MoneyWatch Tech

Twitter Announces Paid Services, Again. Will They Be Enough?

By Erik Sherman

Updated on: September 9, 2009 / 12:24 PM EDT / MoneyWatch

Twitter's co-founder Biz Stone said yesterday that that the company will officially add paid services for businesses to generate revenue in the fourth quarter. It's not the first time he's mentioned in. In fact, the announcement started breaking in the third week of August. Only when Stone spoke to VentureBeat, there were more details of what the company was considering:

a commercial API that will sit atop the normal API
marketing approach of "pay money to make more money"
certified business accounts
analytics that will make business users interested in giving up their free accounts so Twitter doesn't have to force people to switch

Heaven knows they need to do something when so many companies are trying to leverage them, as my colleague Michael Hickins noted that Salesforce.com is doing. But is it all going to be enough to keep up with the business? I've seen group conversations slow so much that they might be going backwards. Twitter has had to go spammer hunting, and yet it comes back right away. There is just too many unique visitors for anyone to ignore, according to data from Compete.com (which reports for US traffic only):

However, it takes money to handle the accompanying traffic, particularly as Twitter is so focused on real-time communications and has been feeling the pinch in terms of what that demands operationally. And if the demands are large now, look at what they can become by comparing Twitter to Facebook:

If Twitter is having problems keeping up now, what happens if it continues to grow and reach a Facebook-type scale of six times the demands it now faces? And all demanding real-time response? Just how much money would it need to wean itself from the VC teat? And Michael Arrington brings up another point: How will Twitter's market valuation change? Once you have revenue, valuation by potential suitors or by investors in an IPO generally turns into multiples of that number. That's not always the case. Amazon had a big uptick in market value at its IPO, one that far exceeded its annual revenue of $40 million to $50 million. And yet, the revenue was known and its growth rate, high. Twitter could find itself with the worst of both worlds: revenue that doesn't look like it will keep the company running at the rate it needs and yet not large enough to entice further investment.

Image via stock.xchng user calexcyou, site standard license.