Monday, May 26, 2008

Om's got the wrong business model for Twitter

I've been spending a lot of time recently looking at product strategies for Elcom, so I was particularly intrigued by one of Om Malik's latest posts that highlighted a business model for Twitter in the midst of their Scoble Problem. He says that he has “a theory that could help Twitter solve its scaling conundrum and also help the company make money”. What he's referring to, of course, is the rather expensive impact that a popular user like Robert Scoble has on their infrastructure.

Twitter (see my feed in the right hand column of this blog) is self-described as essentially a messaging system built on an architecture that better suits a content management system. This means that every time someone tweets, a record is created in a database, and then subsequent to that, tens, hundreds or thousands of messages are sent regarding that tweet - potentially creating their own database records along the way. Unfortunately Scoble has 25,000 followers, so every post from him involves 25,000 messages (and possibly text messages to mobile phones).

“Of course, Om's answer is completely wrong.”

Om says that the answer for Twitter is to view commentators such as Scoble as cash cows, and charge them for the right to have a certain number of followers. Of course, Om's answer is completely wrong. Twitter needs Scoble much more than he needs them. Why should he pay to have followers there? There are dozens of startups waiting for someone like him to to give them the techies' equivalent of an Oprah moment.

Om is right in one sense, the answer to Twitter's business model is hidden in the Scoble example. Instead of charging Scoble for the right to use their system, they should charge people who want to follow Scoble - beyond perhaps the first hundred or so. This allows anyone to use Twitter (helping network externalities along), whilst ensuring that the really heavy loads on the system are paid for, but by the subscribers to the content producers, not the content producers themselves. Another problem is that anyone could create masses of bot accounts to simply drive up your least favorite twitterer's monthly bill.

“That's almost ten times the income without annoying Scoble”

Instead of charging Scoble $10/month for 1,000 subscribers, giving them $250/month, they could charge the people that want to follow Scoble (past the first 100 or so) 10¢/month each, giving them $2,490! That's almost ten times the income without annoying Scoble, by simply asking people to pay a small premium fee if they want to know what Scoble is thinking right now. With that model they can grow as much as they like, and encouraging people like Scoble to use Twitter becomes a win-win proposition.

They are left with a micro-payment problem, but if people follow more than one interesting twitterer then the payments will quickly add up, and with volume I'm sure you could make credit card companies your friends. Besides, you could probably inflate my 10¢/month to 50¢/month with no great outcry. Now Scoble might get annoyed if suddenly 20,000 of his followers disappear, but then again, at least he knows the other 5,000 place a real value upon his tweets - and that's worth a whole lot more in media terms.

[UPDATE: It seems Scoble's already gotten annoyed ...]

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