Twitter: A Business Model Evolving?


I recently got on board the Twitter bandwagon.  Now granted, I only have a handful of followers but so far I am in equal part fascinated with the phenomenon and sort of confused and annoyed by it.  Here you have this capability to let anyone in your following know what you are doing every second of the day if you so choose.  I think of the commercial where the father Tweets that he is “sitting on the patio”.  I mean…who really cares?  Do our mundane activities really provide any value to those who happen to be following?  I am sitting in a coffee shop as I write this and wondering if I should Tweet my followers of that fact.  Are they all going to rush over here and join me for a skinny latte?

And yet, I have found some use in it by announcing my blog posts and letting my little group of “constituents” know that I have something perhaps worthwhile to say.  So what is this all about?  What is it that Twitter will evolve to that will have some lasting and meaningful value?

I read in the Sunday paper this morning that T. Rowe Price and Insight Venture Partners are about to drop $100 Million into the Twitter vault.  The company is said to be valued at $1 Billion.  Yet Twitter won’t really come straight with the genius behind their ultimate business model.  To date they have not made a dime and yet they have managed to raise a huge sum of cash from investors that see this as the next big thing.

In an article in Information Week, David Gardner quotes Paul Holland, a general partner at Foundation Capital as saying “Once every five years or so, a company comes along that has nearly unlimited potential in terms of worldwide users.   Five years ago, it was Facebook. Today, Twitter appears to be the next big thing in social networking.”  Unlimited potential?  Potential for what?  To let the world know that I have just given my yellow lab a bath?  That I just finished cleaning out the garage?

I just got finished reading the book “Free” by Chris Andersen.  It is really a fascinating book although like Twitter, presents an economic framework that I have not yet fully embraced.  The concept of a marketplace based on prices that have no price at all is difficult to grasp and more difficult to mobilize into a business model that ultimately warrants market valuations in the billions.  Will Twitter eventually make its money by capturing massive audiences and then begin cashing in by building a business model based on advertising, cross subsidies and Freemiums (offering digital products for free and then making money by selling up to premium services)?

Well, I really don’t have the answers and since Twitter is not talking, I am kind of in an economic fugue state.  I seem to have forgotten my basic understanding of economics and am sort of wandering through this new economic landscape without a real understanding of who I am anymore or what this new digital marketplace is all about for me.  Perhaps I will just Tweet my followers and see if they know!

Enjoy your Sunday!


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