Twitter’s IPO filing reveals that despite its glossy brand, it is a money-losing machine. Despite revenues tripling last year to $317 million, it lost $79 million, and the bleeding is only getting worse, as ad rates fell 46 percent last quarter. It’s likely to lose even more money this year. In the first six months alone it racked up $69 million in losses. Meanwhile, its user base has been growing more slowly. In the US last quarter, Twitter registered a scant 2 percent growth in Twitterati.
The micro-blogging-conversation platform-social network-short-form messaging service-personalized news wire-mental masturbation machine (or insert your favorite description here) needs to make money if it’s to succeed long term. As with cable TV, where you can have thousands of channels but can’t find anything worth watching, Twitter has amassed hundreds of millions of users and still not be able to wring a dime in profit.
What can it do?
Twitter CEO Dick Costolo told Jeff Bercovici in a revealing hot-off-the-presses Forbes magazine cover story that “the characteristics that make up Twitter — public, real-time and conversational — make it a perfect complement to television.” What’s more, ”TV has always been social and conversation-driven. It’s just that in the past, the reach of that conversation was limited by the number of people in a room or who you could talk to on the phone or the next day at the water cooler. Broadcasters have come to understand that Twitter is a force multiplier for the media they’ve created.”
With its eye on television, Twitter wants to build on its role as TV companion, to be, as Bercovici put it, the “second screen experience that transforms TV into a participatory activity, allowing Twitter users to broadcast wisecracks, critiques and theories in real time.” In a nut shell, tweets of shows become marketing and, the theory goes, induce more people who see these tweets to tune in, boosting ratings, pushing up ad rates, and achieving singularity in the universe.
There are, I think, other ways Twitter could generate revenue, and without messing up the user experience. The search of a new ad unit beyond the oft-ridiculed banner and keyword advertisement — one that Facebook and others also seek — remains elusive.
So here are seven other revenue-generating possibilities that wouldn’t muck with the user experience.
1. Charge companies to use Twitter.
Advertisers, brands, and corporations, the ABC of American capitalism, are on Twitter, because they can market themselves to us. For this privilege, why shouldn’t they pay Twitter? Charge subscriptions of $10,000 a year to JetBlue, McDonalds, Victoria’s Secret, the Gap, and all of these other corporations (Small- to mid-sized businesses could pay far less.) Either they pay up or vacate the premises. Would any of us miss these businesses if they were blocked from promoting low air fares, Big Macs, and lingerie on Twitter?
2. Make users with more than, say, 500,000 followers pay.
It doesn’t have to be 500,000 users. It could be 1 million or 100,000. But once you get beyond a certain threshold of users, you become a brand, and, as I said above, brands should pay. So Ashton Kutcher (15 million followers), Miley Cyrus (14.6 million), and President Barack Obama (almost 38 million) get out your checkbooks, whip out your credit cards or ready your bitcoins, because you should pony up if you want to communicate over Twitter with your legions of admirers. In essence, Twitter would be adopting a freemium model, and premium users should pay premium prices.
3. Create a premium app.
I don’t know about you, but I find Twitter a hot mess to navigate and would pay for an app that would combine advanced metrics with artificial intelligence engines to curate tweets and content based on my interests. The longer I’m on Twitter, the more people I follow, the more I miss. Subscribing to the 80-20 rule (thank you Pareto Principle) even if two out of 10 tweets is actually useful, a lot of juicy stuff speeds through my tweetstream unread. I’d like an app to pick out the relevant bits and line up all those good links to content I might like in a tasty interface. While Twitter is at it, it could allow me entree to some useful metrics. Help me tailor my tweets to generate more impact and point me to other conversation threads I might enjoy.
That’s something for which I’d pay a monthly subscription. I dole out about $10 a month to music streaming companies like MOG. I’d do the same for an app that opened up a whole new world of Twitter absorption. If 1 million people joined me, that’d be $120 per user x a million, or $120 million a year in revenue. That alone would more than offset the company’s losses.
4. Sell premium tweets longer than 140 characters.
Have you ever gotten into a Twitter hullabaloo with someone or someone and found that 140 characters wasn’t sufficient for expressing yourself? Of course you have. So maybe Twitter could let you pay extra for tweets fatter than 140 characters. Say, charge $5 for them so they’re expensive enough that users would only pay up if they really needed to. With 200 million plus users, $5 a pop could really add up.
5. Charge third party app developers.
Twitter hasn’t exactly been friendly to third party developers over the years. It’s also not been very interested in unifying the user experience. I use YoruFukurou on my laptop to access Twitter and Twitter’s own mobile app on my iPhone. Sometimes, if I want to check out someone else’s stream, I find it easier to go to Twitter.com. Not a seamless experience.
Third party developers worry that they could create something, only to have Twitter create the same product and drive them off the platform. So why not make third party apps pay, which would give them peace of mind while also bringing in some cold cash to the company?
6. Sell personalized Twitter portals modeled roughly on Flipboard.
You tweet and months later it’s gone or unfindable. Wouldn’t it be great if there were a place that collected all your tweets a la RebelMouse, curated and categorized them based on their content, glitzed them up with Pinterest-y photos and made your entire Twitter history searchable? I’d pay, say, $25 a year for this like I do with Apple’s iCloud. If 1 million users joined me that would be another $25 million in annual revenue for Twitter.
7. Allow high voltage users to create premium communities.
Let’s face it. Some Twitter-ers have more influence than you or I do. Every word they utter is an intellectual elixir that can fix everything that ails you. So why not let them charge followers for these nuggets of wisdom? Twitter could take a cut of these transactions and make enough money to cover snacks and soft drinks at corporate HQ.
Done right, these seven strategies could turn Twitter’s balance sheet from red to black, and ensure repeatable revenue for years to come. Not sexy as with Hollywood and TV, but, I think, definitely hashtag worthwhile.