Thursday, April 24, 2008

Twitter Monetization, Again

Let me go over some old ground before I get to the new stuff. I'm not claiming that these were original thoughts with me, but here's part of what I was saying back on March 25 (coincidentally enough, in response to a Jeff Pulver post).

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....



I then referenced a Shel Israel post from January 25:

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, I quoted a small portion of Biz Stone's reply. Perhaps it's appropriate to look at more of it today:

It's important that you realize the efforts we are making toward this goal are not a quick fix. Twitter made a big move forward when we hired Lee Mighdoll to lead our engineering and operations team. Lee has been working tirelessly to accomplish the simultaneous tasks of bolstering our current infrastructure while seeking genius engineers to build up our tiny team (currently: 4).

We hope that you can have enough patience to see us through the efforts we are currently engaged in to bring solid stability to Twitter. Again, it won't be something that happens with one down-time or one miracle weekend. It will be a sustained effort.

With regard to revealing our monetization plans I can tell you honestly that we are far more focused on growth and reliability in 2008. Our own hunches as well as advice from some very knowledgeable advisors have us adding great ideas to a list of revenue solutions which we will visit in earnest when we are ready.

Some of you are chuckling already, especially at the first paragraph. Now let's fast forward to the present. Specifically, let's call on Duncan Riley to comment:

Twitter VP Engineering and Operations Lee Mighdoll has left Twitter after 3 months....

But that's only half of what Duncan said. Here's the other half:

[W]e’ve heard that the company is talking to VC’s about a new round (SAI reports likewise), despite the last round of $5.4 million being 9 months old. The company still has no discernible source of income, outside of [its] Japanese licensing deal (if money changed hands…and that’s not a given), and if they’re chasing more money it can only mean the $5.4 million is running out.

Steven Hodson is, if anything, even more cranky than Duncan in his assessment:

As Duncan also points out and as constantly mentioned in the wider tech blogosphere Twitter still has to be able to produce a viable monetization plan for the service. Regardless of the fact that their just launched a Japanese version of the service which is sporting advertising as a test, in the rest of the world there is nothing to indicate that anything beyond a purchase of the service is an exit strategy.

In other words, Twitter has had a monetization plan all along, but it's too tacky to mention - we'll make our money from a purchaser, and let the next owner figure out how to monetize the thing. "Build it and they will come," indeed.

But there's a potential drawback to this strategy, which Hodson points out:

[W]hat happens if there is no real monetization at the end of the fabled Web 2.0 rainbow for Twitter?

At some point the funding will run out and if they don’t find some way to stop bleeding money by being able to produce a viable income stream it could very well head for the TechCrunch Deadpool.

I encourage you to go to Steven's post and answer his question:

Are we the users of Twitter ready for this?

What’s our exit strategy?

[9:38 PM - REACTIONS.]

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