/ 14 April 2010

Biz gets a model

So it's finally happened -- Twitter has a business model. And as with most of its moves, the result is unexpected, elegant and somewhat inscrutable.

So it’s finally happened — Twitter has a business model. After nearly half a decade of being Silicon Valley’s newest revenue-phobic wunderkind, Twitter has begun selling advertising on its platform. And as with most of its moves, the result is unexpected, elegant and somewhat inscrutable.

The idea is simple: promoted tweets. A “tweet”, for the uninitiated, is Twitter’s basic unit of communication: a single 140 character message. From April 13 when you search for something on Twitter — “coffee” for example — the first result you get may be paid for by, say, Starbucks. That’s the example Biz Stone (AKA @biz) used in a typically coy announcement on the company’s blog.

The very thought may horrify Twitter purists out there, but it’s really quite a familiar model. Like the adverts next to Google’s search results, promoted tweets will be clearly marked as adverts, but will look and behave like tweets. Since they are already related to the user’s search, the paid tweets are substantially more likely to be useful to that user.

But here’s where the real genius comes in: the longevity and lifespan of a promoted tweet will rely on people interacting with it. So if enough Twitter users don’t reply, retweet (like forwarding an email) or favourite (ie bookmark) a promoted message, it will quickly disappear.

To many hardnosed business people this will seem like a squandered opportunity. If they had control of a platform like Twitter, one that handles billions of messages a month, they would probably make every tenth tweet an advert. And they certainly wouldn’t let the damn fool users decide which adverts they wanted to see.

But that, in a nutshell, is why Twitter is successful — they let their users decide almost everything. The majority of its features came from its community, who invented novel ways to communicate effectively within the constraints of 140 characters.

From that perspective Twitter is more of a learning machine than a traditional company. Biz famously said that if asked to describe Twitter in three sentences, one of them would be “I don’t know”. Some see this as idiotic — how can a founder not know what his own company does? I see it as an unspoken commitment to radical openness.

This openness has allowed a whole ecosystem of other services to grow up around their service, broadening its usefulness and reach in a way their tiny staff (currently 140 people) would never have been able to do.

If there’s one thing that Biz and Ev (Evan Williams — his co-founder) are not wishy-washy about, it’s their caution about introducing change into the ecosystem they have nurtured into a global phenomenon. When they do so, they make them subtle and simple, so that they can learn from the results without poisoning the roots.

And though they may seem like Silicon Valley’s original tech hippies, Biz and Ev have a deep cunning when it comes to business. Why flood your system with adverts when you can keep them artificially scarce and charge a premium?

Most companies preach respect for their customers — but Twitter live and breathe it. They would rather treat their advertisers mean and keep ’em keen than jeopardise their users’ experience. And by putting the onus on advertisers to make their messages appealing, they have effectively turned them into users too. He’s smarter than he looks, that Biz.

  • For his sins, Alistair has worked in online media for the past decade. Though he started out in editorial, first at MWEB and later Channel24, he eventually gave in to the dark side and became a product manager at 20FourLabs. He recently moved to Media24’s magazines division. He is apparently their social media & editorial strategist. He is not entirely sure what that means either.