to change, even ones that are/were dominant.  If this problem is widely-known, why does this exist?

Knowledge at Wharton examines a book by Black and Gregersen that examines this.  The article cites numerous examples that involve both companies and individuals.

In the case of mobile phones, Motorola was highly successful with analog phones.  Even though digital phone technology existed, it did not feel the need to invest in the future technology because their core competency was in analog technology, and digital technology was an expensive proposition for both the mobile phone producer and the carriers.  Nokia took an opportunity with digital technology, and became the largest mobile phone company in the world.   Samsung was for a while perceived to be a discount mobile phone producer.  It has made inroads in Asia where mobile phone penetration is amongst the highest in the world.  It also recognized the need for a camera in the handset, this was not to replace the digital camera, but rather used as a convenience instead.  Just as Motorola ignored Nokia, it paid dearly with respect to both earnings and market share.  By ignoring the emergence of Samsung as a competitor, Nokia also suffered from the same mistake as Motorola.  Will Motorola, Nokia and Samsung all suffer the same fate with the emergence of Apple and its iPhone? Only time will tell.

The historical example from the article mentioned a Spanish explorer named Cortes was commissioned to find the island of California.  Upon exploring the Gulf of Baja, he was convinced that California was an island.  Another explorer was sent to corroborate the findings of Cortes, and he too was convinced that California was an island.  Because the King of Spain believed this, and that there was difficulty to dispel this notion, it took more than 200 years to correct.

So, why did Motorola, Nokia, and Cortes rest on their laurels and did not effectively adapt to the changing ideas?  This was because both the companies and individuals did not fully understand the strength of new ideas and they did not take the time to fully understand them, and it has led to the downfall of these aforementioned companies and individuals.  More importantly, many companies or individuals are blinded by this missed opportunity because of their current successes in their present model or way of thinking.  Both people and companies develop mental maps on how certain procedures or ideas operate.  The longer these maps have been successful, the harder it is for people or companies to feel a need to switch.  These mental maps also guide both peoples’ and companies’ paradigms.  This trap can happen to any company and to anyone.

I also think that there are other reasons in addition to the ones stated in the article, in my opinion, these include: 1) The hardship and the difficulty that the businesses or individuals perceive as well as experience in order to fulfill the change;  2) Businesses or individuals believe that focusing on its core competency(ies) will minimize its potential failures;  3) From a cost perspective, being already invested in its core competency can reap both economies of scale and scope, and these would not be realized with focusing or investing in new technologies; 4) new and emerging technologies or ideas are unknown, and therefore risky.