Twitter would need 35,000 celebrity tweets grossing $10,000 per tweet -- like Kim Kardashian gets -- in order to begin paying back its investors if recent estimates of the microblogger's ad revenues are correct. This back-of-the-envelope math suggests Twitter is a long way from profitability, and that it needs to bolt on another ad-supported revenue stream in addition to celebrity endorsed tweeting in order to become a real business. Here are my numbers:
- eMarketer estimates that Twitter's 2010 ad revenues are $45 million, all from Kardashian-style promoted tweets.
- That revenue stream may rise to $150 million in 2011, but only if it can grow its user base "substantially." That's a big if, given Twitter's one-note functionality.
- Twitter raised $200 million in venture investment last year on top of $155 million in 2009. That's $355 million it owes its investors.
- Twitter is not profitable. It may have made a profit in 2009 when it took in a $25 million fee from Google (GOOG) and Microsoft (MSFT) to make its tweets searchable, but CEO Dick Costolo said in 2010 it was not profitable.
This all assumes that the Kardashians forgo their cut of the tweet revenue entirely -- an obvious fiction -- and it forgets an estimated $100 million in server costs. If Kim, Khloe and the other one took 50 percent, Twitter would need 70,000 celebrity tweets annually.
There are certainly a lot of celebrities doing a lot of paid tweeting -- Lindsay Lohan made sponsored tweets on her way to jail -- but common sense suggests that only a handful can command The Kardashian. My numbers are merely assumptions and quite possibly wrong, but however you cut it, Twitter quickly runs into a "big numbers" problem: It either needs tens of thousands of celebrities making large sums per tweet or millions of microcelebrities making small sums.
Which leads me to the most bizarre conclusion I've ever reached when discussing corporate strategy: There may not be enough celebrities to sustain Twitter's business model.
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