Innovation Gains, But Twitter's Business Plan Is Stalled

Last Updated Apr 8, 2010 2:53 PM EDT

In an email update considerably longer than 140 characters, Twitter co-founder Biz Stone has reached out to fellow Tweeters about recent product developments, such as adding location data, retweets, and a new front page.

More important is what Stone didn't say.

Stone and company have yet to unveil a business plan for making money from Twitter, promised as recently as last month's CNBC interview. The ongoing anticipation and let-down hurts Twitter's commercial credibility, as do naive statements by Stone, who says, "We don't necessarily have to start making a lot of money right now."

Everyone in business wants to make money, and Twitter is not an altruistic endeavor. It's best to admit how difficult it is to crack the revenue code in the fast-moving social media sector. It's better to experiment with revenue-generating models involving the Twitter faithful -- even at the risk of failing.

Some users are discovering they don't want others to know their location when they tweet (that's too much information, even in the social space). And ExecTweets didn't fly. Third parties such as The Huffington Post are concocting new ways to extend their reach using the micro blog service without paying Twitter a dime.

Although some form of advertiser participation seems inevitable, Stone recently said that Twitter's revenue plan will extend to an ecosystem of apps and features that help build up the service. Despite generous funding from investors, no new apps or features have proven as wildly popular as plain-vanilla Tweeting.

Twitternistas rightly argue that for every application that fails, many others succeed. Mashable provides a thorough and useful Twitter List Directory and Twitter Guidebook (as well as a Facebook Guidebook) that showcase the best functionality on the social micro blogging platform.

Such overviews make it even more apparent that outside abbreviated real-time chat, Twitter's value is as a fund-raising, value-building support tool for others. That means the best way to make money could be charging at the gate, which would be a dramatic and awkward change. TechCrunch's Michael Arrington has written that as a new generation search engine, Twitter has a revenue-generating framework in place. So what does Twitter plan to do with that?

Twitter already functions as an all-purpose utility for other businesses to make money, for example via its credit card scanner app for Apple's new iPad. A bevy of other apps for the iPad such as Twitepad rupture Twitter's simple realm of service to encompass multiple columns of feeds to numerous accounts, back-end data, and an integrated web browser that shrinks entire websites to thumbnail size.

Clearly Stone, who has been too preoccupied to tweet, is taking a cue from Apple by reaching beyond his in-house stable of gifted developers for solutions. Twitter will host its first-ever Chirp developer conference April 14 at San Francisco's Palace of Fine Arts, a week before Facebook's f8 developer conference.

Some are calling it the ultimate platform war. Both Twitter and Facebook social services are logging record usage and are prime candidates for going public in a recovering economy. Privately-held Facebook has become a real business. It could generate more than $1 billion in revenues in 2010 and may have turned about $600 million profits last year, according to some analysts.

Twitter still is chasing the dollars it leaves on the table. And that's always bad business.

  • Diane Mermigas

    Diane Mermigas has been a contributing editor and columnist at Mediapost, The Hollywood Reporter and Crain Communications as well as writing for such sites as Seeking Alpha, TrueSlant and BNET. In addition to speaking and television appearances, Diane consults with companies in digital transition, and is completing a book on the future of media.