What will the future hold for the social media giant?
Last March, Twitter told Reuters that they would be rolling out an “expanded range of services” to “certain customers.” Twitter founder Biz Stone stated he believed these services would be available by the end of 2009.
In other words, Twitter appears to be adopting the “freemium” model, much like other Web 2.0 companies, notably Flickr, Skype, LinkedIn, and Pandora.
The freemium (a portmanteau of “free” and “premium”) business model is simple: offer a service for free, but offer an enhanced version of that service to a small (sometimes tiny) subset of your users, and charge them (sometimes a lot) to use it.
The freemium model works very well because it doesn’t chase away users who are unwilling to pay. The social nature of services like Flickr and LinkedIn means that simply having more users increases the value of the service. But the problem with simply attracting as many users as possible is that most users don’t use the service enough or don’t perceive it as valuable enough to open their wallets.
There will, however, always be a subset of users who see extreme value in a social networking service. These are usually the users who are going to use the service for marketing purposes. They are also the users who are willing to pay. In fact, these users are usually willing to pay enough to offset the cost for all the other users.
I’ve been waiting for Twitter to adopt the freemium model for along time. Any kind of social networking is usually a prime candidate for the freemium model. When Twitter announced their Verified Accounts feature, I was shocked they weren’t charging for it. It’s the perfect example of a freemium feature: most people don’t care and therefore won’t pay, but those who need a Verified Account care deeply about it and likely have the resources to pay for it. Twitter could easily have gotten away with charging $100 a year to have your account verified, and would have made a killing.
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2009 has come and gone, however, and Twitter still isn’t collecting anyone’s credit card information. However, there was one big change that happened to Twitter as the end of 2009 drew near: Project Retweet, announced in August and rolled out in November.
Retweeting is an interesting feature for Twitter to be putting so much focus on. Once upon a time, the Twitter homepage asked you “What are you doing?” Today it asks you to “See what people are saying about…”
Twitter has shifted from being about the individual Twitterer to the Twitter community at large. As such, the Twitter team has improved Twitters ability to spread information across many Twitterers. With the new built-in retweet engine, it is easier to do two important things: control the retweets one receives, and track a tweet as it propagates throughout the Twittersphere.
Both of these scream “viral marketing!” to me. The “expanded range of services” What Twitter was talking up back in March is probably the equivalent of an analytics engine for Twitter which will allow companies using Twitter for marketing to hone their tweets to specific users and lists of users (another recent Twitter feature) more effectively than ever before.
This is just another form of freemium. I don’t really care who is reading my personal tweets, but anyone doing any form of marketing on Twitter (i.e. basically any content-driven website on the web today) would find additional information about their followers to be extremely useful. Twitter could charge a very small amount of Twitterers handsomely for Twitter analytics and more than cover their costs.
It’s not as straightforward for charging for Account Verification, but in the long run, it’s probably more profitable. If Twitter really does intend to have revenue by Q3 2010, this “expanded range of services” is probably only a few months away.
