Analysis – Twitter’s Business Model & Sector Sentiment

Twitter LogoI joined Twitter on May 8, 2007 on the advice of my business partner at @SpaceRef @KeithCowing. Not too long after that we participated in a NASA conference at NASA Ames on Participatory Exploration where @Biz (Stone) explained to the audience what Twitter was and it’s participatory nature. Thinking on it now it’s kind of ironic that Biz was giving us the talk as we were using Jaiku, a competitor then, for the conference. Jaiku is now pretty much history after Google bought it and recently decided to stop working on it and make it open source.

After listening to Biz that day I still wasn’t convinced that Twitter was useful and would survive. In fact I sent an email to my contacts on LinkedIn asking what they thought of Twitter. I got back a variety of answers including; What’s Twitter? To how essential some people thought Twitter would become to their business. So I decided to keep using Twitter and subsequently created over 30 new Twitter accounts for various entities I was involved in including @GeneRef, @OnOrbit, @SpaceMeme, @HMP, @Hyperix etc. I’m glad I created all those accounts because now I’m starting to get some real tangible benefit from being on Twitter and being a part of the conversation. If you don’t know what Twitter is and need a quick simple primer than this recent article in the Vancouver Sun is excellent.

But what’s in it for Twitter? What’s the business model? (2) I don’t think Twitter’s not going to make money through advertising. The community could revolt and move to another platform. And if they wanted to place advertising on the service they would have, should have done so already. Twitter’s not going to make money charging a fee to access the service. That would just make their audience flee and kill the exponential growth they are now experiencing. So how is Twitter going to make money? In my humble opinion the basis of how they are going to make money all started when they made their application programming interface (API) available.

On Friday, September 22, 2006 Twitter announced to the world they had an API and would you be so kind to use it and the developers came flocking. In fact I’ve lost track of how many applications have been developed using the Twitter API but the Twitter Fan Wiki lists many of them. But the point is the developers came, and in developing a variety of applications they helped define what Twitter is and how it can be used. And they defined Twitter better than Twitter itself was able to through the applications they created. And in so doing I think they provided insight to Twitter as to what could be their business model. And it’s all about the data. The data from people’s Tweets, location, clickthroughs etc. Twitter is a gold mine of data and as the service grows the available data to mine is getting better.
TweetDeck BioTech Search exampleAs a simple business example I use TweetDeck as my desktop client to post to Twitter and more importantly to follow areas of the conversation that are relevant to my businesses. I do this in two ways. I follow a lot of people, 580, at last count, but I can’t follow a continuous single stream of the conversation that these people engage in. So I use TweetDeck’s ability to create groups to aggregate people I follow based on the business sector they’re in. This takes care of the people I follow, but what about the rest of the conversation on Twitter. The millions of people I don’t follow and may not be aware of? I use TweetDeck’s search function to create a stream of conversation by topic. For instance I’m interested in search engines like Google, Yahoo, Ask and all the others so I’ve created a search group for the keyword phrase “Search Engines”. I’ve also done this for the BioTech sector. I think by now you should get the idea of the value of both the Twitter service and TweetDeck, the client built on Twitter’s API, bring to my business. But what about Twitter’s business model?
As I’ve said it’s all about the data and I’ve shown an example of how Twitter data can be mined to follow the conversation for business purposes. But now let’s look at the big picture. Twitter like many other online businesses such as Google is collecting a vast amount of data. And not only from the main service as not too long ago they bought a service called Summize which offered a Twitter search engine.
The data Twitter is collecting is very valuable. Analyzed and aggregated in a myriad of sectors it is useful to many businesses. That data can be sold or used to create follow on products. And therein lies the business model in my view for Twitter. In creating a service that forces users to be brief in expressing themselves they’ve created millions of conversation on the fly that are both timely and measure user sentiment. By data mining the conversation and sentiment they’ve created their business model.
Author’s Note: My latest startup is called Hyperix and has been building a vertical search platform for the last two years to create vertical search engines in a variety of niches. We’ve also started a business intelligence unit that will provide products based on the data we are currently collecting and analyzing. Our web crawler HyperixScoop has been crawling Twitter creating a database of users for future use. You can follow me on Twitter @00mb and contact me in a variety of ways.
Updated November 18, 2010.