Twitter Case Study

TWITTER SEARCHES FOR A BUSINESS MODELchirrup, the affable networking range ground on 140 character schoolbook edition messages, is the buzz br early(a)ly networking phenomenon of the year. Like both mixer networking sites, such as Facebook, MySpace, YouTube, Flickr, and others, cheep provides a platform for users to express themselves by creating mental ability and sharing it with their followers, who sign up to give some bingles hooks. And like intimately social networking sites, chirp faces the problem of how to comprise money.As of October 2010, twitter has failed to generate earnings as its management ponders how best to exploit the buzz and user base it has created. chirp began as a Web-based version of popular text messaging attend provided by cell phone carriers. Executives in a podcasting confederacy called Odeo were look for for a new revenue-producing product or process. In March 2006, they created a stand-alone, private union called peep. The basic idea was to marry short text messaging on cell phones with the Web and its ability to create social groups.You start by establishing a Twitter account online, and identifying the friends that you would like to contact your messages. By sending a text message called a tweet to a short code on your cell phone (40404), you bath tell your friends what you ar doing, your location, and whatever else you great power want to say. You ar moderate to 140 characters, scarcely there is no installation and no accusation. This social network messaging service to keep buddies informed is a ace success. Coming up with solid add up for Twitter is not informal because the firm is not releasing some(prenominal) official figures.By kinsfolk 2010, Twitter, according to comScore, had around 30 million unique monthly users in the United States, and perhaps 96 million worldwide, displacing MySpace as the number terce global social network (behind Facebook and Microsofts Live Profile). The nu mber of mortal tweets is also known notwithstanding by the company. According to the company, by first 2007, Twitter had transmitted 20,000 tweets, which jumped to 60,000 tweets in a few months. During the Iranian revolt in June 2009, there were reported to be over 200,000 tweets per hour worldwide.In October 2010, Twitter was recording over 1. 2 million tweets a month. On the other hand, experts believe that 80 percent of tweets are generated by only 10 percent of users, and that the median number of tweet readers per tweet is 1 (most tweeters tweet to one follower). Even more disturbing is that Twittter has a 60 percent churn rate only 40 percent of users bide more than one month. Obviously, many users lose interest in erudition about their friends breakfast menu, and many feel too connected to their friends, who in fact whitethorn only be distant acquaintances, if that.On the other hand, celebrities such as Britney Spears have hundreds of thousands of friends who follow thei r activities, making Twitter a marvelous, free public relations tool. Twitter unfortunately does not make a cent on these activities. The answer to these questions about unique users, numbers of tweets, and churn rate are critical to understanding the business take to be of Twitter as a firm. To date, Twitter has generated losses and has unknown revenues, but in February 2009, it raised(a) $35 million in a turn over that valued the company at $255 million.The following September, Twitter announced it had raised $100 million in additional funding, from private equity firms, preceding(prenominal) investors, and mutual fund giant T. Rowe Price, based on a company valuation of a staggering $1 billion So how tail end Twitter make money from its users and their tweets? Whats its business model and how faculty it evolve over time? To start, consider the companys assets and node value proposition. The main asset is user attention and audience size of it (eyeballs per day).The value proposition is get it now or real time watchword on just about anything from the mundane to the monumental. An equally grievous sset is the database of tweets that contains the comments, observations, and opinions of the audience, and the attend engine that mines those tweets for patterns. These are real-time and spontaneous observations. Yet another asset has emerged in the last year Twitter is a powerful alternate(a) media platform for the distribution of news, videos, and pictures.Once again, no one predicted that Twitter would be the first to report on terrorist attacks in Mumbai, the landing of a rider jet in the Hudson River, the Iranian rebellion in June 2009, or the governmental violence in Bangkok and Kenya in May 2010. How can these assets be monetized? Advertising, what else In April 2010, Twitter announced it s first 386 Part trio Key System Applications for the Digital Age foray into the big-time ad market place with Promoted Tweets. Think Twitter search engine in response to a users query to Twitters search obligation for, say netbooks, a lift out Buy ad for netbooks will be displayed.The company claims Promoted Tweets are not really ads because they look like all other tweets, just a part of the tweet stream of messages. These so-called organic tweets differ therefore from traditional search engine text ads, or social network ads which are far from organic. So far, Best Buy, Bravo, Red Bull, Sony, Starbucks, and Virgin American have signed up. If this actually works, thousands of companies might sign up to blast messages to millions of subscribers in response to related queries.A second Twitter monetization effort announced in June 2010 is called Promoted Trends. Trends is a section of the Twitter home knave that lets users know whats hot, what a lot of people are talking about. The company claims this is organic, and a truthful reflection of what people are tweeting about. Promoted Trends are trends that companies would like to ini tiate. A company can place a Promoted Trends banner on the bottom of the page and when users click on the banner, they are taken to the follower page for that impression or product.Disney bought Promoted Trends for its film Toy Story 3, according to Twitter. In July 2010, Twitter announced its third initiative of the year earlybird accounts, which users can follow to receive special offers. Walt Disney Pictures has apply the service to promote The Sorcerers prentice by offering twofers (buy one ticket, get another one free). The service could work nicely with so-called real-time or flash selling campaigns in entertainment, fashion, luxury goods, technology, and beauty products.So far, Twitter has over 50,000 earlybird followers and hopes to reach influentials, people who shape the purchasing decisions of many others. Another monetizing service is temporal real-time search. If theres one thing Twitter has uniquely among all the social network sites, its real-time information. In 2010, Twitter entered into agreements with Google, Microsoft, and Yahoo to permit these search engines to index tweets and make them forthcoming to the entire Internet. This service will give free real-time content to the search engines as opposed to archival content.It is unclear whos doing who a service here, and the financial arrangements are not public. Other large players are experimenting. Dell created a Twitter outlet account, DellOutlet, and is using it to sell open-box and give up computers. Dell also maintains several customer service accounts. Twitter could charge such accounts a commission on sales because Twitter is playing like an e-commerce sales platform similar to amazon. Other firms have use their Twitter followers fan base to market discount commit tickets (Jet Blue) and greeting cards (Somecards).Freemium is another possibility ask users to pay a subscription fee for premium services such as videos and music downloads. However, it may be too late for this id ea because users have come to lodge the service to be free. Twitter could charge service providers such as doctors, dentists, lawyers, and hair salons for providing their customers with unexpected appointment availabilities. only if Twitters most likely steady revenue source might be its database of hundreds of millions of real-time tweets.Major firms such as Starbucks, Amazon, Intuit (QuickBooks and Mint. om), and Dell have used Twitter to understand how their customers are reacting to products, services, and Web sites, and then making department of corrections or changes in those services and products. Twitter is a fabulous sense of hearing post on the Internet frontier. The possibilities are endless, and just about any of the above scenarios offers some solution to the companys problem, which is a insufficiency of revenue (forget about profits). The company is coy about announcing its business model, what one pundit described as hiding behind a silicon Valley Mona Lisa smile . These Wall Street pundits are thought to be fellowship poopers in the Valley.In a nod to Apples iTunes and Amazons merchant services, Twitter has turned over its messaging capabilities and package platform to others, one of which is CoTweet. com, a company that organizes multiple Twitter exchanges for customers so they can be tracked more easily. Google is selling ad units based around a companys last five tweets (ads are displayed to users who have created or viewed tweets about a company). witter is not charging for this service. In the meantime, observers query if Twitter is twittering away its assets and may not ever show a profit for its $160 million investment.SourcesMatthew Shaer, Twitter Hits 145 Million user Mark, Sees Rise in Mobile Use, Christian Science Monitor, September 3, 2010 Jason Lipshutz, brothel keeper Gaga to Steal Britney Spears Twitter Crown, Reuters, August 19, 2010 Emir Afrati, Twitters Early Bird Ad Ploy Takes Flight, Wall Street Journal, July 14, 2 010 Jessica Guynn, Twitter Tests New Promoted Trends Feature with Toy Story 3 from Disneys Pixar, Los Angeles Times, June 16, 2010 erica Naone, Will Twitters Ad Strategy Work, Technology Review, April 15, 2010 Jessica Vascellaro and Emily Steel, Twitter Rolls Out Ads, Wall Street Journal, April 14, 2010 Brad Stone, Twitters current Valuation $1 Billion, New York Times, September 24, 2009 Jon Fine, Twitter Makes a Racket. But Revenues? Business Week, April 9, 2009.CASE STUDY QUESTIONS1. Based on your reading in this chapter, how would you modify Twitters business model?2. If Twitter is to have a revenue model, which of the revenue models described in this chapter would work?3. What is the most important asset that Twitter has, and how could it monetize this asset?