Tuesday, March 25, 2008

Revisiting Twitter's secret, or non-existent, business plan - time is running short

I recently read something in the Jeff Pulver Blog. It didn't really hit me at the time, but there's something that he said in the post that is still bugging me a couple of days later. Thanks to Google Reader, I was able to find it.

[W]hen meeting a startup for the first time, if during the first 15 minutes of our meeting more time is spent by them talking about their business model than anything else, my track record is that this is a company I am not going to end up getting involved with....

[W]hen meeting with people developing destination sites...[i]f the startup is able to get to a metric of millions of page views per month, there are a number of business models that can be applied. If the startup is not able to build up and maintain the necessary traffic, very few business models will work.

To a point, I agree with Pulver. If your focus is entirely on the business plan and not on the product, then you're going to have a very difficult path ahead of you. (Difficult but not impossible - I'm sure that we can all think of a couple of products that have no value but have a good business plan and are therefore successful.)

But "build it and they will come" only goes so far. You need to think about your product and your business plan together, or else you'll have a really great product which will suddenly disappear. (HD DVD. Sex Pistols.)

So the "get your customers, then choose a business model" idea is sticking in my craw, even two days later.



I've talked ad nauseum about Twitter, which has set itself up as a destination, but at this stage no one (perhaps not even the founders) has any idea about how it will make money. And if it doesn't make money, then it's going to be shut down sooner or later.

Back in January, when I wrote my half-baked idea on Twitter monetization (namely, that Twitter fund itself by offering identity theft insurance), I quoted from a Shel Israel four points post. Point number two:

Reveal monetization plan. If you have it, share it. We users need to understand how it will impact us. Biz, I loved the time we shared in Spain, but it disturbed me when you smiled and said, "there's so many things that we can do." Silicon Valley graveyards are filled with startup corpses, whose founders uttered the same words. My 25 years of consulting companies taught me the #1 cause of death is not lack of financing. Its lack of focus. I have heard so many gushes of what a startup COULD do. The trick is to figure out what you SHOULD do.

At the time, Twitter's Biz Stone replied:

With regard to revealing our monetization plans I can tell you honestly that we are far more focused on growth and reliability in 2008....[We are] adding great ideas to a list of revenue solutions which we will visit in earnest when we are ready.

I should interject that Twitter had a reason for concentrating on reliability at the time (there were too many #twittout situations in which Twitter would go down, especially during tech events such as Steve Jobs' keynote). So we certainly can't fault Biz for concentrating on reliability. And, as far as I can tell, Twitter is more reliable today.

However, as I noted at the time, the growth/reliability plan and the monetization plan must go hand in hand. As a simple example, if Twitter charges $100 per user for month for access, they don't have to ramp their servers up as much. But if Twitter's business model depends upon having 100 million customers accessing the site, then a growth/reliability plan becomes very important.

Why am I talking about this now? Because, as time goes on, it is becoming harder and harder to impose a monetization plan on Twitter.

Since Twitter APIs are freely available, everybody is building front ends to Twitter which allow you to bypass the Twitter UI entirely. It seems like a new Twitter front end, or search engine, or whatever is coming out every few days. The latest front end, as Dave Winer notes, is FriendFeed:

You can optionally route comments from FriendFeed to Twitter (if the original message came from Twitter) as a reply.

One complaint that I've seen about FriendFeed is that the metacomments are contained to FriendFeed itself. Now, with this feature (which I haven't tried yet), this is no longer the case. If FriendFeed gains this capability with other services, then FriendFeed will become the default UI for a lot of people. If FriendFeed can come up with a mobile phone interface, it will become the default UI for me.

So where does this leave Twitter? Winer continues:

Nothing more to say than yes, this is the right thing to do, and yes it is neat, and also it's nice to see Twitter get some competition. We know that products that have competition get better, and ones that don't generally have no incentive to. Considering that it would be good, imho, if Twitter were a little more active in adding features (I know others feel differently) it's good that FF is applying a little friendly (arrrgh) pressure.

If FriendFeed or some other aggregator gives you the ability to post to Twitter and a bunch of other sites, then why bother going to Twitter at all?

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