A business model for Twitter, Google-style

While the scale first style of attacking a market is still be proven out, getting a critical mass is mostly certainly a key element in the success of a social networking startup. These kinds of startups can pop up seemingly overnight in mass quantities, and one of the key ways to compete is to create an extremely rapid growth of user base and establish a site or service as de facto (and a verb) for the space it's in. This describes the trajectory that Twitter appears to be on.

Scaling to 1 billion users for any one startup is monumentally difficult. Scaling to 10 billion, given the current population, is impossible. Sometime before reaching either size, a startup needs to transition into a real business model. There's always the M&A path, but having a real business model amps up the M&A valuation significantly. In that spirit, here're some thoughts about some changes Twitter could make to allow them to "turn on the revenue" tap when they need to.

Two things I see holding Twitter back from gaining serious revenue potential are 1) you can do a lot from a twitter client without visiting the twitter site and 2) lame SMS-style messages lack much of the richness which would otherwise enable monetization opportunities, as I describe below -- the kinds of things that Google capitalizes on. And as I'll explain, if you can fix #2, you get #1 for free. So really, I believe enhancing Twitter messages will be a key factor in their future business proposition.

To be brief, twitter messages hail back to SMS (text) messages, which are limited to ~160 characters. After reserving 20 characters for the user name, you're left with 140 characters, the size of the Twitter-colored text you just read. If you want to add in a link, you probably will use a URL shortening service and lose another 20 characters or so of text space. There's not heck of a lot you can do in that amount of space. Some people claim this is part of Twitter's charm. Blaise Pascal might have claimed "The present letter is a very long one, simply because I had no leisure to make it shorter." In any case, I'd claim they're giving up significant revenue potential. To demonstrate my point, here's a hypothetical tweet (minus the sender info), which includes a shortened link but no other mark-up:

And here's a similar tweet, if tweets were allowed to be marked-up, both explicitly by the sender and implicitly through automatic means:

A number of improvements are shown: 1) the sender was able to mark-up the phrase "Tesla Model S" with a URL, 2) the phrase "electric car" was highlighted automatically by a keyword (perhaps advertising) engine, 3) the phrase "pic of prototype" was linked to an image file the user attached, 4) a map of the sender's previous or current location is displayed, 5) a (potentially targeted) advertisement is displayed, and 6) a voice version of the message is linked to (could be the sender's recording or voice synthesis). Additionally, links can redirect through Twitter (as shown), so that Twitter can more dynamically decide where to redirect them and collect much richer analytics. The links could also include the Twitter viewer's user name to give further info (not shown).

How would this all work? First is the ability for users to mark-up tweets, attach files, and provide lots of other rich info and meta information. Second, Twitter clients need to be updated to access a much richer API and display richer tweets. But what about SMS? I believe the key here is to separate out the tweet message body from all other stuff (mark-up, attachments, meta info), or at least provide/generate a fairly equivalent alternate text body. This will be passed through to SMS. To make the experience much better though, one could effectively merge the SMS reader and a Twitter client on mobile devices. When an SMS tweet comes through, the client/reader could initially display it in raw form. But as soon as the device reaches networking availability, the client could negotiate with Twitter to identify the message (e.g. each side runs a hashing function on the message body) and convert the SMS tweet to its associated tweet ID in the API world. The mark-up and related info could then be retrieved and used to re-display the raw tweet in its much richer form. Essentially this gives a consistency between the SMS and client worlds, but allows messages to come through SMS (given its robustness and availability w.r.t. mobile data). It also allows words to be used where shortened URLs are currently placed (as shown), since mark-up is moved out of the message.

Many other capabilities could fall out of this: e-biz cards, signatures, per-tweet backgrounds, etc. But the win on the business side is that some Google-class services can be applied, and there is much room for differentiating pay-vs-free accounts. For example, paying accounts might be free of advertising keywords, get indirected less through the Twitter site, perhaps be offered more mark-up capabilities (or at all), get text to voice synthesis for their tweets, etc. This would bring Twitter to a higher plane for use as a professional marketing tool. All without breaking the lowest-common denominator (SMS) as a transport.

And might I suggest a "Twitter Platinum" feature, messages greater than 140 characters...

Disclosure: no positions, related IP