Aardvark Daily

Please visit the sponsor!

All that twitters is not gold

As we all know, there are massive fortunes to be made on the internet, if you are lucky enough to become one of the "next big things".

Facebook reported earnings of over US$500m for the last quarter and Google's CEO has received over US$100m in bonuses this year alone.

In the online world, money and profits *can* flow like water.

Unless you're Twitter it seems.

Although Twitter has proven itself to be a very "big thing", the company is having an awful lot of trouble turning that success into revenues and profits.

In fact this week it announced that it lost an astonishing half a billion dollar loss for the fourth quarter of 2013.

Owch!

As a result, shares in the tweeting giant have fallen by over 20% and I suspect investors are wondering "what the?".

The reality is that virtual success does not always translate into financial success and fortune.

Twitter's epic fail reminds me of the pre-dotcom boom era, when huge numbers of Net-based companies used "popularity" as a metric for measuring their success. Unfortunately for them (as for Twitter), investors don't give a stuff about the warm-fuzzies that come from being everyone's favourite online service. Investors are only interested in one thing -- getting a healthy return on the funds they have invested.

The problem that Twitter faces is now a complex and difficult one.

They built an empire on the concept of a 140 character SMS-like message. That's great for creating an extremely concise communications channel but how the hell do you leverage such a small chunk of data in a way that allows you to earn money from it?

As many other companies have learned to their great cost, simply trying to charge for a service which you've been giving away for free is a recipe for failure. Net users rapidly shy-away from paying for anything they've been used to getting for free and there are now a huge number of twitter alternatives that would gladly step in to pick up disaffected tweeters.

With a 140 character limit being the big drawcard of twitter, any attempt to piggy-back a fist-full of advertising would also be fraught with peril and doomed to failure.

The secret to making money from advertising is the striking of an acceptable "value exchange".

If you start tagging 140 char tweets with graphical banners or 200 character ads, you'll effectively ankle-tap the thing that made your service such a success.

Unlike Facebook and Google, who have acres of web-real-estate on which they can slap ads, Twitter has no framework with which to support such a revenue stream.

If Twitter is to make money from its massive user-base, their only hope is to come up with some type of synergistic service that users will *want* to use and which also delivers the extra value and cyber real-estate needed to support those ads or a small subscription.

Can they do it? Or was Twitter a one-hit wonder?

Please visit the sponsor!

(Sorry, forums are stuffed at present)

PERMALINK to this column

Rank This Aardvark Page

Change Font