It wasn’t that long ago that Twitter was just another tech start-up with a modest user base and uncertain prospects for revenue (let alone profitability). But the micro-blogging service has seen explosive growth over the past few years, and a multi-billion dollar IPO is now inevitable.
The founders and early investors aren’t the only ones who have made money off of Twitter; countless individuals and businesses have harnessed the power of social media to create new revenue opportunities. Below we’ll highlight some unique ways to make money off of Twitter, as well as review some inspiring success stories and best practices.
(By the way, you may also be interested in our guides to making money on Facebook, YouTube, Instagram, Pinterest, Google+, iPhone/Android, and with display ad networks). Before we jump in, a quick note on the official Twitter guidelines: the platform doesn’t allow any third parties to inject paid tweets into a timeline on any service that leverages the Twitter API.
So the opportunities to place sponsored messages are still somewhat “old school” in that they must avoid the types of automation that have become ubiquitous on the Web. It’s also worthwhile to highlight the Federal Trade Commission’s (FTC) view on making money through Twitter. In short, it’s A-OK as long as certain protocol is followed–specifically, identifying promoted tweets as ads and including the type of fine print that traditionally accompanies other types of ads. A lot of celebs have ignored these rules so far with no consequences, but it seems likely there will be a crackdown eventually.
A simple proposal
Twitter, like all social media, has evolved dramatically since its founding. What the founders fully envisioned we cannot know. My guess is Twitter’s founders never envisioned corporate accounts with millions of followers. I believe they set out to create a service that would connect people with each other.
Nonetheless, there is one thing we do know: Today, many business entities have millions of followers and communicate with these followers using Twitter as a tool to promote their products and services. This is free advertising, no ifs, ands or buts.
What is perhaps unique about Twitter is the dichotomy between this valuable role in empowering and connecting people and its ongoing lack of profitability.
So, here’s a proposal to radically change the economics of Twitter: Charge businesses that exceed a set number of followers (perhaps 250,000) a monthly fee based on their total number of followers. To provide a sense of scale, here are the follower counts for a cross-section of well-known brands:
- @TeslaMotors 1.4 million
- @Verizon 1.7 million
- @Pepsi 3.1 million
- @CocaCola 3.4 million
- @McDonalds 3.4 million
- @Intel 4.7 million
- @Marvel 4.9 million
- @GoogleChrome 6.1million
- @SamsungMobile 12.1 million
- @Google 17.6 million
I suspect most of these businesses spend large sums (with in-house personnel or outside agencies) planning and developing their Twitter activities — a clear form of advertising that provides value, with no portion going to Twitter. Why would it be wrong for Twitter to capture, through fees, a piece of the economic value its service brings these companies?
To assess the potential magnitude this change might have on Twitter’s bottom line, let’s take a hypothetical example: Suppose Twitter collected an average annual fee of $600,000 from 2,000 businesses. This would represent increased annual revenues of $1.2 billion. Of course, there would be costs associated with implementing this policy, but the upside is enormous: Most of this $1.2 billion increase in revenues would drop straight to the bottom line.
The reality of value delivered
I don’t claim to know what the right fee is, or how this fee should increase by the number of followers involved. But, let’s ask the most important question: Would a major brand leave Twitter if a new fee of $50,000 per month were imposed? Companies with millions of followers derive far greater economic value than this monthly sum. Indeed, I strongly suspect many companies spend far more simply staffing their Twitter-related social media campaigns and working with outside agencies. Of course, this would be a cost, which adds to these existing expenses. But, once again, I strongly suspect tweets bring these companies far higher returns than this proposed monthly fee plus any social media management expenses. I also believe these companies know it.
In short, a central reason for Twitter’s profitability problem is that it has been far too good a deal for large advertisers (defined as any company with a substantial Twitter following, which means the company has an active, significant Twitter presence).
Yes, I think it’s legal
I have discussed this idea with a limited number of colleagues. Inevitably, they ask whether charges of this type, levied solely on companies with large follower bases, might represent some form of illegal price discrimination. My understanding is that this suggested revenue idea is entirely lawful.
Here’s how it can be done: First, let’s take a “worst case” example that assumes, under the applicable law, corporations that are Twitter users have the same rights as people. Then, these charges could be defined as advertising fees on any Twitter user that has more than 250,000 followers. (Remember, Twitter allows users to block followers, so no one forces a person or corporation to move from the free classification to the new, higher-follower paid classification).
Second, discounts for different categories of advertisers (which can be defined by purpose or commercial segment) are, I believe, legal. As a result, individuals and entities with a non-commercial purpose, such as politicians, journalists, academics, news entities, governmental entities and all nonprofits could be exempted from these advertising fees. They would effectively receive a 100 percent discount. Indeed, significant discounts for nonprofits and educational institutions are commonplace across the spectrum of internet services.
Why would it be wrong for Twitter to capture, through fees, a piece of the economic value its service brings these companies?
Finally, the group that may present the most significant issue for this proposal are celebrities: movie stars, athletes, authors and musicians. One again, I believe the issue of category discounts resolves this concern. Twitter could decide not to charge these people — who for many Twitter users add value to the community — or to charge a lower fee (a specific discount for this category).
Now, let’s look at the alternative scenario, and assume corporations do not have the same rights as people. Twitter can freely exempt all individuals from charges. Here, Twitter could require corporations to pay advertising fees based on their volume of followers, with fees starting when a firm has more than 250,000 followers (or whatever number is deemed appropriate). In this scenario, discounts would apply, as frequently happens now online and offline, to entities that have a political, informational or non-commercial purpose (i.e. news entities, political entities, governmental entities and nonprofits). The one difference is that on Twitter these discounts would total a full 100 percent.
Adding value for corporate users
Next, Twitter could take a small piece of the large revenue increase discussed here and create services that add additional value for these paying, large corporate users. I can imagine a wide range of mechanisms that Twitter, with access to its “firehose” of data, could deploy to increase the effectiveness of large businesses actively using its service.
New services may be valuable, but are not necessary
In recent years, Twitter has based its path to profitability on service enhancements designed to increase user engagement and growth, and on a transformation into a media consumption platform. Twitter’s recent loss to Amazon of its “marquee deal” to casts an additional shadow on this often-questioned media-related strategy.
Nonetheless, new service features, while desirable, are not needed for Twitter to achieve far higher profitability: A radical shift in its revenue model will enable Twitter to achieve the profitability it merits. Twitter’s existing user base already delivers enormous marketing and advertising value to businesses. To date, Twitter, in contrast to other media, has not sought to capture an appropriate share of the value its service creates for businesses benefiting from the use of its platform.As an active Twitter user, I also can imagine a wide range of service enhancements that would increase my engagement. For example, I simply can’t imagine why Twitter is not the premier source for an automated, real-time feed of the personalized news topics that meet my interests. The existing “News,” “Trends” and #search features fall short of satisfying this craving. However, issues associated with creating more engaging features are outside the scope of this article.
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