Understanding Twitter Business Model

In the last post titled, ‘Understanding Business Model Fundamentals’, we learnt why do we need to understand business models and how to visually represent a business model using ‘Business Model Canvas’. In this post, we will try to understand Twitter business model design using the Canvas.

Twitter is one of the most popular Social Networking Site (SNS) and Micro-blogging platform in the world. It enables its users to share text messages with a length constraint of 140 characters. These messages (aka tweets) are publically visible, by default. Any user can subscribe to tweets from other users by following them. Users can tweet through Twitter website or Twitter clients and apps for desktops, tablets, or smartphones. The following video (from Twitter early days) explains how it works:

While Twitter started as a service to enable an individual share short updates to a small group, it is now being used for a variety of purposes by different set of users. Some users use it as broadcasting medium to broadcast their own thoughts or the content they want to share. Some users simply sign-in to listen to experts or celebrities or brands, whom they like and admire.  Some use it to discover what other people are saying about their topics of interests; while some use it to follow content publishers to stay informed on the latest.

Businesses are also using Twitter in several ways. Content and Media companies are using Twitter to drive traffic to their websites. It is being used by e-commerce and local businesses for deal promotions. Some businesses are using it as a customer service channel; while some are using it increase their brand awareness and monitor their brand perception. Some non-profits are using Twitter as a fund-raising channel as well.

Twitter started as a service in 2006. It gained immense popularity in 2009-10. As on 8 Sep 2011, as per Twitter official blog, Twitter had 100 Million active users. More than half of them logged in each day. As on 26 Jan 2012, as per Twitter official blog, 1 Billion tweets were send every four days, which means 250 Million tweets were shared every day.

With so many users connected to the platform and using it on a regular basis, it is becoming an attractive destination for the advertisers. Unlike other SNS websites, Twitter hasn’t yet started offering the option of ‘Display Ads’ to the advertisers.  Instead, it has provided them with the following innovative ways to reach the users:

  1. Promoted Accounts – Businesses can scale up their follower-base through Promoted Accounts product. The promoted account appears in search results and within the ‘Who to Follow’ section (powered by Twitter’s account recommendation engine). Promoted Accounts are offered through Cost-Per-Follow (CPF) auction, where a business is charged when a user converts into a follower.
  2. Promoted Tweets – Businesses can promote key messages through Search Results to the non-followers of their account. Promoted Tweets can also be targeted at followers of a business or at the users having similar profile to that of a follower. Promoted Tweets are offered through Cost-Per-Engagement (CPE) auction, where engagement is defined as click, favorite, retweet, or reply of a promoted tweet.
  3. Promoted Trends – Businesses can leverage Promoted Trends product to scale conversations and build mass awareness. Trends reflect hottest topics of discussion during a moment. They appear next to a user’s timeline. Promoted Trends appear at the top in the Trends section.

Twitter is an example of a multi-sided platform. Twitter has built an App ecosystem. Twitter offers APIs that help developers build third party apps. Twitter for Websites (TfW) allows easy integration of twitter into websites with Tweet and Follow buttons. Search API allows a user to query Twitter content and find tweets meeting a search criterion. REST API allows access to core Twitter objects such as timelines, status updates, and user information. Streaming API provides real-time access to Twitter firehose. It helps developers with data-intensive needs.  As per Twitter official blog on 11 July 2011,

“Application developers play a fundamental role in helping people get the best out of Twitter. As an ecosystem, we’ve just crossed one million registered applications, built by more than 750,000 developers around the world. This is up from 150,000 apps just a year ago.  A new app is registered every 1.5 seconds, fueling a spike in ecosystem growth in the areas of analytics, curation and publisher tools.”

Twitter business goal is simple: Increase the number of users using the service. This will help attract more advertisers. While third-party apps help increase website traffic and content usage, Twitter has entered into different kinds of partnerships to increase awareness and drive more users to the service. Here are 4 kinds of Partnerships that Twitter has entered into:

  1. Search Vendors – Twitter licenses full feed of public tweets to search engine vendors such as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling real-time search and discovery.
  2. Device Vendors – Twitter partnered with Apple to enable deep integration of Twitter in iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps such as Flipboard, Livingsocial, and Instagram.
  3. Media – Twitter has entered into partnerships with companies such as Mass Relevance and Crimson Hexagon to help media companies and brands deliver compelling Twitter integration to their users more easily. This can help media companies capture real-time reactions to the important news. Though these partnerships are not major source of revenue, they help in expanding user base. Additional visibility drives further growth for Twitter.
  4. Mobile operators – Twitter has partnered with Telecom operators across the globe to enable users to send and receive tweets from mobile phones using SMS.

All the aforementioned discussion is captured on the Business Model Canvas below. Though we have attempted to capture all important aspects of Twitter Business Model, we might have failed to capture some. What do you think we have missed? Does the Canvas help you quickly understand the big picture of Twitter business?

 

Advertisements
Leave a comment

3 Comments

  1. Francesco

     /  October 8, 2012

    Hello, interesting blog…

    I have not many info on Twitter busines model but I’m not 100% sure that the canvas is then consistent with the description you provided in the article:
    – I see the Developers more as Key Partners than Customers: there is no revenue associated to this segment while they are key to increase the users base.
    – I see the Search Vendors more as Customers than Key Partners as Twitter licenses public tweets to them

    Do you agree?

    Ciao,
    Francesco

    Reply
    • Hi Francesco,

      Thanks for your thoughtful comments. We really appreciate it. We think you are right on both the points. However, our focus was on representing the Twitter’s multi-sided platform that serves distinct set of audience with different value propositions.

      Regards,
      BMIMatters Team

      Reply
  1. Assessing a Business Model Attractiveness « Understanding Business Models

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: