How does Twitter make money?
What is Twitter's business model?
They have hundreds of millions of people using their service but how will they monetize that?
These are all reasonable questions to have about a company that is supposedly trading at nose-bleed, bubbly valuations, and has no idea how to generate revenue. The answer is very simple: As of July, 2010, Twitter had 190M users. If you wanted to advertise to those 190M users by having Twitter send each one of them a tweet, how much would it cost?
To put these numbers into perspective, let's compare Twitter's user base to a traditional media event with a similar number of "users", the Super-Bowl. Super-Bowl ads which only reached 90M viewers in 2010 (according to Nielsen) cost an estimated $2.6M per ad in 2010. That's approximately a cost of $28.8 for every person reached by the ad. If we assume that 10M Twitter accounts are spam-bots, that still leaves us with around 180M active users. If Twitter charged the current Super-Bowl ad rate to send 1 AdTweet (or RevTweet = Revenue Generating Tweet) to all of its users, it would have the user base necessary to justify a price of $5.2M per AdTweet, double the cost of 1 Super-Bowl ad. As such, Twitter would only need to send 192 AdTweets per year to be a $1 billion dollar company in terms of annual revenues. That's less than 1 AdTweet per day. No one would have a problem with that. I follow around 200 people, in one hour I see between 140-180 tweets, so 1 adtweet per day would be a tiny fraction of the total.
For the most part, if you are reading this post, you know that what I am about to say is very true. People use Twitter more than crack addicts use crack. I personally use Twitter every single day of the week, 24 hours per day (who doesn't?). In other words, if I'm awake, I'm using Twitter. We are all hopelessly addicted to it and for a very good reason. Twitter has single-handedly become society's #1 source for news. It has made television, radio, and newspapers almost completely obsolete for getting breaking news. By following the right people, you can hear the latest breaking news hours before it gets reported on TV or radio, and 24 hours before it hits the pages of the newspapers. In a sense, active Twitter posters have become society's new news broadcasters sharing videos, pictures, and news with the world. Social Media News is destroying Old Media News.
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This post divulges into wild-eyed speculation beyond this point.
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Furthermore, it is even possible that in the future either Twitter or Weibo is going to acquire its rival, or they are going to merge. Weibo is exactly like Twitter, 140 characters and all, the only difference is that Sina is headquartered in China and is made for the Chinese speaker. From a business standpoint it would make sense as it would create a massive social media audience to whom you could advertise to. However, pause for a moment and just think of all the implications such a merger would have. A large portion of Chinese citizens already know how to speak English. This platform would allow, for the first time ever, Chinese citizens to talk directly with random or specific US citizens, at virtually no cost, and would allow for finding and meeting new people (networking). Imagine half of your followers being from China. If such a union ever took place, it would not be that hard to see out 75 years into the future a World in which the dominant global language is some mixture of English and Chinese as a direct result of Tweibo.
Disclosure: I currently do not own SINA but I will soon.
You can follow me on Twitter at @elwalvador
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