Categorized | Insight, Movies

Twit twit twitter away with no money…

In this article from Wired.com, it’s funny how something as popular as twitter can’t figure out a way to make  a dime.  Maybe they need some suggestions.  Scribe your thoughts below and maybe we can figure this out for Twitter.  Revenue on the web is a tricky business and these times don’t make it any easier.  Everybody expects everything for free on the net.  Times are a changing though and maybe a free net is just not feasible for the future…Only time will tell.

Twitter Could ‘Go for Years’ Without Earning a Dime, Investor Says

By Chris Snyder

Apparently, Twitter doesn’t need a business plan. At least not for years to come.

“We’ve got a ton of cash. We have far more cash then we need, so I’m not in any hurry,” said Todd Chaffee, General Partner at Institutional Venture Partners, or IVP.

Chaffee, in an interview with Wired.com, says the microblogging service that is the darling of the social media set — and the object of a persistent drumbeat of questions about how and when it will actually earn any money — is well north of $50 million on the balance sheet. And that, he said, can last them for years.

In fact, Twitter did not even actively seek out the current, third round of $35 million in funding lead by Benchmark Capital and IVP, Chaffee said.

It’s hard to argue with the endorsement an unsolicited $35 million windfall implies, but it’s also difficult to ignore the parallels to an earlier era of tech investment enthusiasm, when eyeballs and market share were all that mattered and the thought of actually earning any operational revenue seemed oddly crude, inappropriate and unhip.

But Chaffee, who was also an earlier investor in Yahoo, is still brimming with optimism that the “if you build it they will eventually pay” approach will work.

“You essentially have this company which has these assets that’s turning into a very large media property,” he said. “When you have tens of millions or hundreds of millions of people actively engaged everyday, you’ve got all sorts of monetization opportunities.”

Still, it’s not that they haven’t thought about it. Late last year Twitter investor Bijan Sabet told Wired.com it would unveil a business plan in early 2009 (still time for that). And Chaffee says they profiled a number of potential business models with Twitter before investing. Without providing any specific details, he said that the platform offers much more than your usual online display advertising.

“Twitter has some unique ones like the ability to verify whether or not it’s a real brand that’s being promoted,” he said, noting that anything they do will likely be implemented gradually and in harmony with the service (i.e., no out-of-place banner ads).  Twitter will always remain free to anyone, however, which co-founder Biz Stone has made clear.

More and more brands are turning to Twitter to promote goods and provide feedback on products, but it is difficult to determine who is legit. Burger King recently ran into a case of “brand jacking” with a fake Whopper Virgins account, and someone impersonating the Dalai Lama was escorted off Twitter only to be later reinstated with the mark “unofficial.”

Business model aside, Chaffee has some extremely high hopes for Twitter’s growth and potential, and says he typically has a self-proclaimed hatred for technology unless it improves your life.

“Part of where this thing may go, it may supersede other communication channels,” said Chaffee, who thinks Twitter could some day surpass e-mail and IM.

In general, Twitter has been slowly creeping its way into the mainstream with the help of big names like CNN news anchor Rick Sanchez, who chats with people live on his show, and some big time shout-outs at popular events like the 2009 Grammy Awards, which directed viewers to its Twitter coverage. It has also started ruffling some feathers in Congress.

“Twitter is growing at a phenomenal rate. Active users have increased 900 percent in a year and even though our web traffic is amazing, we see twice that traffic to the APIs. Interacting with Twitter over SMS is also getting more popular every day,” writes co-founder Biz Stone on the Twitter blog.

Fred Wilson and Union Square Ventures participated in both the initial and second rounds of funding, where Twitter added two new partners, Sabet of Spark Capital and Jeff Bezos of Bezos Expeditions in Seattle. Peter Fenton from Benchmark will now be joining Sabet and Wilson on Twitter’s board of directors, and the new additions now give Twitter two major financial centers on both the East and West coasts.

At that time, Stone stated that the private funding “gives us the runway we need to stay focused on the infrastructure that will help our business take flight.”

There was then a CEO swap late in the year with Evan Williams replacing Jack Dorsey which they said was a first step in that new direction.  And in December it hired Kevin Thau as its new Director of Mobile Business Development.

This new round he says gives them even more leverage, and more time to figure out their business strategy — something that has been quite the hot topic among Twitterati for months.

“We are now positioned extremely well to support the accelerating growth of our service, further enable the robust ecosystem sprouting up around Twitter, and yes, to begin building revenue-generating products,” Stone said.

Facebook offered to acquire Twitter for $500 million of its stock several months ago, which also included a cash component, but they turned them down believing that Twitter could make do on its own over time — which seems to be the case in terms of growth at least.

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This post was written by:

Maxwell Rowe - who has written 26 posts on The LGM Project.


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